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Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are

by colund 12y ago

Why the obsession of economic growth? In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. This greed doesn't lead to less global warming or happier people. I think politicians and economists should start thinking about what actually makes people happy. Economics is efficient management of resources nothing else. Giving the population ability to stay healthy with affordable health care, moderate taxes and stability should be a main priority.

wvenable 12y ago
In the US and many other places, economic growth is essentially the retirement plan.
vasilipupkin 12y ago
economic growth, albeit imperfect, is a measure of things getting better for society. So, we should worry about worldwide economic growth, but not necessarily Swedish economic growth. Another point is, lack of growth is a leading indicator of the situation getting worse in the future, even if it is pretty good now. So, yes, economic growth is an imperfect measure, but we have few if any alternatives to economic growth in terms of assessing how things are going in an objective way
- TheOtherHobbes 12y ago
  Not so much imperfect as deceptively irrelevant. "Growth" has absolutely nothing useful to say about "things getting better for society." Things get better for society when jobs pay well, high quality education is freely accessible, talent and creativity are rewarded, cost of entry for entrepreneurship is low, and ecological support systems are stable. There's nothing even remotely difficult about measuring these factors. "Growth" is just a convenient way to disguise increasing inequality and decreasing economic freedom for the majority of the population. If the growth is never distributed it's a useless metric.
  - vasilipupkin 12y ago
    try to think in terms of statistical models, rather than absolute statements. Imagine a continuum in which things you mention receive a numerical score. Growth is a number. It is a number which will have a non-zero correlation with the numerical scores of the things you mention. You can also build models that try to forecast growth based on those scores, and vice versa, forecast those scores based on growth. Once you think in those terms, you can dispense with terminology such as "irrelevant", "useless", "absolutely nothing", etc.
  - ArkyBeagle 12y ago
    Inequality seems to be mostly inversely proportional to growth. Low interest rates are fertile soil for inequality. If I can just buy Certificates of Deposit and live off the interest, instead of having to invest directly, that seems to me to be more egalitarian than less. Low interest rates brighten the line between us ordinary people and professional investors.
Mikeb85 12y ago
Because economic growth is the only way to pay off the massive amounts of debt that currently exist. The US needs to constantly grow and acquire more and more resources, labour and capital or else it will cease being the way it currently is...
- Someone 12y ago
  Inflation also is a way to get rid of debt. A few years with 10% inflation would do wonders for the debt of most countries, provided that their debt is in their own currency.
  - kardashev 12y ago
    Inflation would be a way to get rid of debt, but it literally takes money from the poor and working class and gives it to the rich. 10% inflation is equivalent to a person's salary going down by 10%. Also, any savings you had would be eaten up by 10%. Inflation is the same as taking people's money to pay debt. It's not some magic thing that makes debt go poof.
    - Someone 12y ago
      If you manage to combine a x% inflation with a x% rise in welfare payments and of worker's income, people with relatively little money in the bank will not suffer much. That includes the poor and the very rich (who likely will have invested a large fraction of their savings). The clear winners will be those with relatively high debts, the losers those who have been saving, but not investing. Is it fair to tax the ants while rescuing the grasshoppers? No, but if the country as a whole is a grasshopper, it may be the best one can do. A side effect of this strategy is that it teaches ants to invest, rather than put money in the bank. That's another reason why many countries aim for inflation.
      - cmdkeen 12y ago
        The unfortunate side effect is that it shafts pensioners who should not be investing in equities because of the time scales involved. The UK (though a hefty dose of electioneering is involved) is offering bonds to pensioners which pay a higher coupon to offset the low gilt returns available.
madman86 12y ago
It is a large part of how people in the US make money. Most people have their retirements tied to the stock markets (401k, 403b, and other options are basically just a huge collection of stocks, commodities, and bonds). If growth doesn't occur, the markets don't do as well and may even fall causing a LOT of people to take a hit in retirement funds.
- hnnewguy 12y ago
  >If growth doesn't occur, the markets don't do as well and may even fall causing a LOT of people to take a hit in retirement funds. It isn't just about "markets". There are actual businesses underlying those financial assets that require economic growth to expand, hire people, pay wages and provide an economic return to their owners (including shareholders).
  - collyw 12y ago
    Patagonia outdoor clothing company recently announced they were aiming for no growth. http://www.greenbiz.com/news/2013/03/01/patagonia-founder-takes-aim-elephant-room-growth http://www.greenbiz.com/news/2013/03/01/patagonia-founder-ta...
    - aranazo 12y ago
      It is also a benefit corporation and thus insulated from normal business incentives.
throwaway43 12y ago
Because otherwise we'd have a revolution over the inequalities in our societies. People don't mind that much as long as everyones pie is growing.
jseliger 12y ago
Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine that people in say 2050 will look back on benighted 2015 and marvel at the shit we had to put up with. What gets us from today to 2050? Economic growth, which is likely tied into lots of other things (like science, production, entrepreneurship, etc.).
- deleted 12y ago
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- xorcist 12y ago
  That's not an answer. You could just as well ask "at what point in time do you consider interest rates low enough"? 0%, -1% or -10%? There's no clear answer for either question, of course, but that doesn't mean we shouldn't discuss them.
  - cloakandswagger 12y ago
    How is it not an answer? He's saying that the "greed" described by the original commenter is the same source of innovation that's given us all of the modern amenities we enjoy today. Conversely, I would say outright dismissing the pursuit of growth is not an answer.
    - gamerdonkey 12y ago
      I would say that outright dismissing any concept is not an answer. I do have a problem with equating greed to innovation and cultural growth. Greed, in economic terms, optimizes only for the accumulation of wealth. Many technological and cultural advances would do nothing to amass wealth and would be missing in a society focused solely on economic growth.
