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

by ksrm 10y ago

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.

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

by ksrm 10y ago

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

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.