DeDevelopment Neg cfjmp lab’s DeDev File Uniqueness
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- Renewable technology makes infinite growth possible
- US economic collapse is not inevitable - laundry list of reasons
- AT: Mindset Shift AT: Collapse Inev
- Sustainable and infinite growth is possible - mathematically proven
- Human ingenuity solves resource constraints.
- Self-correction is inherent to capitalism
- Infinite econ growth possible—depends on productivity
- AT: US Econ Collapse Inev
Dedevelopment AffMisc.2AC DedevMindset shift failsGöpel 4/28 - Maja Göpel heads the Berlin office of the Wuppertal Institute for Climate, Environment and Energy. Her research focuses on system transformations and new prosperity models. Preceding this post she helped start up the World Future Council and later directed its Future Justice program with a focus on the representation of future generations and long-termism in current governance structures. Maja has a PhD in political economy and diploma in media/communications, she lectures at universities and enjoys working in international networks. (2014, Maja, Postwachstum, “Getting to Postgrowth: The Transformative Power of Mind- and Paradigm Shifts”, http://blog.postwachstum.de/getting-to-postgrowth-the-transformative-power-of-mind-and-paradigm-shifts-20140428 // SM) The socio-economic concept of path dependencies sheds some light on the underlying reasons: if the status quo is challenged, it translates into a deviation from the “normal” way of doing things which creates higher transaction costs, (presumably) higher risks and a fear of losing roles, identities and privileges. On top of this, standardized procedures, legal institutionalization and the creation of material-economic infrastructures leads to further lock-ins that take a lot of political will to change. This plethora of self-stabilizing path dependencies in our minds and institutions is what Antonio Gramsci captured in his concept of hegemony. Next to the more visible exertion of power in form of money, jurisdiction or other types of coercion, it is the widely established convictions and canonized knowledge, cultural narratives, belief-systems and the “derived needs” in a given society that play out in favor of those benefiting from the status quo.[1] These allow for “leadership with least resistance”, if supported by a programmatic “social myth” which provides the imagination and justifications as to why this particular set of values, norms, practices, institutions and regulations is of general interest. The idea of endless economic growth benefiting all may have been the most powerful example for such a social myth. Its perseverance has been the biggest roadblock for getting the sustainable development agenda on track. The Rio Declaration of the United Nations made sustainable development the overarching policy principle of international cooperation. According to its official definition it means development that “meets the needs of the present without compromising the ability of future generations to meet their own needs” while giving priority to the needs of the poor and acknowledging the limitations that social and technological activities impose on nature’s ability to replenish means. [2] Economic, social and environmental concerns were to be integrated. What happened instead was that environmental and social aspects were fitted into the economic growth story and its underlying paradigm- which tells us nothing meaningful about human needs and keeps us blind to natural reproduction cycles. Needs are reduced to the general concept of “utility maximization” and, based on the ontological assumption that humans are selfish, insatiable and rational, it is concluded that this goal is best serviced by ever increasing consumption. Equipped with so-defined “representative actors”, markets in which everything of value will find a price and is subject to supply and demand, are considered the most efficient and just institutions for progress. Consequently, it is assumed that wealth accumulation on the top will trickle down to the poor as long as they offer anything valuable. According to this rationale of universal monetarization, the need to assess nature’s ability to replenish resources became unnecessary. The concept of “capital substitutability” crept into our development story which means that loss of nature can be compensated by other capital or input factors created by humans. As a consequence, the myth of economic growth became shielded against the attack of “limits to growth” reports and co-opted into the hegemonic regime, as Antonio Gramsci would say. No atlternatives Mead 09 – Walter Russell, Henry A. Kissinger Senior Fellow in U.S. Foreign Policy at the Council on Foreign Relations and the author of God and Gold: Britain, America and the Making of the Modern World. Lauren Gottlieb provided research assistance for this article. February 04, 2009 http://www.tnr.com/article/only-makes-you-stronger “Only Makes You Stronger: Why the recession bolstered America” But, in many other countries where capitalism