    - Mikeb85 12y ago
mauricemir 12y ago
Ask the Japanese with a Mortgage caught in the deflation spiral.
dualogy 12y ago
> Why the obsession of economic growth? Easy. Essentially unknowable/unpredictable future growth expectations/extrapolations were already baked into present-day voter promises, welfare obligations and many bank/insurance/pension calculations, plus current "financial asset" valuations. Now the big scramble is on to will said growth assumptions into actually happening, lest "all bets will be off", literally.
- dgregd 12y ago
  > many bank/insurance/pension calculations It will also clearly show how big banks, HFT companies are making huge profits. They are slowly pulling money out of your pension fund. Banks do not produce, they have no income from dividends, so how they earn?
  - hnnewguy 12y ago
    >HFT companies are making huge profits Were. Regulation and competition are chipping away at those profits. The days of obscene profits in the Wild West are done.
  - zo1 12y ago
    >"Banks do not produce, they have no income from dividends, so how they earn?" They provide a service. Just because they don't "produce" something by processing raw materials, or less-processed goods, doesn't meant they're not providing something of value to someone. But, additionally and simplistically, they make money from giving out loans at higher interest rates than what they give out at in deposits.
    - jsprogrammer 12y ago
      They don't just give out loans, they create brand new money. They also have a state-enforced and -backed monopoly on this creation of new money. So they do "produce", it's just that what they produce is more or less "fictional" violence tokens.
  - sumedh 12y ago
bwanab 12y ago
You make a very good point. However, the obsession with economic growth itself isn't the problem - it's how economic growth is measured. As an example, if a hurricane sweeps through Florida doing billions in damage, Florida is surely worse off, but because of the rebuilding activity that follows, it will register significant growth. As you state, we need to think about what makes people happy. Economics is a great tool to do that, but it will require a rethinking of how the economy is measured.
- ArkyBeagle 12y ago
  I think (macro) econ is a lousy tool for measuring happiness. Micro might be. Now, some parts of the various econs - like the theory of revealed preferences* - may well be useful in measuring or talking about happiness but taken as a while, it is IMO incumbent on economists to be humble about this. *which teaches us that what people say and what they do are two very different things.
- collyw 12y ago
  This reminds me of when Windows Vista (or was it Windows 7) came out, Microsoft claimed it would lead to more growth, through all the upgrades that would need done. So more work needing done leads to more "growth". There is something backwards in that thinking to me.
- rohansingh 12y ago
  The example you gave about Florida is actually very old, and is summed up in the "parable of the broken window": http://en.wikipedia.org/wiki/Parable_of_the_broken_window http://en.wikipedia.org/wiki/Parable_of_the_broken_window As you can see in the Wikipedia article, there are actually many different interpretations and views on whether or not that rebuilding adds value to the economy.
- TeMPOraL 12y ago
  I disagree. The economic growth is very much the problem. You can multiply abstract integers all you want and everything will be fine, but unfortunately the economy is coupled with the real world. Exponential growth means exponentially increasing resource use and energy needs, which is simply unsustainable. We need to cut off that exponent, or else the only singularity we will hit will be the brick wall of "oh shit, we just run out of habitable planets".
cowsandmilk 12y ago
What part of this post suggests that Bernanke is aimed at growth? Bernanke states the goal of the Fed setting rates is full employment. Low interest rates encourage spending, which cause more people to be employed. Lower unemployment is generally good.
nycticorax 12y ago
What part of the OP do you think reflects an "obsession" with economic growth?
drzaiusapelord 12y ago
>Why the obsession of economic growth? Unemployment in the US is around 5.5%. Growth is correlated with jobs, expendable income, etc. So its important if you want to lower real unemployment. >In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. France went, roughly, this route a decade or two ago. Now they have riots in the streets because young people can't find jobs. Youth unemployment in Spain, UK, Greece, Italy, etc are also scary. The socialist style government does a good job governing the problems of today it seems, but the capitalistic styles does a better job of taking care of the future and the young trying to enter the workforce. Those nations saw their economies as 'good enough' at one time. They were paying out big salaries and pensions to their public sector unions and overtaxing their corporations and made their budget. Now they're in hysterics about employment, real estate bubbles, youth riots, and lack of growth. >>In Sweden I'd also be concerned about your .8% GDP spending on military, which is fairly low, especially in an age of a Russia that routinely sends subs into your territories and annexes lands not too far from you guys. Its weird that we're still applauding the welfare nanny state when its been shown to be fail past a certain point, especially in a country with near 8-9% unemployment. Also your GDP has been raising steadily, so I find it hard to believe that growth isn't' a contributing factor to what you perceive as success: https://www.quandl.com/c/sweden/sweden-economy-data https://www.quandl.com/c/sweden/sweden-economy-data If that was a flat graph you wouldn't be chiding us on the internet. You'd be selling shoe shines for gruel or your poor parents would have elected to not birth you. Also, are you an older established person? Wonderful, but please don't throw down the very ladder that you climbed: Today: http://ycharts.com/indicators/sweden_youth_unemployment_rate_lfs http://ycharts.com/indicators/sweden_youth_unemployment_rate... Still almost 22% youth unemployment. Countries that care about growth, like the USA, have half that level. So yeah, maybe you should care about growth.
- jack9 12y ago
  > Unemployment in the US is around 5.5% That's an official statistic (US Bureau of labor statistics) that is, in all reality, fiction. Might want to look at ANY other analysis, other than the announced statistic. Like simply comparing the (est) population to the (est) jobs. Turns out it's more like 10% at best, but that's not the end. Yahoo, Experian, Amazon, etc. The vast majority of the tech employed have become contractors. At least be reasonable enough to do your research. Saying GDP has increased is another statistical mischaracterization. There has been some very clever manipulation by the USG (http://seekingalpha.com/article/1368001-u-s-governments-new-way-of-calculating-gdp http://seekingalpha.com/article/1368001-u-s-governments-new-...). You seem to be woefully glib about topics you haven't been following. Growth hasn't helped the situation as there hasn't been much at all, if any. Rigid financial systems have failed and will do so again if the interest rate (inevitably?) spirals out of control. The executive branch talking heads and investing-in-debt schemes have been paying off for the last few years. It's been increasingly difficult to determine what lengths the fed will go to, in stabilizing the economy and maintaining a positive spin.
