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I think this is the fundamental misunderstanding about growth, one that is generally carried by post-growth and deep ecology people. The growth we're talking ab

by erispoe 10y ago

I think this is the fundamental misunderstanding about growth, one that is generally carried by post-growth and deep ecology people. The growth we're talking about here is growth of economic value, not growth of resource consumption. Yes, resources are finite (oil, total attention time of people), but economic value is not. Entrepreneurs are in this game to create more and more economic value from the same finite resources. Take time: people have roughly the same time now than they had 40 years ago. Yet, we create way more economic value out of this time than 40 years ago, because our productivity has gone up. Resources are finite, economic value is potentially infinite. Therefore, yes, you can have virtually infinite growth of economic value.

ksrm 10y ago
> economic value is potentially infinite Do you mind explaining how? I'm not sure I understand.
- georgeecollins 10y ago
  There is a theory in economics that while resources may be limited, through substitution economic growth is limitless. If growth in an economy is limitless, the economic value of a company is potentially infinite. http://freakonomics.com/2014/01/24/can-economic-growth-continue-forever-of-course/ http://freakonomics.com/2014/01/24/can-economic-growth-conti... I'm not saying this is right or wrong, just trying to explain the thought.
  - dredmorbius 10y ago
    It's wrong. The concept of infinite substitutability was presented as a "principle" in a 1976 paper, itself trying to argue out of the all too obvious implications of Limits to Growth (1972). "The Age of Substitutability", H. E. Goeller and Alvin M. Weinberg, The American Economic Rrview, Vol. 68, No. 6 (Dec., 1978), pp 1-11 https://www.jstor.org/stable/2951003?seq=1 https://www.jstor.org/stable/2951003?seq=1 Somehow this hypothesis has been raised to the level of a scientific law of economics, trumping thermodynamics, physics, chemistry, and 216 years of actual experience of the Industrial Revolution and subsequent industrial periods, as well as economics' own law of diminishing returns. There's nothing here but wishful thinking. https://books.google.com/ngrams/graph?content=infinite+substitutability&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2Cinfinite%20substitutability%3B%2Cc0 https://books.google.com/ngrams/graph?content=infinite+subst...
    - erispoe 10y ago
      Yey, I wasn't talking about "infinite substitutability" here. Although it's part of the equation. I'm talking about productivity. How you can derive way more value now from the same quantity of resources than you could 2 centuries ago. So yes, there is a ceiling in available resources (although there's a whole lot of resources that we can tap in the solar system alone), but as long as you don't see a ceiling in productivity improvement, you don't see a limit to growth.
      - dredmorbius 10y ago
        You may not think you are, but you are. For productivity, virtually all of the Solow residual disappears if you add energy as a factor. R. U. Ayres and Charles A. S. Hall are two (and independent) authors among many who've demonstrated this. Ping back if you'd like me to dig for specific references. Orthodox economics of course ignores this.
- ThrustVectoring 10y ago
  Economic value is a measure of preferences. If I'd pay a dollar to own a widget instead of the status quo, then the economic value of all the processes that got me that widget is $1. With that model, saying that economic value is "potentially infinite" is equivalent to saying that there will always be a way to improve someone's life.
  - deleted 10y ago
    [deleted]
  - dredmorbius 10y ago
    In the short term, economic (that is, market exchange) value is determined by psychology. In the long term, economic value is deteŕmined by thermodynamics. Georgescu-Rogen, Daly, Soddy, Bohm-Bawerk, Marshall, Smith.
- stale2002 10y ago
