How is the economy supposed to grow indefinitely?

[repoman0]

Probably a mistake to ask an honest question in this particular sub-forum, but oh well. First, I'm obviously not an economist. How is it that to be in good standing, the economy has to continue to grow? And how can it be expected to continue to grow when there is finite space, finite capacity for increase in population, finite production capacity, etc... there has to be an upper limit on how much an economy can grow. What happens when we get there? Permanent recession?

 

[berzerker60]

It can't, if things were to remain as they are and continue from here. However, it's fundamentally impossible to forecast the future, you can only make plans with the best available current information, so we pretend that it will continue forever. Ultimately something will happen to completely change the frame from which we ask questions about the economy - major disaster kills off billions, intergalactic colonization, computerized something or other, or something even more unimaginable. Consider how impossible it would be to even conceive of today's global information economy if you were a king 300 years ago, and that's a tiny amount of time in human history.
In the meantime, as long as population grows and technology advances, the economy will continue to grow exponentially, so it's reasonable to expect at least a couple more decades, and probably our lifetimes. What happens then is our kids' problem.

As a frame of reference, consider the arguments of Malthus is the late 1700s that because population increases exponentially and food production is limited to grow linearly, we'd see mass starvation within decades. It was perfectly fine as far as predictions go, more scientific than most, but he couldn't have known that we'd see dramatic increases in agricultural output, transportation efficiency, and a bunch of other areas to make it possible for us to thrive for centuries more.

 

[MiniDoom]

increase in population usually leads to increased production capacity. we have plenty of space.

 

[gevorg]

Innovation pushes economic growth and efficiency. The economy has to keep up with the standard of living that people demand. More and more people think that they're entitled to everything, like iPhones. They want more, they want it faster and they want it now!

 

[Chris A]

Services are the best growth in the USA!

 

[Jaskalas]

What happens when we get there? Permanent recession?

We will keep increasing the cost of living until you can no longer afford children. Anyone foolish enough to try will find themselves staring in an American version of Sudan.

Recession? More like a revolution and complete restructuring of our standard of living and our way of life. Hint, they're going to decrease dramatically.

 

[kia75]

Probably a mistake to ask an honest question in this particular sub-forum, but oh well. First, I'm obviously not an economist. How is it that to be in good standing, the economy has to continue to grow?

What exactly do you mean by good standing?

A functional economy doesn't have to grow, it just has to function. Think of a prison where people barter goods and services for cigarettes. You can cut the prison population in half, or double it and that economy still remains. There is a lower bound to an economy, if the prison has no people then no economy exists.

Economies tend to grow because population grows. Most people want to make money so an economy that's growing is more attractive to people and society but the economy does what it does. You can have an economy of people staying the same or crashing.

And how can it be expected to continue to grow when there is finite space, finite capacity for increase in population, finite production capacity, etc...

The premise is flawed. While I'm certain there is an upper bound for population, there is no upper bound for production capacity. Today is new comic Wednesday and I just bought a brand new digital comic. A million people can buy a digital comic or no one, DC can create as many digital copies as it would like for free.

There might be only a limited amount of material to make buggies but either buggies will be recycled or a new creation (such as cars) will take over.

I would also argue there is no upper bound for space, but this is a technological question not an economy question.

there has to be an upper limit on how much an economy can grow. What happens when we get there? Permanent recession?

There is no upper limit to how much the economy can grow. It's growth potential is infinite. So the question is invalid.

Are you asking if we can have a long recession? If so then yes, Europe went through a thousand year recession called the dark ages.


IMO, your questions seem to come from a misconception of Economy. You seem to think the economy is using gold to buy a car. That is part of it, but it's so much more. The economy is exchanging value over goods or services. So in the playground when a kid pays another kids 2 pokemon cards to eat his vegetables, that's an economic exchange. As long as there are two people exchanging goods or services (sleep with me and I'll give you food) there is economic activity.

 

[repoman0]

There is no upper limit to how much the economy can grow. It's growth potential is infinite. So the question is invalid.

Good response but... I don't know about this part. Nothing real is infinite; it's a mathematical construct convenient for solving some problems. Infinite growth potential means an economy that can grow to the point of exchanging infinite dollars per day. Since that can't happen, there has to be a limit on maximum "dollars per time" that can be exchanged.

And what I mean by good standing is that everyone seems to freak out if the US economy doesn't grow by X% per year.