Bootvis 12y ago
The economy needs to grow as quickly as the population because otherwise there would be a reduction in wealth on the individual level. Also, if inequality remains the same the lives of those on the bottom of society see their lives improve. Less essential, but the people here should appreciate it, growing the economy means that young people have the opportunity to develop themselves professionally, e.g start start-ups.
- avn2109 12y ago
  >> "The economy needs to grow as quickly as the population..." In countries with declining populations, ought the economy to contract?
  - ArkyBeagle 12y ago
    Possibly. It depends on how well they do exports.
  - adventured 12y ago
    That can be avoided through productivity gains. Germany's population essentially hasn't increased in 40 years. Their nominal GDP has increased by 15 fold in that time (even after accounting for inflation it's a significant expansion, all due to productivity gains).
  - Bootvis 12y ago
    Well, it probably will if a large number of people leave and that doesn't have to be bad news for the ones that stay. Of course, that will depend on the specific situation. I can't come up with an example where there was a large decline in population in an area on a voluntariy basis.
ArkyBeagle 12y ago
We have nonnegative gains in efficiency and we have population growth. If those are not reflected in the monetary base, then the result is a trend in the direction of deflation. That presents a set of problems, challenges to very deeply established assumptions about things like government, business and personal debt. Deflation leads to instability, as people who want to work cannot - and not for a good reason, but because of monetary "evils". Happiness is rather a dangerous standard to use - it varies widely. Material comfort is more appropriate for discussions involving economics. Low interest rates also contribute to income inequality - if the market interest rate is 0.5% and your business produces returns of 5%, you're now a "rock star" business, and will attract "too much" investment. As there evolves winners and losers in that game, income inequality rises.
- mark_l_watson 12y ago
  You might enjoy reading the Austrian Economics take on this at the mises.org web site. Their front page has a few articles on how (sometimes) deflation is just fine.
  - ArkyBeagle 12y ago
    This ( plus nearly all of Rothbard ) is where I disagree with the Austrians. I don't think specie-fever is particularly an Austrian .. opinion but they're also highly correlated - Austrians tend to be fond of gold. If I win my bet, specie is pretty dramatically a bad idea, as the interwar stories show well enough for me. Austrians in general don't seem to grasp that flows matter as much. When I want to be hyperbolic, I will accuse deflation of being a big contributor to WWII. I just don't like the idea of the level of currency in circulation being a drag on transactions. Throw in that how debt can be a real problem for people, and I just can't go there. I rather giggle at the "Hayek and the suit" story, although I admire Hayek greatly. I'm closest to Friedman/Fisher/(these days)Sumner. Mainly because the story is one of poor instrumentation leading to policy that doesn't do what we want, which suits my biases. "Interfluidity" did an ( I think ) brilliant piece titled "Depression Is A Choice" in which they mused that deflation may well reflect our revealed preferences.
cgh 12y ago
"housing prices are all time high." This is not a good thing and I'm not sure why you seem to think it is. You talk about happiness - one way to help the "happiness quotient" is affordable housing.
- colund 12y ago
  It's true that all time housing prices is not a good thing. But low interest rates helps keep the Swedish housing bubble growing. Low interest rates encourages people to invest big but when the interest rates go back up people risk getting in financial trouble.
  - mcguire 12y ago
    That would answer my question about the availability of loans: there is too much money available. Sounds like Sweden is going to join the rest of us in the Twenty-first Century soon.
collyw 12y ago
"Why the obsession of economic growth?" Because the economy is essentially a Ponzi scheme.
twobits 12y ago
"Why the obsession of economic growth?" Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printed. "Times are bad" = Enough is enough, CBs stop printing, you have to pay/give back, what doesn't exist, ie the interest. Defaults are unavoidable, and the people on top, pick up whatever they want on pennies to the dollar. To put it simply: You print 100 out of thin air. There is no more money in the world. Next year, you owe 110. Where can you find the 10? (Spoiler: You can't.)
- harperlee 12y ago
  Assuming that you can create value of 11 or more with that 100, someone can exchange 11 of their future / current / past effort (with money), (s)he pays you, you pay your debt, and you now have 1 or more to be at the other side of the transaction. Unless you state that all value in the world is fixed, a zero sum game, that argument of the "Money as debt" documentary doesn't really hold water.
  - twobits 12y ago
    Value is definitely and obviously not fixed. It increases with effort, creativity, work, inventions, etc. But you pay for value with money. And you don't control that, and someone else controls how much, or not at all, you have access to. ..ie, you get 100 to (try to) invent X. You deliver. You give a lot of value to the world. But the CBs decided to cut printing money, and tomorrow you have to pay back 110. Your work, gave (new) value. But that's irrelevant. You can't find the 10. You are bankrupt. The people on top, get your work (which is 100+50 in new value), for 20. You still owe. Have a good day.
  - dismal2 12y ago
    Money is absolutely debt, are you claiming that it isn't?
- randyrand 12y ago
adventured 12y ago
