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Wednesday, October 01, 2003

Is economic growth a panacea? Part II.

Ok, well, maybe I should give a little more detail than I did below in my first wiseguy post.

Some number of tens of thousands of years ago, humankind led a more or less sustainable lifestyle. It was probably nasty, brutish, and short, with the life expectency under 30 years. There were certainly localized famines and other severe problems that would wipe out or severly decrease local populations. Nonetheless, on a global basis, we led a sustainable existence.

Sometime later, mostly due to population growth, which in turn was mostly due to economic growth and early technology, our existence became non-sustainable and it is most probably non-sustainable today. In other words, if we freeze the global economy, population, and technology exactly where it is today, we will eventually run out of critical, non-renewable natural resources and billions of us will die leaving the rest a life of misery and poverty. Those still alive will scrape an existence from the earth, possibly stripping it of life in short order, greatly damaging the environment and ensuring yet more misery and death. Bummer! I hate it when that happens!

The most critical natural resources are the fossil fuels. We are in the oil age and are currently completely dependent on it for survival. Even beyond our economy requiring massive amounts of transportation to function, it requires on the order of 10 calories of oil for each 1 calorie of food we produce here in the U.S. and that ratio is similar in most of the developed countries. Sure, we can conserve, but all other things being equal, conservation simply delays the day of reckoning somewhat.

In my opinion, the only way to get humanity back on the sustainable track is for technology to advance such that we are no longer dependent on oil and other critical natural resources. The best way to get technology to advance is to grow. It looks to me (though I've never done any formal analysis) that growth, wealth creation, and technological advancement are very strongly correlated. For example, technology has advanced hugely over the past 20 years during a period of high economic growth. Economic growth involves increasing demand, demand is closely related to necessity, and necessity is the mother of invention (technology).

It isn't necessarily obvious that general technological advancement will happen to create a solution for the energy constraint problem. The reason I'm convinved it will happen is that it is already. For example, technological innovation is reducing the cost of solar power from photovoltaic cells about 5 percent per year in cost per kilowatt hour and has been doing so for more than three decades. It's about $.25/kwh right now. At $.02/kwh it becomes cheaper to use solar cells to produce hydrogen from electrolysis than to produce gasoline from oil (at $25/barrel). At at 5 percent per year reduction, we should arrive there in less than 50 years.

I have no idea if it will indeed be photovoltaics that end the oil age. It will likely be something else even better that we haven't thought of yet. The concept is that technological advancement coupled with market pressures as fossil fuels become more scarce and expensive will naturally cause us to evolve incrementally and smoothly without ever getting anywhere near a serious crisis. If (here's the big if), we don't get in the way of technological advancement.

Many others agree with this concept. For example, Bjorn Lomborg and Oliver Rubin write:

The limit of sustainability is not a static ceiling but is formed and expanded by human innovation and technological progress. This exponential dynamic seems to have outpaced any pressure on the limit. Thus, perhaps the most problematic assumption is the omission of technological progress and human innovation from the model. Only by ignoring these strong dynamic forces can one posit a fixed limit to growth. By contrast, Yale economist William Nordhaus has demonstrated that if the rate of technological progress is included in these calculations, the Earth's collapse will be avoided by a large margin.

Of course, many others disagree with this concept. They vehemently disagree. They apoplectically disagree. They even violently disagree. Paul Ehrlich, the Stanford biologist, a brilliant scientist, is one of those who vehemently disagrees (although not violently). Over three decades he has made many, many dire predictions. Interestingly, not one of these predictions has turned out to be right.

Besides, what is the alternative to growth and technology? If we stop economic growth, catastrophe is guaranteed. I don't see how we can go backwards, because of both politics and the difficulty in trying to reduce the size of the economy. We can't go backwards, we can't stay where we are. The only direction is forwards.

Some people have proposed a "Manhattan Project" for renewable energy. Maybe, but I don't buy it. I think that focused resources can possibly produce new technology under certain conditions. I don't think it can necessarily produce new technology that is cost effective. We were willing to produce the bomb at any cost. We already have alternative technologies for energy, they're just not yet cost effective.

So is economic growth a panacea? No, but it's the only choice.

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