There's a limit on how much total "stuff" we can produce because there are finite raw materials. There's a limit on digital "stuff" too because there's only so much data transmission bandwidth and storage space.. although it's ever increasing. Maybe I just don't like the word "infinite" outside of mathematics.

My biggest issue I guess is that there is a population limit that will be enforced one way or another - likely through unavailability of food for >X Million people. With a static population size, amount of money flowing around will stay relatively constant. I see no reason why it wouldn't work just fine like that, but people don't seem to be happy when we hear about 0% growth.

 

[Gonad the Barbarian]

It's supposed to because of the assumption that demand is infinite and so is the potential for wealth creation. I think that's an erroneous assumption. How can an economy continue to grow beyond the ability of a population's ability to consume? It can't. What limits a population's ability to consume? If nothing else the law of diminishing marginal utility. There is such a thing as "enough."

 

[Bateluer]

When you understand that there is not a finite amount of wealth, its not hard to see how an economy can continue to grow for a very very long time. Growth may slow to a crawl at times though, until a correction or reset occurs.

 

[Moonbeam]

It's a black swan effect from a singularity.

 

[OverVolt]

Wealth is actually infinite. Since it is derived from the efforts of humans. Even sans oil, stuff like intricate carvings, agriculture by hand etc. were the wealth of the time.

What we have now is not enough of what people want (oil ). Technically agriculture done by hand is the most efficient by acreage. So I wouldn't be worried about 7 Billion population without oil honestly, lots of mouths to feed but twice as many hands to work If they were working that is. The economy would be like 90% agriculture based.

I really think its the financial system compensating for a lack of oil now that India, China, etc. are starting to consume lots and lots of it. The financial system will break, they all do. I'm not sure when that will happen. Could be soon, could be like 75 years. Its not really worth worrying about.

 

[Tom]

Probably a mistake to ask an honest question in this particular sub-forum, but oh well. First, I'm obviously not an economist. How is it that to be in good standing, the economy has to continue to grow? And how can it be expected to continue to grow when there is finite space, finite capacity for increase in population, finite production capacity, etc... there has to be an upper limit on how much an economy can grow. What happens when we get there? Permanent recession?

The economy is a process, like life, like the water cycle, like the energy of the Sun.

We don't really know if those things are infinite but we're a long long way from needing to worry about that.

 

[piasabird]

There are several things going on here. Cheap labor keeps coming into our country. So we have plenty of labor so we dont need more population. Close all our borders.

Then we import lots of items that we could make locally. We are fuelling a trade deficiet and giving money to our competitors i.e. China. Part of this is caused by over-regulation which costs people more to build things in the USA. So businesses moved manufacturing overseas to get around this. If you take a look at our automobile industry, if we restricted our imports to lower percentages people in the USA would get more jobs and the government would earn more taxes.

I mentioned the automobile industry because changing that industry could bring some of the best benefits for americans. Some imports are good so that we can compare our automobiles to other countries. Competition is a good thing, but often foreign countries dont play by our rules and have an unfair advantage.

There are some other industries we could change just a little bit. For instance, the computer industry is way out of wack and almost all computer parts come from Asia from taiwan and now mainland china. We need to force the people in Taiwan to build factories in the USA or other countries like in South America. China is monopolizing the industry. There is a real danger that if we have a war that computer supplies will shrivel up and we will not even be able to get the computers we need. We forced people like toyota to build cars in the USA so we could do the same for computers. We could start with a rule like all computer cases sold in the USA have to be made here. We dont really have enough facilities or know how to take it back from asia. However, we could force the issue and make them do it for us like we build toyotas in the USA.

 

[piasabird]

Since USA has a large % of the world wealth it is only the USA that can be blamed if we have a trade imbalance.

 

[themusgrat]

This is actually a great question that gets to the heart of alot of debt crisis issues. Alot of people seem to think that if the US can throw enough money at recessions like this, you can get the economy back going, and they do actually think that as long as the government maintains a healthy economy, there is limitless economic growth.