To acquire the high salaries you're talking about, Sweden had to grow substantially at some point in the past. The 1970s and 1980s were terrible times in Sweden economically. You had to grow out of that through economic reforms. http://www.forbes.com/forbes/2009/0803/international-invest-guide-obama-sweden-public-downsizing.html http://www.forbes.com/forbes/2009/0803/international-invest-... From 2001 to 2014, Sweden's GDP per capita went from $26,000 to $60,000. Surely you didn't need any of that growth, right? It's easy to soap-box about greed, when ~90% of the world is far worse off than you are. Sweden also has a consumer debt vs disposable income ratio of 180%, one of the highest on earth, and it's brewing into a crisis. Without the high salaries, courtesy of past growth (since Sweden's economy hasn't expanded since 2008), Sweden would currently be in a crisis economically due to the very high individual debt levels. Most likely in the future to deal with those debts, Sweden will have to slash its standard of living, or boost its growth. Nobody likes to go backwards in comfort, and that's why the 'obsession' with growth - you can't stand still for very long, you either have to go forward or you will go backwards. http://www.reuters.com/article/2014/11/09/sweden-economy-idUSL6N0SU28K20141109 http://www.reuters.com/article/2014/11/09/sweden-economy-idU... http://www.bloomberg.com/news/articles/2014-01-13/nordic-crisis-waiting-to-happen-puzzles-krugman-assessing-debts http://www.bloomberg.com/news/articles/2014-01-13/nordic-cri...
branchless 12y ago
"House prices at an all time high" So young people are poorer - this is not good. The wealth effect will wear off for older people who have housing and then the young are left passing over more of their labour to older people and banks.
cmdkeen 12y ago
Because not everyone has a Swedish lifestyle, and you seem to be stretching the upper bounds of immigration. So how do you propose dealing with the 1 billion+ people in the world who need their stands of living increased? Capitalism has worked wonders at relieving poverty across the globe. It may have led to wage stagnation in outsource-able jobs in the West but it has led to a huge global poverty reduction. Even in Europe it has led to mass improvements in jobs that can't be outsourced, including plenty of blue collar jobs. Maslow's hierarchy of needs is 72 years old now, it isn't rocket science, people can only be happy in their circumstances if their more basic needs are met.
mcguire 12y ago
"...negative prime interest rate and [...] housing prices are all time high." Wait. How does that work? Negative prime interest rate -> no loans available -> housing (and other credit-oriented purchase) prices fall.
- adventured 12y ago
  Negative interest rates doesn't mean no loans are available, it means the central bank is charging banks for the deposits they hold and typically that gets passed along to savers. One theory behind it is to force savers to spend, by adding a cost to their savings. And to force banks to lend, by adding a cost to their cash holdings. Something the parent comment doesn't seem to realize, is that having negative interest rates is a sign your economy is not functioning properly. If you have to resort to negative interest rates to keep assets from falling in value, and to drive consumer spending or bank loans, then you're already in deep trouble. Sweden's negative interest rates are likely an indication that a storm is coming for them; were they to raise interest rates it would cause a recession; and if they don't raise interest rates, their real estate bubble will continue to inflate until it explodes. They have to take their medicine one way or another. Here's a good summary of how it works: http://www.bloombergview.com/quicktake/negative-interest-rates http://www.bloombergview.com/quicktake/negative-interest-rat...
anigbrowl 12y ago
Because of population growth, which is slowing but far from finished. If the population is getting larger and the economy is not, then there are fewer economic resources available per person. Also, even in a stable population, if there is no economic growth then there tends to be an increase in economic inequality, because then economic transactions are zero-sum in the aggregate (by definition) and so the people who have more money at the beginning have leverage in any economic negotiation, ie they are more likely to be price makers than takers. Economics is efficient management of resources nothing else. Giving the population ability to stay healthy with affordable health care, moderate taxes and stability should be a main priority. Those things are economics problems. 'Efficient management of resources' is really quite complex, even if everyone were agreed about what we consider efficient, which we're not.
randyrand 12y ago
Giving the population ability to stay healthy with affordable health care, moderate taxes and stability should be a main priority You can only do this with growth. In 1700 you couldn't afford good healtcare even if you were king. It simply didn't existed. In 2015 you could't travel on roads without the constant threat of death. In 2017 you couldn't use VR to keep in touch with loved ones. In 2030 you couldn't live in old age independently because of fatigue and weakness. Now in 2100, we have solved all of these problems. People are healthier, taxes are low and declining. People are happy, safe, and free to do as they want. This is why I am thankful for progress. What a time to be alive.
ci5er 12y ago
> In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high To which I say: Good for you! > Why the obsession of economic growth? There are many reasons. Here is one: http://ourworldindata.org/data/growth-and-distribution-of-prosperity/world-poverty/#declining-global-poverty-1820-2010-share-of-people-living-in-extreme-poverty-max-roserref http://ourworldindata.org/data/growth-and-distribution-of-pr... Our work is not here done. Except, maybe in Sweden.
mikeash 12y ago
One big reason I want economic growth is because I want to live a lot longer than the standard 80-90 years in perfect health, and I want the same for my loved ones. Affordable health care is great, but what you get for it right now frankly sucks. No matter how affordable your health care is, or no matter how rich you are and how much money you pour into it, you're going to die fairly soon, and probably go through a lot of horrible problems on the way. I want health care that's so advanced it's "perfect." I want people to routinely choose when to die rather than having it thrust upon them. I want forgetting the names of your children to be as weird and old-fashioned as dying of smallpox. The research and development needed to get there has a high economic cost, and growth is how you can pay for it.
EGreg 12y ago
Indeed. Endless economic growth comes atthe expense of negative externalities. Companies are incentivized to produce more - or their competitors will - by using up more of the planet's resources and producing more waste, forever. This is unsustainable. At current rates, how long can this planet sustain our growth in consumption? The main underlying cause of this is population growth. If countries can learn to break their dependency on a social security pyramid, by leveraging the increased productivity that automation enables, then countries like Japan with a graying population can in fact become nations of fewer, more affluent people. Scientific and technological advancement does NOT have to depend on more consumer crap marketed and sold to more people.
jedharris 12y ago
There are two very different senses of "growth" here. The good sense is that better ways of doing things is "growth" -- for example cheaper more efficient solar panels can slow global warming, reduce centralized power, etc. The bad sense is increased GDP, more stuff, etc. There's no strong reason good growth has to produce bad growth. We can decouple them.