  Sure. Imagine if moores law continues going strong, until we have computer's powerful enough to simulate realities. Now anyone can have whatever they want, only limited by computer processing power. Also, just becuase resources are "finite" doesn't mean we are anywhere close to the limit. You could just as easily respond by paying "Sure, the universe is finite. Let solve inequality by limiting the amount of resources a person can use to 1 galaxy per person. Nobody needs more resources than an entire galaxy!". Until we get to that point, we aren't anywhere close to "finite" growth.
  - TheOtherHobbes 10y ago
    You realise "Only limited by computer power" still means "Only limited by available resources"? A computer isn't a perpetual motion machine. It runs under the laws of physics just as everything else does. How much energy do you think you would need to truly simulate a galaxy at quantum levels of resolution? But what if you don't need quantum levels? Then you're into a more subtle argument - confusing an economy of resources with an economy of experiences that can be created using those resources. It might seem "obvious" how that makes it possible to use less of everything, but if you think it through in detail it really isn't. You still need practical infrastructure, power, and even if everyone is in VR 24/7, you still need nutrients and waste disposal. You can't start by assuming infinity because Moore's Law, and then pretending it makes all the hard problems go away. It doesn't.
    - erispoe 10y ago
      You're right, but it's a moot point for all practical purposes. Of course there is a limit, but if the limit is so high that we'll never reach it, it's as if there's no limit. The point is, if you can be millions of times more productive with the same quantity of resources, your reserve of economic growth is gigantic. Not truly limitless, of course, but limitless for all intents and purposes.
    - stale2002 10y ago
      I wasn't suggesting that we simulate a galaxy. I was suggesting that we capture the entire energy output of a galaxy and give it to one person. And then do that for every person in the world. There is a lot of energy out there and a lot of technological growth to go before we hit a "finite" limit.
yourapostasy 10y ago
> Therefore, yes, you can have virtually infinite growth of economic value. I prefer to phrase it as "potentially asymptotically endless growth of economic value". Lording over all of this are the (as far as we currently know) iron laws of thermodynamics. Until the economy is majority fad/fashion-driven and ascribes value literally upon human whimsy, it must derive ground truth value out of those laws, and as far as we know there does not exist an infinite supply of energy. We are a long ways from reaching the asymptote, but even "virtually infinite" will literally cook the planet with an economy using ideal Carnot efficiency-based engines.
- erispoe 10y ago
  That's a good point and I accept your suggestion. But if we are never likely to even see the beginning of the asymptote, we can just treat it as infinite. And people understand "virtually infinite" more than "potentially asymptotically endless" even though you're correct. > Until the economy is majority fad/fashion-driven and ascribes value literally upon human whimsy, it must derive ground truth value out of those laws. I would disagree with that, but I'm happy to reconsider if you care to explain more. Economy is based on our preferences, as economic agents. The rationality of our preferences is irrelevant to the economic system. In this way, there is no "ground truth". That's supply and demand, not a cost-driven economy. There is no economy outside of interacting economic agents performing transactions, this is what an economy is.
- bordercases 10y ago
  > asymptotes This is brilliantly clarifying, thank you.
reubenswartz 10y ago
Whether or not growth in economic value is infinite, no company can grow faster than the overall economy indefinitely, which is what, in theory, determines where investors put their money.

