Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Fluke,barchid,Howyoudoin,servodude,tjh290633, for Donating to support the site

Prosperity without economic growth?

including Budgets
csearle
Lemon Quarter
Posts: 2010
Joined: November 4th, 2016, 2:24 pm
Has thanked: 1184 times
Been thanked: 459 times

Prosperity without economic growth?

#248274

Postby csearle » August 31st, 2019, 8:53 am

Does the economy actually need to grow in order for us to be prosperous?

Imagining a time (which may never come) when humanity has mined the planet's last mineral resource such that everything is made from recycled material. Maybe mining firms have long-since diversified into recycling firms or space explorers. Imagine also that by then the lifestyles of the peoples of this Earth had been largely equalised. Could the economy simply stop growing, i.e. reach a stable state where it didn't grow but was nevertheless working well for everybody?

I appreciate this is an unlikely scenario, but I just wondered if a flat-lining economy always had to be a bad thing.

Chris

UncleEbenezer
Lemon Quarter
Posts: 3775
Joined: November 4th, 2016, 8:17 pm
Has thanked: 421 times
Been thanked: 623 times

Re: Prosperity without economic growth?

#248311

Postby UncleEbenezer » August 31st, 2019, 10:29 am

csearle wrote:Does the economy actually need to grow in order for us to be prosperous?

Is there a lesson to be drawn from Japan?
Could the economy simply stop growing, i.e. reach a stable state where it didn't grow but was nevertheless working well for everybody?

At the individual level, yes. c.f. Work-life balance, FIRE, etc.

At the population level, only if that population were itself stable and sustainable. A 95% reduction in Blighty might do the job, except that we don't live in isolation.

Urbandreamer
Lemon Slice
Posts: 663
Joined: December 7th, 2016, 9:09 pm
Has thanked: 40 times
Been thanked: 131 times

Re: Prosperity without economic growth?

#248317

Postby Urbandreamer » August 31st, 2019, 10:48 am

Well it really depends upon what you mean by "growth" and "prosper".

By the way recycling is currently hugely important and prevelant with certain resources. Any new product made from either lead or gold is likely to mostly consist of recycled material. Glass, copper and aluminium are also recycled in large quantities.

However I do believe that the economy does have to grow for us to prosper. I just don't see that such growth need to be as a result of resource or labour exploitation.

For example I would argue that the growth in the market, increased availability and reduced costs of talking books increased my prosperity. Others may feel the same over streaming video services. Such growth has not been as a result of resource or labour exploitation. Nor do I begrudge those who profit from providing me these things.

Why do I think that the economy needs to grow for us to prosper? Well that's tied in to the meaning of prosper. The term is generally understood to mean somthing (health, wealth etc) improving or growing. Hence I would argue that while you may be comfortable you can't "prosper" if things remain the same.

In this weeks Investers Chronicle Chris Dillow expresses "Doubts over profit-led growth".
https://www.investorschronicle.co.uk/ch ... ed-growth/

You might find his comments about policies favouring labour as a means to promote growth and prosperity interesting. Though I suspect that the profit motive of the artice may be seen as a distraction from your thesis that growth would not be needed, should there be no possibility to improve the lot of the populus.

dspp
Lemon Quarter
Posts: 3918
Joined: November 4th, 2016, 10:53 am
Has thanked: 3043 times
Been thanked: 914 times

Re: Prosperity without economic growth?

#250157

Postby dspp » September 7th, 2019, 4:22 pm

If you read Piketty you will see that the data for the last thousand years or so indicates that low growth rates result in increased concentration of wealth, and that it takes abnormally high growth rates to reverse that trend. Use of taxation to reverse the trend of wealth concentration requires very high taxation levels indeed.

Personally I think the planet will either require - or impose - a negative growth rate on humans. How humans cope with it is a very big question indeed.

regards, dspp

ReformedCharacter
Lemon Slice
Posts: 982
Joined: November 4th, 2016, 11:12 am
Has thanked: 472 times
Been thanked: 245 times

Re: Prosperity without economic growth?