by colund 12y ago

wvenable 12y ago

In the US and many other places, economic growth is essentially the retirement plan.

vasilipupkin 12y ago

economic growth, albeit imperfect, is a measure of things getting better for society. So, we should worry about worldwide economic growth, but not necessarily Swedish economic growth. Another point is, lack of growth is a leading indicator of the situation getting worse in the future, even if it is pretty good now. So, yes, economic growth is an imperfect measure, but we have few if any alternatives to economic growth in terms of assessing how things are going in an objective way

TheOtherHobbes 12y ago
Not so much imperfect as deceptively irrelevant. "Growth" has absolutely nothing useful to say about "things getting better for society." Things get better for society when jobs pay well, high quality education is freely accessible, talent and creativity are rewarded, cost of entry for entrepreneurship is low, and ecological support systems are stable. There's nothing even remotely difficult about measuring these factors. "Growth" is just a convenient way to disguise increasing inequality and decreasing economic freedom for the majority of the population. If the growth is never distributed it's a useless metric.
- vasilipupkin 12y ago
  try to think in terms of statistical models, rather than absolute statements. Imagine a continuum in which things you mention receive a numerical score. Growth is a number. It is a number which will have a non-zero correlation with the numerical scores of the things you mention. You can also build models that try to forecast growth based on those scores, and vice versa, forecast those scores based on growth. Once you think in those terms, you can dispense with terminology such as "irrelevant", "useless", "absolutely nothing", etc.
- ArkyBeagle 12y ago
  Inequality seems to be mostly inversely proportional to growth. Low interest rates are fertile soil for inequality. If I can just buy Certificates of Deposit and live off the interest, instead of having to invest directly, that seems to me to be more egalitarian than less. Low interest rates brighten the line between us ordinary people and professional investors.

Mikeb85 12y ago

Because economic growth is the only way to pay off the massive amounts of debt that currently exist. The US needs to constantly grow and acquire more and more resources, labour and capital or else it will cease being the way it currently is...

Someone 12y ago
Inflation also is a way to get rid of debt. A few years with 10% inflation would do wonders for the debt of most countries, provided that their debt is in their own currency.
- kardashev 12y ago
  Inflation would be a way to get rid of debt, but it literally takes money from the poor and working class and gives it to the rich. 10% inflation is equivalent to a person's salary going down by 10%. Also, any savings you had would be eaten up by 10%. Inflation is the same as taking people's money to pay debt. It's not some magic thing that makes debt go poof.
  - Someone 12y ago
    If you manage to combine a x% inflation with a x% rise in welfare payments and of worker's income, people with relatively little money in the bank will not suffer much. That includes the poor and the very rich (who likely will have invested a large fraction of their savings). The clear winners will be those with relatively high debts, the losers those who have been saving, but not investing. Is it fair to tax the ants while rescuing the grasshoppers? No, but if the country as a whole is a grasshopper, it may be the best one can do. A side effect of this strategy is that it teaches ants to invest, rather than put money in the bank. That's another reason why many countries aim for inflation.
    - cmdkeen 12y ago
      The unfortunate side effect is that it shafts pensioners who should not be investing in equities because of the time scales involved. The UK (though a hefty dose of electioneering is involved) is offering bonds to pensioners which pay a higher coupon to offset the low gilt returns available.

madman86 12y ago

It is a large part of how people in the US make money. Most people have their retirements tied to the stock markets (401k, 403b, and other options are basically just a huge collection of stocks, commodities, and bonds). If growth doesn't occur, the markets don't do as well and may even fall causing a LOT of people to take a hit in retirement funds.

hnnewguy 12y ago
>If growth doesn't occur, the markets don't do as well and may even fall causing a LOT of people to take a hit in retirement funds. It isn't just about "markets". There are actual businesses underlying those financial assets that require economic growth to expand, hire people, pay wages and provide an economic return to their owners (including shareholders).
- collyw 12y ago
  Patagonia outdoor clothing company recently announced they were aiming for no growth. http://www.greenbiz.com/news/2013/03/01/patagonia-founder-takes-aim-elephant-room-growth http://www.greenbiz.com/news/2013/03/01/patagonia-founder-ta...
  - aranazo 12y ago
    It is also a benefit corporation and thus insulated from normal business incentives.

throwaway43 12y ago

Because otherwise we'd have a revolution over the inequalities in our societies. People don't mind that much as long as everyones pie is growing.

jseliger 12y ago

Why the obsession of economic growth? One alternate question might be, "At what point in time do you consider the economy to have become 'big enough' that you don't care about growth?" Today? 2000? 1990? 1970? The people who might think today is "big enough" might also have thought that say 1990 was big enough, and yet very few people would want to be limited to 1990's tech / culture. It seems reasonable to imagine that people in say 2050 will look back on benighted 2015 and marvel at the shit we had to put up with. What gets us from today to 2050? Economic growth, which is likely tied into lots of other things (like science, production, entrepreneurship, etc.).

deleted 12y ago
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xorcist 12y ago
That's not an answer. You could just as well ask "at what point in time do you consider interest rates low enough"? 0%, -1% or -10%? There's no clear answer for either question, of course, but that doesn't mean we shouldn't discuss them.
- cloakandswagger 12y ago
  How is it not an answer? He's saying that the "greed" described by the original commenter is the same source of innovation that's given us all of the modern amenities we enjoy today. Conversely, I would say outright dismissing the pursuit of growth is not an answer.
  - gamerdonkey 12y ago
    I would say that outright dismissing any concept is not an answer. I do have a problem with equating greed to innovation and cultural growth. Greed, in economic terms, optimizes only for the accumulation of wealth. Many technological and cultural advances would do nothing to amass wealth and would be missing in a society focused solely on economic growth.
  - Mikeb85 12y ago

mauricemir 12y ago

Ask the Japanese with a Mortgage caught in the deflation spiral.

dualogy 12y ago

> Why the obsession of economic growth? Easy. Essentially unknowable/unpredictable future growth expectations/extrapolations were already baked into present-day voter promises, welfare obligations and many bank/insurance/pension calculations, plus current "financial asset" valuations. Now the big scramble is on to will said growth assumptions into actually happening, lest "all bets will be off", literally.