rubs people the wrong way, this is not the case. On either side of the Atlantic, for example, the Latin world is often drawn to anti-capitalist movements and rulers on both the right and the left. Russia, too, has never really taken to capitalism and liberal society--whether during the time of the czars, the commissars, or the post-cold war leaders who so signally failed to build a stable, open system of liberal democratic capitalism even as many former Warsaw Pact nations were making rapid transitions. Partly as a result of these internal cultural pressures, and partly because, in much of the world, capitalism has appeared as an unwelcome interloper, imposed by foreign forces and shaped to fit foreign rather than domestic interests and preferences, many countries are only half-heartedly capitalist. When crisis strikes, they are quick to decide that capitalism is a failure and look for alternatives. So far, such half-hearted experiments not only have failed to work; they have left the societies that have tried them in a progressively worse position, farther behind the front-runners as time goes by. Argentina has lost ground to Chile; Russian development has fallen farther behind that of the Baltic states and Central Europe. Frequently, the crisis has weakened the power of the merchants, industrialists, financiers, and professionals who want to develop a liberal capitalist society integrated into the world. Crisis can also strengthen the hand of religious extremists, populist radicals, or authoritarian traditionalists who are determined to resist liberal capitalist society for a variety of reasons. Meanwhile, the companies and banks based in these societies are often less established and more vulnerable to the consequences of a financial crisis than more established firms in wealthier societies.
None of which means that we can just sit back and enjoy the recession. History may suggest that financial crises actually help capitalist great powers maintain their leads--but it has other, less reassuring messages as well. If financial crises have been a normal part of life during the 300-year rise of the liberal capitalist system under the Anglophone powers, so has war. The wars of the League of Augsburg and the Spanish Succession; the Seven Years War; the American Revolution; the Napoleonic Wars; the two World Wars; the cold war: The list of wars is almost as long as the list of financial crises. Renewable technology makes infinite growth possibleWorstall 12 (Tim, Senior Fellow at the Adam Smith Institute in London, and one of the global experts on the metal scandium, "Infinite growth on a finite planet? Easy-peasy!", May 18 2012, http://blogs.telegraph.co.uk/finance/timworstall/100017248/infinite-growth-on-a-finite-planet-easy-peasy/) You'll have heard this before, no doubt: infinite growth is impossible on a finite planet. It's something of a mantra for environmentalists and is used as absolute proof that we're just going to have to do without that pesky economic growth thing. The problem here is that the conclusion isn't justified by the premise: it's driven by ignorance of what economic growth actually is. The basic idiocy starts with the observation that there isn't an infinite amount of stuff out of which we can make stuff. This is obviously true and no one asserts differently. However, it's entirely possible to have a system which is finite in one dimension, and this will not limit growth within that system in another, entirely different, direction. Using good old neoclassical economics, we define economic growth as an increase in GDP (not quite, but that's close enough for us). GDP is the value at market prices of all final goods and services. This is, by definition, equal to the value produced in that economy, the value as perceived by those doing the buying of all those things. GDP is by no means perfect. Simon Kuznets, who invented it, pointed out much the same things that Ms Lucas and all the rest point out now. It doesn't measure distribution, doesn't measure exhaustion of natural resources and so on. But it is what it is, and it is what we normally mean by economic growth. So, using GDP, can we have infinite economic growth on a finite planet by just making ever more things? No, clearly, we cannot: there is a limit to the number of atoms available to us. But that's not actually what we're measuring in GDP: we're not measuring the amount, tonnage (it was the Soviets who measured that), volume or even number of things that are made. We are measuring the value. So, is there a limit to the amount of value that we can add? A useful way of thinking about technological advance is that it offers us either better ways of doing old things or the opportunity to do entirely new things. Either of which can also be described as the ability to add more value. Which leads us to the conclusion that as long as technology keeps advancing then we can continue to add more value and thus we can continue to have more economic growth. Strange as it may seem, this explanation built purely on standard neoclassical economics is exactly