The Economics of Change


When non-economists start talking about the limits to economic growth, we often enter the bizarro world.

For example, here is a YouTube video titled: Economic Growth, Climate Change and Environmental Limits

https://www.youtube.com/watch?v=AQscc1HYjhU

I suppose this is because growth is most easily understood by our biological experience as a living organism – we are born small and end up bigger. The universe is expanding. But from an economic point of view that definition can be challenged.

When our skeletal bodies stop expanding, sometime around our late teenage years, do we stop growing? Or is growth merely measured in change over time? Certainly we see ourselves growing in wisdom, knowledge, emotional understanding, etc. In fact, economic growth statistics, like gross domestic product (GDP), are actually measures of year-over-year change, not necessarily physical expansion.

For instance, when we recycle old, used goods into new goods, we measure positive economic growth in terms of GDP, yet there may be no physical expansion at all. If your old car is recycled into steel, rubber, and glass and a new, more efficient electric car is produced from those materials, we have engineered positive economic growth, but there is no extra car on the road. A more absurd example would be if we paid a worker to dig a hole in the backyard, then paid another worker to fill it in. Both activities would register as positive GDP growth (workers’ income), but there will be no physical expansion of something created, only the loss of energy. (The Second Law of thermodynamics still applies.)

Economic growth is merely the conversion of energy into different forms so that all living organisms can adapt to a changing environment in order to survive and thrive. Positive growth is merely a measure of doing this successfully. That is certainly a good thing. It means that future growth will probably be less focused on expansion of markets and more on preserving certain scarce resources like clean air, water, and a sustainable biosphere. That is economic growth.

Just consider then what an anti-growth agenda implies: a universe frozen in time. In other words, a dead universe.

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