dgregd 12y ago
> many bank/insurance/pension calculations It will also clearly show how big banks, HFT companies are making huge profits. They are slowly pulling money out of your pension fund. Banks do not produce, they have no income from dividends, so how they earn?
- hnnewguy 12y ago
  >HFT companies are making huge profits Were. Regulation and competition are chipping away at those profits. The days of obscene profits in the Wild West are done.
- zo1 12y ago
  >"Banks do not produce, they have no income from dividends, so how they earn?" They provide a service. Just because they don't "produce" something by processing raw materials, or less-processed goods, doesn't meant they're not providing something of value to someone. But, additionally and simplistically, they make money from giving out loans at higher interest rates than what they give out at in deposits.
  - jsprogrammer 12y ago
    They don't just give out loans, they create brand new money. They also have a state-enforced and -backed monopoly on this creation of new money. So they do "produce", it's just that what they produce is more or less "fictional" violence tokens.
- sumedh 12y ago

bwanab 12y ago

You make a very good point. However, the obsession with economic growth itself isn't the problem - it's how economic growth is measured. As an example, if a hurricane sweeps through Florida doing billions in damage, Florida is surely worse off, but because of the rebuilding activity that follows, it will register significant growth. As you state, we need to think about what makes people happy. Economics is a great tool to do that, but it will require a rethinking of how the economy is measured.

ArkyBeagle 12y ago
I think (macro) econ is a lousy tool for measuring happiness. Micro might be. Now, some parts of the various econs - like the theory of revealed preferences* - may well be useful in measuring or talking about happiness but taken as a while, it is IMO incumbent on economists to be humble about this. *which teaches us that what people say and what they do are two very different things.
collyw 12y ago
This reminds me of when Windows Vista (or was it Windows 7) came out, Microsoft claimed it would lead to more growth, through all the upgrades that would need done. So more work needing done leads to more "growth". There is something backwards in that thinking to me.
rohansingh 12y ago
The example you gave about Florida is actually very old, and is summed up in the "parable of the broken window": http://en.wikipedia.org/wiki/Parable_of_the_broken_window http://en.wikipedia.org/wiki/Parable_of_the_broken_window As you can see in the Wikipedia article, there are actually many different interpretations and views on whether or not that rebuilding adds value to the economy.
TeMPOraL 12y ago
I disagree. The economic growth is very much the problem. You can multiply abstract integers all you want and everything will be fine, but unfortunately the economy is coupled with the real world. Exponential growth means exponentially increasing resource use and energy needs, which is simply unsustainable. We need to cut off that exponent, or else the only singularity we will hit will be the brick wall of "oh shit, we just run out of habitable planets".

cowsandmilk 12y ago

What part of this post suggests that Bernanke is aimed at growth? Bernanke states the goal of the Fed setting rates is full employment. Low interest rates encourage spending, which cause more people to be employed. Lower unemployment is generally good.

nycticorax 12y ago

What part of the OP do you think reflects an "obsession" with economic growth?

drzaiusapelord 12y ago

>Why the obsession of economic growth? Unemployment in the US is around 5.5%. Growth is correlated with jobs, expendable income, etc. So its important if you want to lower real unemployment. >In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high. France went, roughly, this route a decade or two ago. Now they have riots in the streets because young people can't find jobs. Youth unemployment in Spain, UK, Greece, Italy, etc are also scary. The socialist style government does a good job governing the problems of today it seems, but the capitalistic styles does a better job of taking care of the future and the young trying to enter the workforce. Those nations saw their economies as 'good enough' at one time. They were paying out big salaries and pensions to their public sector unions and overtaxing their corporations and made their budget. Now they're in hysterics about employment, real estate bubbles, youth riots, and lack of growth. >>In Sweden I'd also be concerned about your .8% GDP spending on military, which is fairly low, especially in an age of a Russia that routinely sends subs into your territories and annexes lands not too far from you guys. Its weird that we're still applauding the welfare nanny state when its been shown to be fail past a certain point, especially in a country with near 8-9% unemployment. Also your GDP has been raising steadily, so I find it hard to believe that growth isn't' a contributing factor to what you perceive as success: https://www.quandl.com/c/sweden/sweden-economy-data https://www.quandl.com/c/sweden/sweden-economy-data If that was a flat graph you wouldn't be chiding us on the internet. You'd be selling shoe shines for gruel or your poor parents would have elected to not birth you. Also, are you an older established person? Wonderful, but please don't throw down the very ladder that you climbed: Today: http://ycharts.com/indicators/sweden_youth_unemployment_rate_lfs http://ycharts.com/indicators/sweden_youth_unemployment_rate... Still almost 22% youth unemployment. Countries that care about growth, like the USA, have half that level. So yeah, maybe you should care about growth.

jack9 12y ago
> Unemployment in the US is around 5.5% That's an official statistic (US Bureau of labor statistics) that is, in all reality, fiction. Might want to look at ANY other analysis, other than the announced statistic. Like simply comparing the (est) population to the (est) jobs. Turns out it's more like 10% at best, but that's not the end. Yahoo, Experian, Amazon, etc. The vast majority of the tech employed have become contractors. At least be reasonable enough to do your research. Saying GDP has increased is another statistical mischaracterization. There has been some very clever manipulation by the USG (http://seekingalpha.com/article/1368001-u-s-governments-new-way-of-calculating-gdp http://seekingalpha.com/article/1368001-u-s-governments-new-...). You seem to be woefully glib about topics you haven't been following. Growth hasn't helped the situation as there hasn't been much at all, if any. Rigid financial systems have failed and will do so again if the interest rate (inevitably?) spirals out of control. The executive branch talking heads and investing-in-debt schemes have been paying off for the last few years. It's been increasingly difficult to determine what lengths the fed will go to, in stabilizing the economy and maintaining a positive spin.

