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>Is it common to assume economic growth can proceed at an infinite rate? Infinite rate = adding wealth at infinity dollars per hour. Clearly absurd. Unbounded

by DenisM 8y ago

>Is it common to assume economic growth can proceed at an infinite rate? Infinite rate = adding wealth at infinity dollars per hour. Clearly absurd. Unbounded growth = adding 100 dollar per hour without an end date in sight. I can argue this is feasible: Let's say you and I are trading loaves and fishes between us (using dollars as a medium of exchange). This makes a stable economy grounded in tangible goods. Then we introduce notion of intellectual property: I make paintings and you make software. Each year you make better software and sell it to me at higher price, then I make better paintings and sell them to you for the higher price. The price of bread and fish remains the same, so when the government comes in to measure the CPI they will see that the food price did not go up, therefore there is no inflation. So the dollar value of all transactions is going up, but the inflation is not going up. This can easily go on forever because it doesn't rely on any kind of natural resource that could be exhausted, apart from your hunger for better paintings and my desire for better software.

mikekchar 8y ago
Sometimes I find this kind of thing pretty weird (keep in mind that I have a very naive understanding of economics). For example, food prices as a ratio of average income keep falling. So our standard of living is improving! The same goes for a lot of goods -- like clothes. People have better access to food, more clothes, better houses and more disposable income to boot. It has struck me, though, that this standard of living increase is actually dependent upon a very specific system of production. I live in Japan and I have an interest in traditional Japanese clothing. I can buy traditional Japanese clothing made the same way it was always made, but I can't afford it. So in a way, we are not comparing apples to apples when we measure our increase in standard of living. The very fact that an artisan making traditional goods in the traditional way desires the same increase in standard of living as I have means that their goods are at least as expensive (as a ratio of average income) as they always were. Sometimes because they have a very limited market, their prices are considerably higher in order to achieve an acceptable income. In that way, I think economic growth is a bit of an illusion. We can still improve efficiency a lot -- how many people are limited in their life because they simply lack capital? I would argue that the vast majority of people on the planet fall into this category. We can grow the economy in very real terms by ensuring that more people get access to more capital. But a lot of it is smoke and mirrors. Externalities are not accounted for -- whether it be environmental degradation or simply loss of lifestyle and culture. Our march of progress steamrolls things that are valuable, without much thought.
- DenisM 8y ago
  The key to unbounded growth is commoditization of living necessities. What is necessary to live is produced more efficiently as time passes, so they take smaller share of the overall economy, while luxuries grow to take bigger share. Luxuries are less resource intensive so they can grow their share without straining the earth, simply by increasing price.
- heavenlyblue 8y ago
  What you're saying is true. But today you have a much higher chance of actually having something to wear independently from the scale of your income. 100 years ago having _something_ to wear was a luxury. Today you can buy it at any quality/price you'd like.

by DenisM 8y ago

mikekchar 8y ago

Sometimes I find this kind of thing pretty weird (keep in mind that I have a very naive understanding of economics). For example, food prices as a ratio of average income keep falling. So our standard of living is improving! The same goes for a lot of goods -- like clothes. People have better access to food, more clothes, better houses and more disposable income to boot. It has struck me, though, that this standard of living increase is actually dependent upon a very specific system of production. I live in Japan and I have an interest in traditional Japanese clothing. I can buy traditional Japanese clothing made the same way it was always made, but I can't afford it. So in a way, we are not comparing apples to apples when we measure our increase in standard of living. The very fact that an artisan making traditional goods in the traditional way desires the same increase in standard of living as I have means that their goods are at least as expensive (as a ratio of average income) as they always were. Sometimes because they have a very limited market, their prices are considerably higher in order to achieve an acceptable income. In that way, I think economic growth is a bit of an illusion. We can still improve efficiency a lot -- how many people are limited in their life because they simply lack capital? I would argue that the vast majority of people on the planet fall into this category. We can grow the economy in very real terms by ensuring that more people get access to more capital. But a lot of it is smoke and mirrors. Externalities are not accounted for -- whether it be environmental degradation or simply loss of lifestyle and culture. Our march of progress steamrolls things that are valuable, without much thought.

DenisM 8y ago
The key to unbounded growth is commoditization of living necessities. What is necessary to live is produced more efficiently as time passes, so they take smaller share of the overall economy, while luxuries grow to take bigger share. Luxuries are less resource intensive so they can grow their share without straining the earth, simply by increasing price.
heavenlyblue 8y ago
What you're saying is true. But today you have a much higher chance of actually having something to wear independently from the scale of your income. 100 years ago having _something_ to wear was a luxury. Today you can buy it at any quality/price you'd like.