#250183

Postby ReformedCharacter » September 7th, 2019, 6:32 pm

dspp wrote:Personally I think the planet will either require - or impose - a negative growth rate on humans. How humans cope with it is a very big question indeed.

regards, dspp

Maybe, but perhaps we are moving into a new era that will be more transformative than the Industrial Revolution, AI that far exceeds human intelligence and cheap almost limitless energy, for example.

RC

dspp
Lemon Quarter
Posts: 3918
Joined: November 4th, 2016, 10:53 am
Has thanked: 3043 times
Been thanked: 914 times

Re: Prosperity without economic growth?

#250252

Postby dspp » September 8th, 2019, 8:20 am

ReformedCharacter wrote:
dspp wrote:Personally I think the planet will either require - or impose - a negative growth rate on humans. How humans cope with it is a very big question indeed.

regards, dspp

Maybe, but perhaps we are moving into a new era that will be more transformative than the Industrial Revolution, AI that far exceeds human intelligence and cheap almost limitless energy, for example.

RC


The growth data seems to say otherwise.

I am not disregarding your hypothesis. Indeed it is the one I used to hold. However the data seem to point in a different direction. It could be that there is a multi-decadal lull going on as the easy wins of the industrial revolution are over, globalisation easy wins are also done, and demographic easy wins. Maybe there will be some decades of absorbtion of the post-industrial technologies then growth will step up again.

That is a big call to make, and I repeat it is not what the data suggest.

regards, dspp

Lootman
Lemon Half
Posts: 5957
Joined: November 4th, 2016, 3:58 pm
Has thanked: 35 times
Been thanked: 931 times

Re: Prosperity without economic growth?

#250327

Postby Lootman » September 8th, 2019, 3:11 pm

dspp wrote:If you read Piketty you will see that the data for the last thousand years or so indicates that low growth rates result in increased concentration of wealth, and that it takes abnormally high growth rates to reverse that trend. Use of taxation to reverse the trend of wealth concentration requires very high taxation levels indeed.

No doubt Piketty has his thousands of years' worth of data and I just have a line of reasoning, but I would have thought the exact opposite is the case.

In periods of high growth, massive amounts of wealth are created and that typically accrues, at least in a capitalist nation, to the owners of enterprises. So for instance the tech boom of the last 25 years or so has created many billionaires (and lost a few during the dot.com bust) and that has the effect of increasing inequality. Particularly since Tech companies are often not mass employers - the average profit per employee for Tech companies is very high, so the effects of that gain in wealth is concentrated.

Conversely, in low growth situations there are fewer opportunities for individuals to accrue great wealth. That typically means we are all more "equal", although of course being poorer but less unequal is hardly a desirable situation. Indeed, that is a part of why I regard all this concern about inequality as a false concern. To my mind high inequality is a sign of success, prosperity and wealth creation, even if not everyone shares in it. Whereas a society can be more equal and yet be drab, with anaemic growth and a sclerotic economy.

In the UK compare the pre-Thatcher days with the last 40 years. We are more unequal now, and yet few would argue that the economy or business climate was better in the days before then, when there were few billionaires because of high tax rates and low growth.

As to whether high tax rates are effective in redistributing wealth, even if I were to agree that is desirable, I think the answer is negative. More likely high tax rates merely relocate wealth beyond the jurisdiction that is imposing those high rates. Surely that was the theory behind the global move to lower tax rates after 1979 - to attract capital and wealth rather than to drive it out? Such reasoning is a component of Laffer's eponymous curve.

dspp
Lemon Quarter
Posts: 3918
Joined: November 4th, 2016, 10:53 am
Has thanked: 3043 times
Been thanked: 914 times

Re: Prosperity without economic growth?

#250343

Postby dspp » September 8th, 2019, 4:50 pm

Lootman wrote:
dspp wrote:If you read Piketty you will see that the data for the last thousand years or so indicates that low growth rates result in increased concentration of wealth, and that it takes abnormally high growth rates to reverse that trend. Use of taxation to reverse the trend of wealth concentration requires very high taxation levels indeed.

No doubt Piketty has his thousands of years' worth of data and I just have a line of reasoning, but I would have thought the exact opposite is the case..