the same as the diagnosis that Herman Daly gives us in ecological economics. He tells us that we face real and imminent resource constraints (I don't agree, but let's go with his argumenent) and that thus we can have no more quantitative growth. This "quantitative" is the same as the above "more stuff". Daly also talks about qualitative growth. The "qualitative" is equal to the "add more value" and I suspect the only reason Daly doesn't say so is that he wants to be able to define what is valuable for people: you know the sort of thing, more walking in forests, more digging our own veg patches, rousing choruses of Kumbaya, as opposed to the neoclassical method of measuring value, which is what you, each and individually, value. Walks in the woods are just fine but so are steaks, excessive booze and even Simon Cowell. Whatever floats your boat. As an example, let's have a glimspe of an extreme form of Daly's "steady-state economy". This is one where resources from the environment are taken only at the rate that that environment can support. Renewables are used only at the rate at which they can be renewed. We're not chewing up mounntains to make copper: we're only recycling that copper we've already got. Is economic growth possible here? Yes, obviously it is. For while we've got limited resources to play with, it is still always open to us to find new ways to add value to them. To be silly about it, we've got 1 million tonnes of copper and that's it. We use that copper to make paperweights. Then we learn how to make copper into computer motherboards and we recycle all paperweights into computers. We value the computers more than the paperweights: we've just had GDP growth, we've just had economic growth, with no increase in the consumption of resources. Even in this steady-state economy therefore, even one in which everything is recycled, we can still have economic growth through advancing technology. This advancing technology is known as an increase in total factor productivity (TFP). What we'd like to know next is how much limiting ourselves to only this type of growth is going to limit total growth. Bob Solow once worked out that 80 per cent of the economic growth in 20th-century market economies came from TFP growth. Only 20 per cent came from more resource use: in the socialist economies there was no TFP growth, and all growth came from greater resource use. So we can indeed have quite a lot of economic growth even in the greenest of economies, can we not? US economic collapse is not inevitable - laundry list of reasonsAmadeo 5/4 (Kimberly, President of WorldMoneyWatch.com and has 20 years senior-level experience in economic analysis and business strategy working for major international corporations, M.S., Sloan School of Business, M.I.T. and M.S. Planning, Boston College, "10 Reasons Why the U.S. Economy Won't Collapse", May 4 2014, http://useconomy.about.com/b/2014/05/04/10-reasons-why-the-u-s-economy-wont-collapse.htm) Frequently, I receive emails from readers and friends asking if the U.S. economy or the U.S. dollar are going to collapse. I don't know why they've suddenly become concerned. Not one of them sent me a similar email the week of September 17, 2008 when the U.S. economy almost DID collapse. Things have gotten slower in 2014, but last year the U.S. economy is poised had one of its best years since 2007. The stock market set new records, housing prices were headed in the right direction, GDP was be in the healthy 2-3% growth zone. Although this year is a little shakier, that's a far cry from a collapse. Maybe all the gloom-and-doomers who make money by selling gold (which is dropping), guns and canned food -- not to mention their own books on how to survive -- are worried because things ARE ACTUALLY OK. Anyway, here's 10 reasons why the U.S. economy, and the dollar, won't collapse: The U.S. debt, though high, won't cause a collapse. Unlike Greece, the U.S. prints its own money. The U.S. could possibly run a much higher debt to GDP ratio than it does now and still not face economic collapse. Obama Added to the Debt to get us out of recession, not send us toward collapse. The U.S. won't Default on Its Debt. China Isn't Selling Its Dollar Holdings. China and Japan won't cause a Dollar Collapse. The Dollar Is Slowly Declining, not collapsing. The dollar won't be replaced as the World's Global Currency. The Fed's Quantitative Easing program can't cause Hyperinflation. There are too many failsafe measures that will prevent a U.S. Economic Collapse. AT: Mindset ShiftAT: Collapse InevInfinite growth is possible - energy growth is distinct from economic growthHarford 1/24 (Tim, senior columnist for the Financial Times, won the Bastiat Prize for economic journalism in 2006, runner up in 2010, member of the Royal Economic Society council and a visiting fellow at Nuffield College, Oxford, "Can Economic Growth Continue Forever? Of Course!", January 24 2014, http://freakonomics.com/2014/01/24/can-economic-growth-continue-forever-of-course/) Can economic growth continue forever? The internet seems to be full of