Unlimited economic growth

A commentary by Martin Wolf in Today titled “Is unlimited growth a thing of the past?”

There are two kinds of economic growth: that driven by population increases, and the other driven by productivity per person.

The cap on population-driven economic growth depends on the carrying capacity of the planet. The limit is obvious: there is only so much resources for a finite number of people.

The cap on productivity-driven economic growth is not so obvious. Technology can contribute both to increased resource use as well as increased efficiency of resource use, so the problem is not directly related to limited resources. The question is whether human innovation is infinite.

Much of the article reflects on a paper by an economist Robert Gordon which has kicked up quite some interest. The observation is that most of the greatest productivity improvements that have lasting impacts on our lives were the first ones: the industrial revolution and early advances of science, especially medicine. The more recent ones show a gradual decline in important and permanence of their effects.

In the 2000s, the impact of the information revolution has come largely via enthralling entertainment and communication devices. How important is this? Prof Gordon proposes a thought-experiment. You may keep either the brilliant devices invented since 2002 or running water and inside lavatories. I will throw in Facebook. Does that make you change your mind? I thought not. I would not keep everything invented since 1970 if the alternative were losing running water.

So the prediction is that growth will stall, at least in the near future, for advanced economies like ours, while the less developed rest of the world catches up. Maybe that should shape our mindset from now on.

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