As an engineer I prefer when the theories fit the facts, rather than throwing away any facts that don't fit my theories.

All the Pikeety graphs are here
http://piketty.pse.ens.fr/files/capital ... sLinks.pdf

Typical curves showing that wealth concentration is returning (this is an income one, you can also find capital ones)
http://piketty.pse.ens.fr/files/capital ... f/F9.2.pdf

Growth & return rates, long run
http://piketty.pse.ens.fr/files/capital ... F10.10.pdf

It is worth actually reading Piketty. He makes many of the same points you have made, and then shows the extent to which they are or are not true, and the extent to which other factors dominate.

A point he alludes to en passant is that maintaining the order of things is easier through justification than through repression. This has many implications.

A low growth world may or may not be coming, but it certainly appears to fit the long run data.

regards, dspp

ReformedCharacter
Lemon Slice
Posts: 982
Joined: November 4th, 2016, 11:12 am
Has thanked: 472 times
Been thanked: 245 times

Re: Prosperity without economic growth?

#250351

Postby ReformedCharacter » September 8th, 2019, 5:27 pm

dspp wrote:
The growth data seems to say otherwise.

I am not disregarding your hypothesis. Indeed it is the one I used to hold. However the data seem to point in a different direction. It could be that there is a multi-decadal lull going on as the easy wins of the industrial revolution are over, globalisation easy wins are also done, and demographic easy wins. Maybe there will be some decades of absorbtion of the post-industrial technologies then growth will step up again.

That is a big call to make, and I repeat it is not what the data suggest.

regards, dspp

Thank you. I'd be interested in your views about Ray Kurzweil and his thesis about accelerating change. Perhaps it is because I am biased towards an optimistic view of the future but I find his thesis persuasive.

Already within the past sixty years, life in the industrialized world has changed almost beyond recognition except for living memories from the first half of the 20th century. This pattern will culminate in unimaginable technological progress in the 21st century, leading to a singularity.


RC

dspp
Lemon Quarter
Posts: 3918
Joined: November 4th, 2016, 10:53 am
Has thanked: 3043 times
Been thanked: 914 times

Re: Prosperity without economic growth?

#250438

Postby dspp » September 9th, 2019, 8:38 am

ReformedCharacter wrote:
dspp wrote:
The growth data seems to say otherwise.

I am not disregarding your hypothesis. Indeed it is the one I used to hold. However the data seem to point in a different direction. It could be that there is a multi-decadal lull going on as the easy wins of the industrial revolution are over, globalisation easy wins are also done, and demographic easy wins. Maybe there will be some decades of absorbtion of the post-industrial technologies then growth will step up again.

That is a big call to make, and I repeat it is not what the data suggest.

regards, dspp

Thank you. I'd be interested in your views about Ray Kurzweil and his thesis about accelerating change. Perhaps it is because I am biased towards an optimistic view of the future but I find his thesis persuasive.

Already within the past sixty years, life in the industrialized world has changed almost beyond recognition except for living memories from the first half of the 20th century. This pattern will culminate in unimaginable technological progress in the 21st century, leading to a singularity.


RC


Well, he comes from the same school as me so maybe I'm biased :)

He's very smart, but I'm not sure his strand of thinking is entirely justifiable when compared with the evidence. Some aspects of it are clearly correct, and obvious to anyone who pays attention - so all he really has been is a superb (self)publicist about them - but even with those areas compound return outcomes can be hard to predict in respect of timescales, and whether/if/what limits will be reached. There are always limits. Always. However other aspects are less justifiable and I tend towards a more cautious view with dystopian characteristics, resource constraints, and considerable tensions likely in the futures I think are more plausible in the shorter term (100-200 years). Beyond that I am more hopeful, but the bit in between could be tricksy.

(By the way I think that a purist pattern-recognition approach to AI, which in essence is what the cyberneticist doctrine is (imho) is unlikely to work for generalised AI. But it has sure made fantastic advances in some areas, but always about one or two generations after they were expected to arrive !)