physicists explaining that economists are clueless on this topic. There’s the late Albert Bartlett’s hugely popular videos – or Tom Murphy’s article “Exponential Economist Meets Finite Physicist.” The key issue is that exponential growth will eventually take you to impossible places. And by eventually, the physicists mean “sooner than we expect.” Exponential growth is any kind of growth that compounds like interest payments. The classic example is the rice on the chessboard. According to an old story, the inventor of the game of chess was offered a reward by a delighted king. He requested a modest-sounding payment: one grain of rice on the first square of the chessboard, two on the second, four on the third, doubling each time. Yet this is actually a colossal amount—many times the annual rice production of the entire planet. The chessboard prize was 100 percent growth per square; but 10 percent, 1 percent or even 0.0001 percent—it’s all exponential growth. And it all becomes trouble eventually, because each little bit of growth will itself be multiplied by growth in the future. As Albert Einstein, yet another physicist, is famously said to have declared (but probably did not), “the most powerful force in the universe is compound interest.” The implication for economic growth seems obvious. Our economy grows at a few percent a year. That hasn’t presented many insuperable problems so far. But growth of a few per cent a year is nevertheless exponential growth, and eventually—the physicists worry—we’ll reach a square on the economic chessboard that we just can’t fill. Economists understand this point perfectly well. One of the very first people to be called an economist was the Reverend Thomas Malthus, who died almost two hundred years ago. Malthus was worried about exponential population growth, and his math was incontrovertible. Fortunately, in the short term technological progress was faster than population growth. More recently population growth has been slowing down dramatically. There’s every reason to believe that the population of the planet is going to stabilize. I don’t think anybody believes zero population growth is unsustainable. You might well respond that even if population growth stops, growth in the economy – in GDP – will continue, and fall foul of the rice-on-the-chessboard problem. But I think that here we find a serious gap in the logic of the exponential doomsayers. They’re looking at exponential growth in physical processes—things like heating, cooling, lighting, movement. This is understandable, because they are, after all, physicists. Tom Murphy’s blog post is particularly startling on this point. He points out that if our energy consumption grows at 2.3 percent a year—less than historical rates but enough to increase energy consumption tenfold each century—then the entire planet will reach boiling point in just four centuries. It’s not the greenhouse effect at work; it’s irrelevant to Professor Murphy’s point whether the energy comes from fossil fuels, solar power or fairy dust. This is simply about the waste heat given off, inevitably, when we use energy to do useful work. And it’s pretty hard to argue with the laws of thermodynamics. The calculation sounds shocking, but it’s just the rice on the chessboard all over again. Here’s the logic lapse: energy growth is not the same as economic growth. GDP merely measures what people are willing to pay for, which is not necessarily connected to the use of energy, or any other physical resource. True, since the beginning of the industrial revolution the two have tended to go hand in hand, but there’s no logical reason why that tendency needs to continue. Indeed, it appears to have stopped already. Would you like to take a guess at energy growth per person in the United States over the last quarter of a century? It’s not just less than 2.3 percent. It’s less than zero. The same is true for other developed economies such as Germany, Japan and the United Kingdom. Now this is partly due to offshoring to China – but the offshoring effect just doesn’t seem big enough to explain what is going on. It’s also about the changing nature of what is bought and sold in a modern economy. Think of New York City. It’s a high-income place, and has for more than a century been a creative powerhouse: publishing, music, fashion, art, finance, software, you name it. But energy consumption per person in New York City is lower than in the United States as a whole—in fact, it’s lower than the average in any American state. Ultimately, we can do a lot of the things we value—including value in the grubby pecuniary sense of “are willing to pay lots of cash for”—without expending vast amounts of energy. It’s easy to grasp why exponential economic growth is not the same as exponential energy growth. If I’m worried about money, I may turn off my heating and wear a coat and hat indoors; a bit of extra money will mean I take off the hat and coat and use more energy. But that doesn’t mean that if I win the lottery I will celebrate by boiling myself alive. I fully agree with the environmentalists