Bootvis 12y ago

The economy needs to grow as quickly as the population because otherwise there would be a reduction in wealth on the individual level. Also, if inequality remains the same the lives of those on the bottom of society see their lives improve. Less essential, but the people here should appreciate it, growing the economy means that young people have the opportunity to develop themselves professionally, e.g start start-ups.

avn2109 12y ago
>> "The economy needs to grow as quickly as the population..." In countries with declining populations, ought the economy to contract?
- ArkyBeagle 12y ago
  Possibly. It depends on how well they do exports.
- adventured 12y ago
  That can be avoided through productivity gains. Germany's population essentially hasn't increased in 40 years. Their nominal GDP has increased by 15 fold in that time (even after accounting for inflation it's a significant expansion, all due to productivity gains).
- Bootvis 12y ago
  Well, it probably will if a large number of people leave and that doesn't have to be bad news for the ones that stay. Of course, that will depend on the specific situation. I can't come up with an example where there was a large decline in population in an area on a voluntariy basis.

ArkyBeagle 12y ago

We have nonnegative gains in efficiency and we have population growth. If those are not reflected in the monetary base, then the result is a trend in the direction of deflation. That presents a set of problems, challenges to very deeply established assumptions about things like government, business and personal debt. Deflation leads to instability, as people who want to work cannot - and not for a good reason, but because of monetary "evils". Happiness is rather a dangerous standard to use - it varies widely. Material comfort is more appropriate for discussions involving economics. Low interest rates also contribute to income inequality - if the market interest rate is 0.5% and your business produces returns of 5%, you're now a "rock star" business, and will attract "too much" investment. As there evolves winners and losers in that game, income inequality rises.

mark_l_watson 12y ago
You might enjoy reading the Austrian Economics take on this at the mises.org web site. Their front page has a few articles on how (sometimes) deflation is just fine.
- ArkyBeagle 12y ago
  This ( plus nearly all of Rothbard ) is where I disagree with the Austrians. I don't think specie-fever is particularly an Austrian .. opinion but they're also highly correlated - Austrians tend to be fond of gold. If I win my bet, specie is pretty dramatically a bad idea, as the interwar stories show well enough for me. Austrians in general don't seem to grasp that flows matter as much. When I want to be hyperbolic, I will accuse deflation of being a big contributor to WWII. I just don't like the idea of the level of currency in circulation being a drag on transactions. Throw in that how debt can be a real problem for people, and I just can't go there. I rather giggle at the "Hayek and the suit" story, although I admire Hayek greatly. I'm closest to Friedman/Fisher/(these days)Sumner. Mainly because the story is one of poor instrumentation leading to policy that doesn't do what we want, which suits my biases. "Interfluidity" did an ( I think ) brilliant piece titled "Depression Is A Choice" in which they mused that deflation may well reflect our revealed preferences.

cgh 12y ago

"housing prices are all time high." This is not a good thing and I'm not sure why you seem to think it is. You talk about happiness - one way to help the "happiness quotient" is affordable housing.

colund 12y ago
It's true that all time housing prices is not a good thing. But low interest rates helps keep the Swedish housing bubble growing. Low interest rates encourages people to invest big but when the interest rates go back up people risk getting in financial trouble.
- mcguire 12y ago
  That would answer my question about the availability of loans: there is too much money available. Sounds like Sweden is going to join the rest of us in the Twenty-first Century soon.

collyw 12y ago

"Why the obsession of economic growth?" Because the economy is essentially a Ponzi scheme.

twobits 12y ago

"Why the obsession of economic growth?" Because central banks (CB) print money out of thin air. That "money" is debt. You print 100, you owe 110 counting interest. How can you pay the 10, if you only printed/exists, 100? You can't. You, me, everyone, is a debt slave. "Times are good" = CBs print a lot of money (out of thin air). A lot of non existant interest too, but you don't notice, cause more money/debt is printed. "Times are bad" = Enough is enough, CBs stop printing, you have to pay/give back, what doesn't exist, ie the interest. Defaults are unavoidable, and the people on top, pick up whatever they want on pennies to the dollar. To put it simply: You print 100 out of thin air. There is no more money in the world. Next year, you owe 110. Where can you find the 10? (Spoiler: You can't.)

harperlee 12y ago
Assuming that you can create value of 11 or more with that 100, someone can exchange 11 of their future / current / past effort (with money), (s)he pays you, you pay your debt, and you now have 1 or more to be at the other side of the transaction. Unless you state that all value in the world is fixed, a zero sum game, that argument of the "Money as debt" documentary doesn't really hold water.
- twobits 12y ago
  Value is definitely and obviously not fixed. It increases with effort, creativity, work, inventions, etc. But you pay for value with money. And you don't control that, and someone else controls how much, or not at all, you have access to. ..ie, you get 100 to (try to) invent X. You deliver. You give a lot of value to the world. But the CBs decided to cut printing money, and tomorrow you have to pay back 110. Your work, gave (new) value. But that's irrelevant. You can't find the 10. You are bankrupt. The people on top, get your work (which is 100+50 in new value), for 20. You still owe. Have a good day.
- dismal2 12y ago
  Money is absolutely debt, are you claiming that it isn't?
randyrand 12y ago

adventured 12y ago

To acquire the high salaries you're talking about, Sweden had to grow substantially at some point in the past. The 1970s and 1980s were terrible times in Sweden economically. You had to grow out of that through economic reforms. http://www.forbes.com/forbes/2009/0803/international-invest-guide-obama-sweden-public-downsizing.html http://www.forbes.com/forbes/2009/0803/international-invest-... From 2001 to 2014, Sweden's GDP per capita went from $26,000 to $60,000. Surely you didn't need any of that growth, right? It's easy to soap-box about greed, when ~90% of the world is far worse off than you are. Sweden also has a consumer debt vs disposable income ratio of 180%, one of the highest on earth, and it's brewing into a crisis. Without the high salaries, courtesy of past growth (since Sweden's economy hasn't expanded since 2008), Sweden would currently be in a crisis economically due to the very high individual debt levels. Most likely in the future to deal with those debts, Sweden will have to slash its standard of living, or boost its growth. Nobody likes to go backwards in comfort, and that's why the 'obsession' with growth - you can't stand still for very long, you either have to go forward or you will go backwards. http://www.reuters.com/article/2014/11/09/sweden-economy-idUSL6N0SU28K20141109 http://www.reuters.com/article/2014/11/09/sweden-economy-idU... http://www.bloomberg.com/news/articles/2014-01-13/nordic-crisis-waiting-to-happen-puzzles-krugman-assessing-debts http://www.bloomberg.com/news/articles/2014-01-13/nordic-cri...