As always with these things, dine selectively, judiciously, and reflectively. And remember I am no seer.

regards, dspp

colin
Lemon Slice
Posts: 538
Joined: December 10th, 2016, 7:16 pm
Has thanked: 10 times
Been thanked: 73 times

Re: Prosperity without economic growth?

#252465

Postby colin » September 17th, 2019, 9:32 pm

If an increase in population leads to an increase in GDP will not an increase in 'smart' machines (ie 3d printing from computer generated files) also increase GDP?

gryffron
Lemon Quarter
Posts: 1568
Joined: November 4th, 2016, 10:00 am
Has thanked: 76 times
Been thanked: 251 times

Re: Prosperity without economic growth?

#252475

Postby gryffron » September 17th, 2019, 11:02 pm

How do you define "prosperity"? If you define it in purely monetary terms then clearly the answer to the OP's question is no.

But suppose we can make the same "stuff" for half the price. Then we can all have more "stuff" whilst the economy shrinks. But is that prosperity? I'd say it is. But most objective measures would say no.

Gryff

colin
Lemon Slice
Posts: 538
Joined: December 10th, 2016, 7:16 pm
Has thanked: 10 times
Been thanked: 73 times

Re: Prosperity without economic growth?

#252499

Postby colin » September 18th, 2019, 10:22 am

gryffron wrote:How do you define "prosperity"? If you define it in purely monetary terms then clearly the answer to the OP's question is no.

But suppose we can make the same "stuff" for half the price. Then we can all have more "stuff" whilst the economy shrinks. But is that prosperity? I'd say it is. But most objective measures would say no.

Gryff

Our technological development has allowed us to make the same stuff for half the price throughout history but the economy has not shrunk because of technological development. With the new higher level of income surplus to requirements we can buy more stuff or more services and entrepreneurs seek investors to develop new stuff to sell us. As incomes relative to essential expenditure rises then people should have the option of choosing to have more spare time to spend as they wish. How can that not be an increase in prosperity paid for by an increase in GDP which is the result of higher productivity produced by technological development rather than more people just being more frantically busy?

gryffron
Lemon Quarter
Posts: 1568
Joined: November 4th, 2016, 10:00 am
Has thanked: 76 times
Been thanked: 251 times

Re: Prosperity without economic growth?

#252506

Postby gryffron » September 18th, 2019, 11:08 am

Colin, I concur that is what has happened in the past. Manufacturers have always up-specced their products to keep the prices high. Our expectations have increased faster than production prices have decreased. That's why a a top end mobile phone is still $1000 whilst you can buy something which would have been considered awesome 20 years ago for $10 in Tescos. Cars, trains and aircraft are other areas that have added features (aircon, reversing cameras, seat back entertainment, etc), as at least a partial counter to decreasing production costs. Even food. We increasingly buy convenience food at much higher cost than the basic raw materials.

But it isn't necessarily so. If we can produce the same stuff cheaper, without increasing expectations, we could certainly increase "standard of living" whilst the economy shrinks. It could happen. It is possible that environmentalist pressures may force this as a reaction to ever-increasing-expectation. Though it is in the interests of the entire of big business to ensure it doesn't.

(I'm avoiding the word "prosperity". IMO "prosperity" is misleading, as most people would consider it to be measured in money, so must be linked to economic growth. It's entirely plausible "standard of living" could improve as "prosperity" falls.)

Gryff

SalvorHardin
Lemon Slice
Posts: 670
Joined: November 4th, 2016, 10:32 am
Has thanked: 514 times
Been thanked: 383 times

Re: Prosperity without economic growth?

#252514

Postby SalvorHardin » September 18th, 2019, 11:33 am

It is possible to have an increasingly prosperous economy without economic growth. That's because economic growth is defined as an increase in Gross Domestic Product (GDP) and GDP is not an accurate measure of the performance of the economy. GDP is a horribly flawed method of calculation, here are some of the flaws.

1) All government spending counts towards GDP, no matter how wasteful. Want to increase GDP? Hire people to dig holes and then hire people (possibly the same people) to fill in the same holes. Blow up bridges and then rebuild them. Make stuff and then destroy it. All of the money spent in these examples counts towards increasing GDP even though there has been no useful output. GDP is very popular amongst Keynesians (and most politicians) because it "proves" that they are improving the economy even when they are harming it by the serious misallocation of resources.