who worry that we cannot continue consuming more and more water, spewing out more and more carbon dioxide and burning more and more coal. The problem comes if we then leap to the conclusion that the economy itself cannot keep growing. Thankfully, that just doesn’t follow. Sustainable and infinite growth is possible - mathematically provenLeach 1/31 (Andrew, Ph.D. from Queen’s University in Economics, and a B.Sc (Environmental Sciences) and M.A. (Economics) from the University of Guelph, previous Assistant Professor at HEC Montreal, currently the Associate Professor in the Alberta School of Business and I hold the Enbridge Professorship in Energy Policy, "Finite Resources and Infinite Growth", January 31 2014, http://andrewleach.ca/uncategorized/finite-resources-and-infinite-growth/) If you want to get to increasing economic growth with a finite resource, you need an increase in productivity. Suppose that you still have the same finite resource stock, but that you become 3% more productive each year in your use of resources – you generate 3% more total product from each unit of resource extraction. The growth in productivity allows you to use fewer resources each year, while still increasing production. Resource stocks still decline, and approach zero asymptotically, but it’s like going half the distance to the goal line in football – you’ll get closer every time but you’ll never score. Resource extraction with increasing So, how do you increase productivity? Energy is used in our economy as a complement to labour and capital, so if you want to increase the productivity of your finite resource then increase energy efficiency, decrease the resource-intensity of energy, increase labour productivity, or increase the quality of your human and physical capital. This is what Queen’s University economist John Hartwick had in mind when he wrote down the Hartwick rule – the mathematical proof of what I’ve just tried to do in words: as long as you invest sufficiently in improvements in productivity, and manage resources optimally, its possible to sustain infinite growth from a finite resource. Of course, the Hartwick rule is not a law – it doesn’t guarantee that this will always be achieved, and it certainly doesn’t say that it can be accomplished with any level of investment – it just tells you that its mathematically possible. Saying that it’s impossible to achieve exponential growth infinitely with finite resources does nothing to advance our discussions of resource management and ignores plenty of evidence to the contrary in the economics literature. What we should be discussing instead is how to make sure we follow Hartwick’s rule, but that’s another story for another day. Human ingenuity solves resource constraints.Lomborg 12 – is a Danish author, academic, and environmental writer. He is an adjunct professor at the Copenhagen Business School, director of the Copenhagen Consensus Centre and a former director of the Environmental Assessment Institute in Copenhagen. (Bjorn, 2012, 6-21 “Environmental Alarmism, Then and Now” http://www.foreignaffairs.com/articles/137681/bjorn-lomborg/environmental-alarmism-then-and-now) Forty years on, how do the predictions stack up? Defenders like to point out that The Limits to Growth carefully hedged its bets, with its authors claiming that they were not presenting "exact predictions" and that they were "deliberately . . . somewhat vague" on time frames because they wanted to focus on the general behavior of the system. But this is sophistry. It was obvious from the way the book was both presented and understood that it made a number of clear predictions, including that the world would soon run out many nonrenewable resources. Assuming exponentially increasing demand, The Limits to Growth calculated how soon after 1970 various resources would be exhausted. Their conclusion was that before 2012, the world would run out of aluminum, copper, gold, lead, mercury, molybdenum, natural gas, oil, silver, tin, tungsten, and zinc -- 12 of the 19 substances they looked at. They were simply and spectacularly wrong. They singled out mercury, claiming that its known global reserves in 1970 would last for only 13 years of exponential growth in demand, or 41 years if the reserves magically quintupled. They noted that "the prices of those resources with the shortest static reserve indices have already begun to increase. The price of mercury, for example, has gone up 500 percent in the last 20 years." Since then, however, technological innovations have led to the replacement of mercury in batteries, dental fillings, and thermometers. Mercury consumption has collapsed by 98 percent, and by 2000, the price had dropped by 90 percent. They predicted that gold might run out as early as 1979 and would certainly do so by 1999, based on estimations of 10,980 tons of known reserves in 1970. In the subsequent 40 years, however, 81,410 tons of gold have been mined, and gold reserves are now estimated to be 51,000 tons. Known reserves of copper in 1970 came to 280 million tons. Since then, about 400 million tons have