branchless 12y ago

"House prices at an all time high" So young people are poorer - this is not good. The wealth effect will wear off for older people who have housing and then the young are left passing over more of their labour to older people and banks.

cmdkeen 12y ago

Because not everyone has a Swedish lifestyle, and you seem to be stretching the upper bounds of immigration. So how do you propose dealing with the 1 billion+ people in the world who need their stands of living increased? Capitalism has worked wonders at relieving poverty across the globe. It may have led to wage stagnation in outsource-able jobs in the West but it has led to a huge global poverty reduction. Even in Europe it has led to mass improvements in jobs that can't be outsourced, including plenty of blue collar jobs. Maslow's hierarchy of needs is 72 years old now, it isn't rocket science, people can only be happy in their circumstances if their more basic needs are met.

mcguire 12y ago

"...negative prime interest rate and [...] housing prices are all time high." Wait. How does that work? Negative prime interest rate -> no loans available -> housing (and other credit-oriented purchase) prices fall.

adventured 12y ago
Negative interest rates doesn't mean no loans are available, it means the central bank is charging banks for the deposits they hold and typically that gets passed along to savers. One theory behind it is to force savers to spend, by adding a cost to their savings. And to force banks to lend, by adding a cost to their cash holdings. Something the parent comment doesn't seem to realize, is that having negative interest rates is a sign your economy is not functioning properly. If you have to resort to negative interest rates to keep assets from falling in value, and to drive consumer spending or bank loans, then you're already in deep trouble. Sweden's negative interest rates are likely an indication that a storm is coming for them; were they to raise interest rates it would cause a recession; and if they don't raise interest rates, their real estate bubble will continue to inflate until it explodes. They have to take their medicine one way or another. Here's a good summary of how it works: http://www.bloombergview.com/quicktake/negative-interest-rates http://www.bloombergview.com/quicktake/negative-interest-rat...

anigbrowl 12y ago

Because of population growth, which is slowing but far from finished. If the population is getting larger and the economy is not, then there are fewer economic resources available per person. Also, even in a stable population, if there is no economic growth then there tends to be an increase in economic inequality, because then economic transactions are zero-sum in the aggregate (by definition) and so the people who have more money at the beginning have leverage in any economic negotiation, ie they are more likely to be price makers than takers. Economics is efficient management of resources nothing else. Giving the population ability to stay healthy with affordable health care, moderate taxes and stability should be a main priority. Those things are economics problems. 'Efficient management of resources' is really quite complex, even if everyone were agreed about what we consider efficient, which we're not.

randyrand 12y ago

Giving the population ability to stay healthy with affordable health care, moderate taxes and stability should be a main priority You can only do this with growth. In 1700 you couldn't afford good healtcare even if you were king. It simply didn't existed. In 2015 you could't travel on roads without the constant threat of death. In 2017 you couldn't use VR to keep in touch with loved ones. In 2030 you couldn't live in old age independently because of fatigue and weakness. Now in 2100, we have solved all of these problems. People are healthier, taxes are low and declining. People are happy, safe, and free to do as they want. This is why I am thankful for progress. What a time to be alive.

ci5er 12y ago

> In Sweden we currently have negative prime interest rate and people have higher salaries than ever and housing prices are all time high To which I say: Good for you! > Why the obsession of economic growth? There are many reasons. Here is one: http://ourworldindata.org/data/growth-and-distribution-of-prosperity/world-poverty/#declining-global-poverty-1820-2010-share-of-people-living-in-extreme-poverty-max-roserref http://ourworldindata.org/data/growth-and-distribution-of-pr... Our work is not here done. Except, maybe in Sweden.

mikeash 12y ago

One big reason I want economic growth is because I want to live a lot longer than the standard 80-90 years in perfect health, and I want the same for my loved ones. Affordable health care is great, but what you get for it right now frankly sucks. No matter how affordable your health care is, or no matter how rich you are and how much money you pour into it, you're going to die fairly soon, and probably go through a lot of horrible problems on the way. I want health care that's so advanced it's "perfect." I want people to routinely choose when to die rather than having it thrust upon them. I want forgetting the names of your children to be as weird and old-fashioned as dying of smallpox. The research and development needed to get there has a high economic cost, and growth is how you can pay for it.

EGreg 12y ago

Indeed. Endless economic growth comes atthe expense of negative externalities. Companies are incentivized to produce more - or their competitors will - by using up more of the planet's resources and producing more waste, forever. This is unsustainable. At current rates, how long can this planet sustain our growth in consumption? The main underlying cause of this is population growth. If countries can learn to break their dependency on a social security pyramid, by leveraging the increased productivity that automation enables, then countries like Japan with a graying population can in fact become nations of fewer, more affluent people. Scientific and technological advancement does NOT have to depend on more consumer crap marketed and sold to more people.

jedharris 12y ago

There are two very different senses of "growth" here. The good sense is that better ways of doing things is "growth" -- for example cheaper more efficient solar panels can slow global warming, reduce centralized power, etc. The bad sense is increased GDP, more stuff, etc. There's no strong reason good growth has to produce bad growth. We can decouple them.