2) GDP calculations are hopeless when it comes to product improvements. If a much better version of a product is produced it doesn't add to GDP. Worse still, if these improvements cause the price of the product to fall then GDP falls (so the economy is worse off).

3) GDP can't cope with "free" stuff such as Google, YouTube, Facebook. Wikipedia, etc., which provide a tremendous benefit to their users but no benefit whatsoever according to the statistics.

4) GDP is increased by exports but reduced by imports. Stupid. The GDP international trade calculation is + Exports - Imports. So the value to GDP is equal to the difference in exports and imports which is simply ridiculous ($220 billion of exports and $210 billion of imports produces a lesser contribution to GDP than $15 billion of exports and $1 billion of imports)

5) GDP has a major problem when it comes to intermediate goods. It basically ignores them and only looks at the "final" product. Whatever that is. This excludes a lot of economic activity from the GDP calculation.

6) GDP can't cope with "Z-Goods" (goods and services provided within households for no monetary consideration).

From the Mises Institute (Austrian Economics):

"GDP purports to measure economic activity while largely divorcing itself from the quality, profitability, depth, breadth, improvement, advancement, and rationalization of goods and services provided. For example, even if a ship — built at great expense — cruised without passengers, fished without success, or ferried without cargo; it nevertheless contributed to GDP. Profitable for investors or stranded in the sand; it added to GDP. Plying the seas or rusting into an orange honeycomb shell; the nation’s GDP grew."

https://mises.org/library/what-gdp

"Gross domestic product (GDP) is increasingly a poor measure of prosperity. It is not even a reliable gauge of production"

https://www.economist.com/briefing/2016 ... e-with-gdp

scrumpyjack
Lemon Slice
Posts: 631
Joined: November 4th, 2016, 10:15 am
Has thanked: 23 times
Been thanked: 178 times

Re: Prosperity without economic growth?

#252515

Postby scrumpyjack » September 18th, 2019, 11:39 am

The political situation would be very difficult in a society without economic growth, so I can’t see it is really feasible. Governments need growth to pay for public expenditure and to keeping ‘kicking cans down the road’

Any government that had a policy of zero growth would not last long in office.

But
Increasingly economic activity does not involve physical stuff
Improved recycling and green energy means growth does not need to consume all the planets resources.
Improved manufacturing techniques mean products can be made using fewer resources. We have seen this with every type of product – they become smaller, lighter etc etc

If your timescale is thousands of years (which is very short anyway in terms of the planet's timescales) other things will intervene – wars, plagues etc

colin
Lemon Slice
Posts: 538
Joined: December 10th, 2016, 7:16 pm
Has thanked: 10 times
Been thanked: 73 times

Re: Prosperity without economic growth?

#252528

Postby colin » September 18th, 2019, 1:15 pm

scrumpyjack wrote:The political situation would be very difficult in a society without economic growth, so I can’t see it is really feasible. Governments need growth to pay for public expenditure and to keeping ‘kicking cans down the road’

Any government that had a policy of zero growth would not last long in office


Are not government borrowing costs determined in part by future expectations of economic growth which determines how easily or not future generations can repay the debt?

Charlottesquare
Lemon Quarter
Posts: 1156
Joined: November 4th, 2016, 3:22 pm
Has thanked: 8 times
Been thanked: 113 times

Re: Prosperity without economic growth?

#252951

Postby Charlottesquare » September 20th, 2019, 7:17 pm

colin wrote:
scrumpyjack wrote:The political situation would be very difficult in a society without economic growth, so I can’t see it is really feasible. Governments need growth to pay for public expenditure and to keeping ‘kicking cans down the road’

Any government that had a policy of zero growth would not last long in office


Are not government borrowing costs determined in part by future expectations of economic growth which determines how easily or not future generations can repay the debt?


Repay!!!!!!

Service is more appropriate, surely.


Return to “The Economy”

Who is online

Users browsing this forum: No registered users and 4 guests