been produced globally, and world copper reserves are now estimated at almost 700 million tons. Since 1946, new copper reserves have been discovered faster than existing copper reserves have been depleted. And the same goes for the other three most economically important metals: aluminum, iron, and zinc. Despite a 16-fold increase in aluminum consumption since 1950, and despite the fact that the world has consumed four times the 1950 known reserves in the years since, aluminum reserves now could support 177 years of the present level of consumption. The Limits to Growth also worried about running out of oil (in 1990) and natural gas (in 1992). Not only have those not run out, but their reserves, measured in terms of years of current consumption, are larger today than they have ever been since 1970, even though consumption has increased dramatically. WHAT THEY MISSED The basic point of The Limits to Growth seemed intuitive, even obvious: if ever-more people use ever-more stuff, eventually they will bump into the planet's physical limits. So why did the authors get it wrong? Because they overlooked human ingenuity. The authors of The Limits to Growth named five drivers of the world system, but they left out the most important one of all: people, and their ability to discover and innovate. If you think there are only 280 million tons of copper in the ground, you'll think you'll be out of luck once you have dug it out. But talking about "known reserves" ignores the many ways available resources can be increased. Prospecting has improved, for example. As recently as 2007, Brazil found the Sugar Loaf oil field off the coast of São Paulo, which could hold 40 billion barrels of oil. Extraction techniques have also been improving. The oil industry now drills deeper into the ground, farther out into the oceans, and higher up in the Arctic. It drills horizontally and uses water and steam to squeeze out more from existing fields. And shale gas can now be liberated with new fracking technology, which has helped double U.S. potential gas resources within the past six years. This is similar to the technological breakthrough of chemical flotation for copper, which made it possible to mine ores that had previously been thought worthless, and similiar to the Haber-Bosch process, which made nitrogen fixation possible, yielding fertilizers that now help feed a third of humanity. Aluminum is one of the most common metallic elements on earth. But extracting it was so difficult and expensive that not so long ago, it was more costly than gold or platinum. Napoleon III had bars of aluminum exhibited alongside the French crown jewels, and he gave his honored guests aluminum forks and spoons while lesser visitors had to make do with gold utensils. Only with the invention of the Hall-Héroult process in 1886 did aluminum suddenly drop in price and massively increase in availability. Most often, however, ingenuity manifests itself in much less spectacular ways, generating incremental improvements in existing methods that cut costs and increase productivity.
the United Kingdom's coal use. He saw the Industrial Revolution relentlessly increasing the country's demand for coal, inevitably exhausting its reserves and ending in collapse: "It will appear that there is no reasonable prospect of any release from future want of the main agent of industry." And in 1908, it was Andrew Carnegie who fretted: "I have for many years been impressed with the steady depletion of our iron ore supply. It is staggering to learn that our once-supposed ample supply of rich ores can hardly outlast the generation now appearing, leaving only the leaner ores for the later years of the century." Of course, his generation left behind better technology, so today, exploiting harder-to-get-at, lower-grade ore is easier and cheaper. Another way to look at the resource question is by examining the prices of various raw materials. The Limits to Growth camp argues that as resource constraints get tighter, prices will rise. Mainstream economists, in contrast, are generally confident that human ingenuity will win out and prices will drop. A famous bet between the two groups took place in 1980. The economist Julian Simon, frustrated by incessant claims that the planet would run out of oil, food, and raw materials, offered to bet $10,000 that any given raw material picked by his opponents would drop in price over time. Simon's gauntlet was taken up by the biologist Ehrlich and the physicists John Harte and John Holdren (the latter is now U.S. President Barack Obama's science adviser), saying "the lure of easy money can be irresistible." The three staked their bets on chromium, copper, nickel, tin, and tungsten, and they picked a time frame of ten years. When the decade was up, all five commodities had dropped in price, and they had to concede defeat (although they continued to stand by their original argument). And this was hardly a fluke: commodity prices have generally declined over the last century and a half (see Figure 2). In short, the authors of The Limits to Growth got their