This, of course, flies in the face of all history. Economies never succeed infinitely. There are many reasons why economies have downturns, but one reason is because it's a healthy economy! Who knew! Healthy economies are not straight lines, they're dips and rises that do eventually move up and up with increased spending power. Alot of people apparently thought that the recession would be the end of the American financial system unless we took on an additional 6tn worth of debt. eskimowhoever is one of those. I had this argument with him the other day. He said we didn't spend enough, and that we should still be spending more! Who knew! The best way out of a recession is to take on, shall I say, 10tn worth of debt? What about 15tn? Boy would the economy be booming! Look, if you really wanted to stimulate the economy by taking on 10tn of debt, you would just write everyone who filed their income taxes a check for about $75k, tax free, if my math is right. Think of what that would do to the economy? How many mortages paid off, how many credit cards, how much would the housing sector boom, yadda yadda. It would be a shot of adrenaline that would last a long time with incredible benefits.

The problem is the 10tn worth of debt. Someone has to pay it. There are several ways to get rid of it, but they're all bad for the economy. It's a case of sacrificing the economy of the future, to shorten a recession of the present. If the government spending money is truly, absolutely, good for the economy, then anytime the government is paying off its debt, it's not spending the money that's being used to pay it off, which is bad. Then you add in the how many billion? It's like 400bn per year in interest on our debt.

One last thing. The idea that the government spending money is good for the economy is true, but only because anyone spending money is good for the economy. There is a strong argument to be made that the government isn't particularly efficient when it spends money, and that alot of what the government spends money on goes straight into the pockets of the uber rich. Which, ironically, is what the left side of the aisle hates. I won't pick sides here, because both sides are at fault. There is a great argument to be made that the government needs to not spend as much as it can, so that people can be free to spend money how they choose. One word for that is freedom. Liberty aside, people spending money will always make mistakes. People and a more free economy were partially to blame for the Great Depression. There will be recessions with a free economy. Bankers and lenders will make bad decisions. However, you've got to ask yourself, what is the cost of our present economy going to be? The Fed artificially regulated housing prices in order to boost the housing market. There's a famous Ron Paul clip from 2001 where he says that they are creating a housing market bubble, and that the bubble will one day pop, as all bubbles do. How right he was. You cannot regulate an economy into wealth. You can regulate it, but anytime you try to force it towards anything, there will eventually be a backlash. I think that the Fed was largely to blame for this recent recession. And I think that us trying to force the economy upright and taking on so many trillions of dollars worth of debt will be to blame for events in the future. Anytime you borrow, you must pay at some point. It's never fun, no matter how you go about it.

 

[Infohawk]

It might help to think of growth as increased efficiency. It doesn't have to mean more junk necessarily. With growth, people get more services and better goods for the same amount of effort.

Can we keep growing? Seems like it will be a technological issue of whether we can extract energy cheaply or not.

 

[Ausm]

Just ask a Republicon...cut EVERYTHING except the Military industrial complex and this will stimulate growth.

 

[piasabird]

We need to force a vote in congress everytime we use the military outside of our borders. Even O'Bammah is too eager to fight other countries wars. We did not need to be involved in Egypt, or Libya and we should stay out of Syria. We need to get out of Iraq and Afghanistan, and Germany, and Spain, and Italy, and Japan and South Korea.

 

[hal2kilo]

Probably a mistake to ask an honest question in this particular sub-forum, but oh well. First, I'm obviously not an economist. How is it that to be in good standing, the economy has to continue to grow? And how can it be expected to continue to grow when there is finite space, finite capacity for increase in population, finite production capacity, etc... there has to be an upper limit on how much an economy can grow. What happens when we get there? Permanent recession?

Don't worry your little head about it, the invisible hand of free markets fix everything.

 

[sm625]

The economy isnt growing. Look at the production and consumption and transport of real quantifiable goods. Tons of coal mined and shipped. Gigawatthours of electricity consumed. Millions of barrels of gasoline purchased.

Look at loaded inbound container traffic:

Still below the peak set 6 frickin years ago!

VMT:

OMFG still declining. The country is collapsing all around us and the poor stupid sheeple cant even see it. Look at the all seeing eye on the back of all those dollar bills being printed. The occult symbolism. It is there to remind you of the type of power you are facing. Wake the hell up. They're just printing money and giving it to them selves and lying about how its inflating the hell out of the economy. Health care costs up 0.2% yoy? That's what they claim. That's how they hold cpi low. It's a total scam, economic warfare. And thereis no frickin opposition to any of it. The heart and soul of america is being... "hedonically adjusted" away.

 

[Zebo]

Keep growing stuff manufacturing stuff and mining stuff. Stuff is what defines wealth. Make more stuff more wealth. I assume there is a theoretical cap on our planet but it's very far away. If at all since elements that comprise 'stuff' don't disappear.

I don't believe in finite anything.