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How Many Economists Subscribe To The Perpetual Growth Model?

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P315

The Age of Turbulance

But can trade and standards of living continue to increase indefinitely?

Yes. That is the gift of competitive free markets and the irreversible accumulation of technology. The volume of cross border trade has few national limits.

Greenspan clearly believes that perpetual growth is possible or that the economy hasn't and won't reach it's maximum level for several hundred which means it would just be someone else's problem in the future.

Is this a common held belief among academic economists that living standards can just go up indefinitely due to technological advances?

Or will it be more that those countries that hold the technology can advance at the expense of the others?

From the preceding page

At the same time, the US and other developed countries increasingly specialized in conceptual products and intellectual services that are valued highly in the marketplace. IN the US for example, value added in finance and insurance rose from 3% GDP in 1953 to 7.8% in 2006, while in manufacturing it fell significantly over the same years.

Do conceptual products create inflation? I assume he's talking about CDO's etc.....

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Greenspan clearly believes that perpetual growth is possible or that the economy hasn't and won't reach it's maximum level for several hundred which means it would just be someone else's problem in the future.

Is this a common held belief among academic economists that living standards can just go up indefinitely due to technological advances?

Do conceptual products create inflation? I assume he's talking about CDO's etc.....

No, he means things like the iPod (invented in the US, made in China, most value added goes to the US).

I'm an economist and I subscribe to the theory to an extent, it's not worked badly for lots of countries in the last 50 years. But there are clear environmental limits at the moment, and it's also quite easy to screw up through bad policy or just letting human excesses run wild.

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Or will it be more that those countries that hold the technology can advance at the expense of the others?

since technology is not a physical good with boundaries -once created, the major costs don't militate against 1 or 1,000,000 applications - then providing countries have people with brains, they will have technology - and get breaks along the way - witness China and Airbus technology

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No, he means things like the iPod (invented in the US, made in China, most value added goes to the US).

I'm an economist and I subscribe to the theory to an extent, it's not worked badly for lots of countries in the last 50 years. But there are clear environmental limits at the moment, and it's also quite easy to screw up through bad policy or just letting human excesses run wild.

So as long as you keep inventing you can keep growing? Or is it the skill to invent new equipment that allows you to resell the same items over and over again. LP to cassettes, to CD or Betamax, VHS to DVD then BluRay etc....

This still seems to be a model based on perpetual consumption and as you noted it hits environmental problems. I don't believe that this level of consumption is sustainable without clean energy.

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Living standards can continue to increase indefinately, we just need to use the resources we have more efficiently.

If the UK changed the tax rules so that wealth creation wasn't penalised at every stage of production living standards would increase almost instantly as it would amount to an effective pay rise for the earners in the economy.

This may not show up as 'growth' in the GDP stats but the quality of life for many people would be greatly improved as their purchasing power increases.

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So as long as you keep inventing you can keep growing? Or is it the skill to invent new equipment that allows you to resell the same items over and over again. LP to cassettes, to CD or Betamax, VHS to DVD then BluRay etc....

This still seems to be a model based on perpetual consumption and as you noted it hits environmental problems. I don't believe that this level of consumption is sustainable without clean energy.

I agree with this - but clean energy does not seem far off

already energy is far cleaner than, say, direct coal and wood burning leading to smog in the 19th century from so many chimneys - OK so the pollution is exported, but on a per MW basis, a modern coal power station is very clean compared to an old coal stove

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I agree with this - but clean energy does not seem far off

already energy is far cleaner than, say, direct coal and wood burning leading to smog in the 19th century from so many chimneys - OK so the pollution is exported, but on a per MW basis, a modern coal power station is very clean compared to an old coal stove

Even the ones being built in China?

Although recent reports suggest China is attempting to embrace green energy, whether it's at sufficient level to sustain 1.3bn people is an entirely different question.

The other dilemma in the technological advancement is that ultimately it should create a low cost economy all things being equal, which is at odds with the high cost trajectory we are currently on.

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Even the ones being built in China?

Although recent reports suggest China is attempting to embrace green energy, whether it's at sufficient level to sustain 1.3bn people is an entirely different question.

The other dilemma in the technological advancement is that ultimately it should create a low cost economy all things being equal, which is at odds with the high cost trajectory we are currently on.

We've chosen the high cost trajectory because these high costs end up as gains in other peoples pockets.