most famous factor, resources, spectacularly wrong. Their graphs show resource levels starting high and dropping, but the situation is precisely the opposite: they start low and rise. Reserves of zinc, copper, bauxite (the principal ore of aluminum), oil, and iron have all been going spectacularly up (see Figure 3). Self-correction is inherent to capitalismGoldberg 6/30 – Goldberg is a bestselling author and columnist. Prior to joining National Review, he was a founding producer for Think Tank with Ben Wattenberg on PBS and wrote and produced several other PBS documentaries. He is the recipient of the prestigious Lowell Thomas Award. His first book, Liberal Fascism (Doubleday, 2008), quickly became a New York Times bestseller. (2014, Jonah, AEIdeas, “Capitalism’s Capacity for Self-correction — ‘Example Is the School of Mankind’”, http://www.aei-ideas.org/2010/04/capitalisms-capacity-for-self-correction-%E2%80%94-example-is-the-school-of-mankind/ // SM) “Example is the school of mankind,” observed Edmund Burke, “and they will learn at no other.” This is the fundamental insight of both conservatism and libertarianism. People learn from their mistakes. To use Dodd’s logic, I am just as vulnerable as ever to riding my bike without holding the handlebars. But I don’t do that anymore, even though the federal government has done nothing to make it harder for me to do it again. Why? Because I learned from my mistakes. Even the federal government has been known to learn from its errors. As Christopher DeMuth noted at the 2008 AEI chairman’s dinner: One of the reasons to doubt that the financial crisis will produce not just a hard recession but a 1930s-style depression is that we have a truer knowledge of monetary policy. Back then the conventional wisdom was that because supply and demand were falling, therefore less money was needed for exchange, therefore the money supply should be contracted. Essentially no one thinks that way today. That the goal of monetary policy should be price stability is knowledge that was acquired at great cost through decades of study and contentious debate. In facing our current crisis, it is an asset as valuable as the Federal Reserve’s balance sheet. This is not to say that the financial crisis doesn’t justify any reforms. But let’s not forget that inherent to capitalism is the capacity for self-correction. Surely the disappearance of Lehman Brothers and the dismantling of AIG is an example that many can learn from. The real danger seems to me that people like Dodd haven’t learned the lesson that government is not the only—or best—corrective to the excesses of capitalism. Infinite econ growth possible—depends on productivityLeach 14 Marketing, Business Economics and Law (Andrew, rescuing the frog, “Finite Resources and Infinite Growth “,January 31, 2014, http://andrewleach.ca/uncategorized/finite-resources-and-infinite-growth/ //SRSL) Today’s Globe and Mail featured a column by Gary Mason on a world without oil. ”If you believe that the economy is structured in such a way that it needs to grow continually in order to survive,” it states, “then it will take an endless supply of energy to feed it. ” The article then raises the question, ”How does an economy grow exponentially forever if the one element it needs more than anything to flourish is contracting with time?” This is a common refrain from environmentalists such as David Suzuki (here, here, here and likely a thousand other places): “it’s absurd to rely on economies based on constant growth on a finite planet.” But, is it? I’ll have more on this at Macleans in a couple of days, but this will serve as a technical primer.¶ Intuitively, it sounds simple – if I use up a certain amount of a finite quantity each year, it will eventually run out. But that tells you that you can’t have constant or increasing resource extraction from a finite resource, it doesn’t tell you anything about what you do with the resources you extract, how productive they are, or whether or not they enable continued economic growth. It’s certainly possible to sustain exponential growth infinitely with finite resources, as long as productivity improves.¶ Let me take you through an example (this is a really basic model, but I’ve fit it with some reasonable numbers so its intuitive). Suppose that gross world product (real, including all environmental costs) is given by 1450*R*X, where R is resource productivity and X is extraction. If you use oil extraction as a proxy for resources, and we extract about 31.4 billion barrels of oil per year, and let R equal 1, you’ll get a gross world product of $45,515 billion, about the same as the CIA World Factbook estimate of 2012 gross world product. Let’s also suppose, for the sake of this argument, that the 1.8 trillion barrels of oil in current global reserves represents the sum total of all the oil which will ever be extracted – a finite resource.¶ With those numbers, the myopic approach to maintaining constant growth with no change in productivity would lead to all oil resources being exhausted in 55 years, and then instant economic collapse.