If you’ve enjoyed Do the Math even just a little bit over the years, you have Asher Miller to thank, in part. Asher is the Executive Director of the Post Carbon Institute, whose work I had been following for a few years when I reached out in 2011. I reported that I was going to be passing through their neighborhood, and asked if they would be up for a meeting. I spent a few hours with Asher, and he encouraged me to commit some of my ideas and analyses to writing, suggesting a blog format that could be re-posted to the Energy Bulletin, which is now Resilience.org.
So I took his advice. Within a month, I created Do the Math, and the Energy Bulletin promptly picked up my first post on Galactic Scale Energy, which then found its way to reddit. Thus, within a few days of publishing my first blog post, I had hit the 100,000 page view mark. That strong start—and even the fact that it started at all—is due in no small measure to Asher’s encouragement, suggestion, and the close connection between PCI and the Energy Bulletin.
Fast-forward a decade, and I again was set to pass through PCI’s (relocated) haunt. I again reached out to Asher, who suggested that I stop in for a podcast recording of Crazy Town, which he does with Jason Bradford (PCI Board President; on his farm) and Rob Dietz (PCI Program Director). We had a fun time together, and an enjoyable conversation, which you can listen to on your podcast app of choice by clicking this link, or you could try this semi-permanent link to the “bonus” episode in question.
Tom, I think it was one of the interviewers who said "Our economic system is absolutely dependent on exponential growth," and you've said essentially the same thing many times. But as a physicist who's never studied economics, I find that statement vague and I don't know how to make it precise.
Can you make it precise, into a statement that's quantitative and testable?
For instance, say we define economic growth in terms of world GDP. Is there a certain annual percentage growth rate for world GDP that you would say our economic system is absolutely dependent on?
Well, lots of stuff. How does the economy react to a recession (brief pause in growth)? What about depression? What if interest rates were negative? How would loans work? How would big projects get financed? What role would banks play? If tomorrow is not "bigger" than today, investment is a whole other animal. Social Security depends in growth in two ways: investment return, and a growing labor force so that a retiree today can extract more money than they put in over the years (otherwise shoving money under a mattress could be a better strategy). Medicare and pension funds are similar. Take away growth, and the landscape is radically altered.
None of those qualitative "what about" arguments convince me that the world economy is absolutely dependent on any particular fixed rate of exponential growth. I believe you when you say things would be different, but it's not clear to me that civilization collapses or anything like that. Of course I'm just a physicist, not an economist.
From the data I've seen, it appears that the rate of GDP growth in rich countries has slowed quite a bit since the post-war period. The US GDP grew at an annual rate of about 4% from 1950 to 1973, but only 1.5% from 2007 to 2017. Sure, some people fare worse than others and the experts make a lot of noise about it, but I feel like the US is better off economically than it was back in the 1960s when I was a kid. For Japan it's been much more extreme: more than 8% growth during the 50s and 60s, and less than 1% average growth in recent years. Again I'm sure there are people who are unhappy about this, but Japan's economy hasn't collapsed.
So again, I'm wondering whether you think there's some minimum annual growth rate that our economy absolutely depends on. If the minimum is under 1%, that can sure buy us a lot of time to figure out what to do when it hits 0%. But I'm still not convinced that going from 2% to 0% will be any harder than it was to go from 4% to 2%. Am I missing something important?
Comparisons of life today vs. the 60s must also consider the enormous amount of "inheritance spending" we've engaged in during the intervening decades as we have drawn down finite resources. Of course we have more goodies now, but at great cost. The growth rate, in a sense, is how fast those commodities are being exploited, while the standard of living is connected to the accumulation of wealth from that exploitation. It's derivative vs. integral. The high growth rate in the 60s is part of why we have so much now.
What happens if the derivative changes sign? If finite resources translates to reduced extraction year after year, then I think we're looking at negative rates, and not debating whether 0.5% is sufficient to avoid collapse. Can our economy avoid collapse if the long term prospects are for negative growth rates? Will our institutions survive? So when I and others claim that our economic system requires growth, we are making the distinction between positive and negative sign, not the magnitude of positive growth. If you're fine with negative growth and think the economy will do fine, then we've got differences that I suspect are irreconcilable.
We can't yet have irreconcilable differences on these economic predictions because I have no strong opinions at all (I'm just an ignorant physicist!), and I don't yet understand what your prediction is.
Are you saying there's some kind of catastrophic economic discontinuity when the (suitably time averaged) GDP growth rate goes from +0.01% to -0.01%? (I don't think you're saying this but I'm not sure.)
Are you saying there's some *other* essential resource, besides energy, whose exhaustion will result in world GDP not just flattening but rapidly decreasing? (I think this might be what you're saying but again I'm not sure.)
Whatever you're saying, please spell it out for us physicists!
This exchange has veered into an unproductive, unjustifiably formal corner. I'm no stranger to precision, and appreciate the many domains in which it may be employed, but this is not one of them. Economists have sought to bring physics-like rigor to their field, but collective psychology in a complex system has a way of defying tidy theoretical simplicity. Trying to cast economic success/failure into a physics-like phase transition (e.g., water to ice at precisely 0 C) distracts from the larger and more important perspective. As this discussion appears to have run its course, I'll terminate it here.
Well, I'm just an economics student, which is much less than a physicist.
However, in my opinion, the economy does not require any growth and is in no danger of collapse, even with 0% growth. Debts are paid from income, not growth. That's how you can repay a loan even if you don't get a raise. Of course there are a few "ponzi borrowers" who are relying upon a raise to pay their loans. However, even if the debts are unpayable, the result is bankruptcy, not collapse. Bankruptcy is either a change of ownership or creditors not getting paid. Either way, it has nothing to do with the power plants shuttering.
For example, the typical interest rate on loans throughout the medieval period was 10% per year, but growth was near zero for longer than a millenium. Still, civilization did not collapse.
To be sure, no growth would be an unwelcome phenomenon. Retirees would have less than they thought they were going to have. Stock market returns would be less than half (but definitely not zero). We'd be like Japan has been for the last couple of decades, but even slightly worse.
Still, the economic system does not require growth to avoid collapse, IMO.