Technology has helped the wealth creation process, but the gains in producitivity are easily get offset by rising costs of the housing market. If this burden were reduced by implementing the proper reforms then we could cut working hours by ~40% (the size of the governments wealth grab via taxation) and still be as productive as we are now.

The result would be a significant increase in 'growth' without lifting a finger.

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Is this a common held belief among academic economists that living standards can just go up indefinitely due to technological advances?

Yes. Academic economists consider that economic activity begins at the primary industrial stage i.e. the mining/harvesting/foresting of raw materials. The previous non-human parts of the process (e.g. the formation of oil) are discarded as "externalities". This is why they don't discriminate between renewable materials such as wood, and non-renewables such as coal.

I also believe that they don't consider the effects of private debt in their economic models, though you'll have to go to Steve Keen's site to see the details of this. His opinion is that classical and neo-classical economics are hogwash, and that 99% of professional economists are actively dangerous.

Edited by CokeSnortingTory

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So as long as you keep inventing you can keep growing? Or is it the skill to invent new equipment that allows you to resell the same items over and over again. LP to cassettes, to CD or Betamax, VHS to DVD then BluRay etc....

This still seems to be a model based on perpetual consumption and as you noted it hits environmental problems. I don't believe that this level of consumption is sustainable without clean energy.

No matter how green the energy is generated or how many plastic yogurt pots we put in the recycle bin, if the target is for world economies to expand by 2 to 3% each year forever, the planet will be burnt out.

Edited by Take Me Back To London!

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Even the ones being built in China?

yep even them - if they were as inefficient as a coal stove they'd be economically unviable. but I bet there is room for improvement in them against western standards!!!

Although recent reports suggest China is attempting to embrace green energy, whether it's at sufficient level to sustain 1.3bn people is an entirely different question.

yep

The other dilemma in the technological advancement is that ultimately it should create a low cost economy all things being equal, which is at odds with the high cost trajectory we are currently on.

yeah - people are s*dding greedy, which is the main crux. beating the Jonese etc.

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Yes. Academic economists consider that economic activity begins at the primary industrial stage i.e. the mining/harvesting/foresting of raw materials. The previous non-human parts of the process (e.g. the formation of oil) are discarded as "externalities". This is why they don't discriminate between renewable materials such as wood, and non-renewables such as coal.

I also believe that they don't consider the effects of private debt in their economic models, though you'll have to go to Steve Keen's site to see the details of this. His opinion is that classical and neo-classical economics are hogwash, and that 99% of professional economists are actively dangerous.

I agree with this, in fact I think its the fundamental problem with economics. Economists won't distinguish between wealth that is the produce of nature -such as the formation of oil, etc - and wealth that is the product of human effort. By lumping all these items under the catagory 'capital' they tie themselves and the economy up in knots because they refuse to recognise who has added value and by what means. This is essential if we want to determine how to allocate resources in a fair way.

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This is essential if we want to determine how to allocate resources in a fair way.

but why would we be so pious as to wish to do that?

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Living standards can continue to increase indefinately, we just need to use the resources we have more efficiently.

If the UK changed the tax rules so that wealth creation wasn't penalised at every stage of production living standards would increase almost instantly as it would amount to an effective pay rise for the earners in the economy.

This may not show up as 'growth' in the GDP stats but the quality of life for many people would be greatly improved as their purchasing power increases.

Living standards haven't increased, though. Crushed on an overpriced, crowded train trying to drink shite buffet coffee, with a kid with a leaking IPod on one side, and a bloke wrestling with a 54" boxed plasma on the other - while talking on your mobile about your 400K mortgage isn't a better standard of living. It's just more expensive imported trash around the place - and a pile more debt everywhere.

Houses are smaller; roads more congested; living costs higher and stress more universal. When we look at ourselves other than as consumers we will see the essential poverty of modern life.

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To prevent asset bubbles?

no, works the other way around - dogmatic market-intervention promotes asset bubbles

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Guest Steve Cook
No matter how green the energy is generated or how many plastic yogurt pots we put in the recycle bin, if the target is for world economies to expand by 2 to 3% each year forever, the planet will be burnt out.

Exactly

Green energy policies are bullsh*t if it is supposed tyhey will allow our economies to grow indefinitely. All they can possibly do at best is put of the day of reckoning for a little longer.

We have to learn to live within our means. Meaning, at best, a static state economy. But, more realistically, a contracting one until we get back to somewhere we are likely to be able to sustain into the deep future.

All else is bullsh*t. Bllsh*t that has only been "sustainable" for the last century or two on the back of cheaply available hydrocarbons.

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