¶ Of course, this would not actually happen, since prices would adjust even if there were no productivity changes. To understand what would happen, go to the last period before the collapse – a period in which the world extracts 35 billion barrels of oil out of a remaining stock of about 40 billion barrels. Knowing what was going to happen if you stuck with that plan, you’d likely decide that it makes sense to carry some extra oil through to the following year, to stave off collapse and/or to profit from absurdly high prices. In doing so, you’d raise prices in that year. Of course, people would have seen this coming too, leading to conservation of oil from previous years as well. This is a clumsy explanation of what Harold Hotelling wrote down almost 100 years ago – that since oil is like a capital asset, owners will act to maximize returns and this will smooth price and extraction decisions over time. If you imposed a Hotelling solution – one which maximized the value of oil over time, you’d end up with something which looks something like this:¶ However, Hotelling doesn’t get you to economic growth with finite resources – production is still decreasing over time, and tends asymptotically to zero – it’s just that there is no collapse and oil is distributed over time such that there are no gains in net present value to be achieved by shifting production forward or back in time. (In the graph above, I approximated a 400 year solution – I didn’t solve the full optimal control problem).¶ If you want to get to increasing economic growth with a finite resource, you need an increase in productivity. Suppose that you still have the same finite resource stock, but that you become 3% more productive each year in your use of resources – you generate 3% more total product from each unit of resource extraction. The growth in productivity allows you to use fewer resources each year, while still increasing production. Resource stocks still decline, and approach zero asymptotically, but it’s like going half the distance to the goal line in football – you’ll get closer every time but you’ll never score.¶ So, how do you increase productivity? Energy is used in our economy as a complement to labour and capital, so if you want to increase the productivity of your finite resource then increase energy efficiency, decrease the resource-intensity of energy, increase labour productivity, or increase the quality of your human and physical capital. This is what Queen’s University economist John Hartwick had in mind when he wrote down the Hartwick rule – the mathematical proof of what I’ve just tried to do in words: as long as you invest sufficiently in improvements in productivity, and manage resources optimally, its possible to sustain infinite growth from a finite resource. Of course, the Hartwick rule is not a law – it doesn’t guarantee that this will always be achieved, and it certainly doesn’t say that it can be accomplished with any level of investment – it just tells you that its mathematically possible.¶ Saying that it’s impossible to achieve exponential growth infinitely with finite resources does nothing to advance our discussions of resource management and ignores plenty of evidence to the contrary in the economics literature. What we should be discussing instead is how to make sure we follow Hartwick’s rule, but that’s another story for another day. AT: US Econ Collapse InevEvidence that growth is inevitable is statistical – not mechanistically deterministicKorowicz, ’14 - David Korowicz is a physicist who studies the interactions between economics, energy, climate change, food security, supply chains, and complexity. David is an independent consultant. He was a ministerial appointment to the council of Comhar, Ireland’s sustainable development commission. He was head of research at The Ecology Foundation, and is on the executive committee of Feasta, The Foundation for the Economics of Sustainability: a Think Tank, (David, “How to be Trapped: An Interview with David Korowicz”, Resilience, http://www.resilience.org/stories/2014-03-19/how-to-be-trapped-an-interview-with-david-korowicz)//Roetlin People can be uncomfortable with such evolutionary explanations. However, they’re not mechanistically deterministic, but statistical, people and small groups will always surprise more than very large human groups. After all coming across a convent of celibates is not a sign that human sex is dead! Nor do such arguments rigidly define behavior. For example, Stephen Pinker marshals diverse evidence (in The Better Angels of Our Nature) to show that there’s been a remarkable fall in the risk of personal violence that he has associated with rising wealth, globalisation, states and independent legal systems, changing cultures and the expansion of empathy. Of course we remain highly sensitive to the risk of violence, and there’s no reason the situation cannot reverse, but he demonstrates we’ve become much nicer to each-other in all sorts of ways! Download 1.08 Mb. Share with your friends:
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