by erispoe 10y ago

ksrm 10y ago

> economic value is potentially infinite Do you mind explaining how? I'm not sure I understand.

georgeecollins 10y ago
There is a theory in economics that while resources may be limited, through substitution economic growth is limitless. If growth in an economy is limitless, the economic value of a company is potentially infinite. http://freakonomics.com/2014/01/24/can-economic-growth-continue-forever-of-course/ http://freakonomics.com/2014/01/24/can-economic-growth-conti... I'm not saying this is right or wrong, just trying to explain the thought.
- dredmorbius 10y ago
  It's wrong. The concept of infinite substitutability was presented as a "principle" in a 1976 paper, itself trying to argue out of the all too obvious implications of Limits to Growth (1972). "The Age of Substitutability", H. E. Goeller and Alvin M. Weinberg, The American Economic Rrview, Vol. 68, No. 6 (Dec., 1978), pp 1-11 https://www.jstor.org/stable/2951003?seq=1 https://www.jstor.org/stable/2951003?seq=1 Somehow this hypothesis has been raised to the level of a scientific law of economics, trumping thermodynamics, physics, chemistry, and 216 years of actual experience of the Industrial Revolution and subsequent industrial periods, as well as economics' own law of diminishing returns. There's nothing here but wishful thinking. https://books.google.com/ngrams/graph?content=infinite+substitutability&year_start=1800&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2Cinfinite%20substitutability%3B%2Cc0 https://books.google.com/ngrams/graph?content=infinite+subst...
  - erispoe 10y ago
    Yey, I wasn't talking about "infinite substitutability" here. Although it's part of the equation. I'm talking about productivity. How you can derive way more value now from the same quantity of resources than you could 2 centuries ago. So yes, there is a ceiling in available resources (although there's a whole lot of resources that we can tap in the solar system alone), but as long as you don't see a ceiling in productivity improvement, you don't see a limit to growth.
    - dredmorbius 10y ago
      You may not think you are, but you are. For productivity, virtually all of the Solow residual disappears if you add energy as a factor. R. U. Ayres and Charles A. S. Hall are two (and independent) authors among many who've demonstrated this. Ping back if you'd like me to dig for specific references. Orthodox economics of course ignores this.
ThrustVectoring 10y ago
Economic value is a measure of preferences. If I'd pay a dollar to own a widget instead of the status quo, then the economic value of all the processes that got me that widget is $1. With that model, saying that economic value is "potentially infinite" is equivalent to saying that there will always be a way to improve someone's life.
- deleted 10y ago
  [deleted]
- dredmorbius 10y ago
  In the short term, economic (that is, market exchange) value is determined by psychology. In the long term, economic value is deteŕmined by thermodynamics. Georgescu-Rogen, Daly, Soddy, Bohm-Bawerk, Marshall, Smith.
stale2002 10y ago
Sure. Imagine if moores law continues going strong, until we have computer's powerful enough to simulate realities. Now anyone can have whatever they want, only limited by computer processing power. Also, just becuase resources are "finite" doesn't mean we are anywhere close to the limit. You could just as easily respond by paying "Sure, the universe is finite. Let solve inequality by limiting the amount of resources a person can use to 1 galaxy per person. Nobody needs more resources than an entire galaxy!". Until we get to that point, we aren't anywhere close to "finite" growth.
- TheOtherHobbes 10y ago
  You realise "Only limited by computer power" still means "Only limited by available resources"? A computer isn't a perpetual motion machine. It runs under the laws of physics just as everything else does. How much energy do you think you would need to truly simulate a galaxy at quantum levels of resolution? But what if you don't need quantum levels? Then you're into a more subtle argument - confusing an economy of resources with an economy of experiences that can be created using those resources. It might seem "obvious" how that makes it possible to use less of everything, but if you think it through in detail it really isn't. You still need practical infrastructure, power, and even if everyone is in VR 24/7, you still need nutrients and waste disposal. You can't start by assuming infinity because Moore's Law, and then pretending it makes all the hard problems go away. It doesn't.
  - erispoe 10y ago
    You're right, but it's a moot point for all practical purposes. Of course there is a limit, but if the limit is so high that we'll never reach it, it's as if there's no limit. The point is, if you can be millions of times more productive with the same quantity of resources, your reserve of economic growth is gigantic. Not truly limitless, of course, but limitless for all intents and purposes.
  - stale2002 10y ago
    I wasn't suggesting that we simulate a galaxy. I was suggesting that we capture the entire energy output of a galaxy and give it to one person. And then do that for every person in the world. There is a lot of energy out there and a lot of technological growth to go before we hit a "finite" limit.

yourapostasy 10y ago

> Therefore, yes, you can have virtually infinite growth of economic value. I prefer to phrase it as "potentially asymptotically endless growth of economic value". Lording over all of this are the (as far as we currently know) iron laws of thermodynamics. Until the economy is majority fad/fashion-driven and ascribes value literally upon human whimsy, it must derive ground truth value out of those laws, and as far as we know there does not exist an infinite supply of energy. We are a long ways from reaching the asymptote, but even "virtually infinite" will literally cook the planet with an economy using ideal Carnot efficiency-based engines.

erispoe 10y ago
That's a good point and I accept your suggestion. But if we are never likely to even see the beginning of the asymptote, we can just treat it as infinite. And people understand "virtually infinite" more than "potentially asymptotically endless" even though you're correct. > Until the economy is majority fad/fashion-driven and ascribes value literally upon human whimsy, it must derive ground truth value out of those laws. I would disagree with that, but I'm happy to reconsider if you care to explain more. Economy is based on our preferences, as economic agents. The rationality of our preferences is irrelevant to the economic system. In this way, there is no "ground truth". That's supply and demand, not a cost-driven economy. There is no economy outside of interacting economic agents performing transactions, this is what an economy is.
bordercases 10y ago
> asymptotes This is brilliantly clarifying, thank you.

reubenswartz 10y ago

Whether or not growth in economic value is infinite, no company can grow faster than the overall economy indefinitely, which is what, in theory, determines where investors put their money.