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scepticus

Life In Flat Land

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In the Marc Coleman thread, I suggested that it was not ultimately politicians that are to blame for single minded persuit of growth-at-all-costs, but more to do with the fact the public at large have no grasp on what a steady state, or non-growth economy would actually look or feel like.

I think this is a very interesting topic, not least because we have been experiencing such an economy for half a decade and arguably (in real terms, more or less) quite a bit longer than that. Maybe, for whatever reason it remains our future. Certainly alot of people here think we should stop chasing growth.

I figured it would be interesting to poll people who think we should not chase growth, for what you'd expect of such an economic situation. Let us at least begin with the assumption that the political economy would be reasonably well run (say, swiss-like), and let us further assume that for whatever reason, the period of non-growth will last for 100 years, and that, because the economy is well run and has useful stuff to export, the trade and current account surpluses are basically balanced (e.g. 0) averaged over a 10 year window. This probably means we should assume its trade partners are in the same boat.

What outcomes would you expect for any or all of:

* Social mobility and wealth distribution

* Energy consumption distribution

* Employment rates (and what professions)

* Bank base rate, plus the rate a retail saver would experience.

* Frequency and nature of Bank failures and financial crises

* Expectations for velocity of money

* Market metrics like volatility, corporate landscape, corporate borrowing rates, equity valuations

* How house purchases would be funded and would move from hand to hand. If mortages, at what interest rate would they typically be available? If mortgage lending is not available to the majority, how does that affect house prices, rents and some of the other factors above?

Note that because real GDP (which defines growth) and energy consumption are very closely correlated (near 100%), it is probably NOT reasonable to assume an increase in the energy per capita budget given the constraints above. Efficiency savings MAY be posited, but then it needs to be considered whether that leads to growth and how it affects any of the factors above, and whether the economy in question benefits from the energy savings or whether some foreigner or owner of capital benefits.

Thoughts?

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why growth?

excess wealth is what is needed....the excess used to help those who dont cut the mustard.

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In the Marc Coleman thread, I suggested that it was not ultimately politicians that are to blame for single minded persuit of growth-at-all-costs, but more to do with the fact the public at large have no grasp on what a steady state, or non-growth economy would actually look or feel like.

I think this is a very interesting topic, not least because we have been experiencing such an economy for half a decade and arguably (in real terms, more or less) quite a bit longer than that. Maybe, for whatever reason it remains our future. Certainly alot of people here think we should stop chasing growth.

I figured it would be interesting to poll people who think we should not chase growth, for what you'd expect of such an economic situation. Let us at least begin with the assumption that the political economy would be reasonably well run (say, swiss-like), and let us further assume that for whatever reason, the period of non-growth will last for 100 years, and that, because the economy is well run and has useful stuff to export, the trade and current account surpluses are basically balanced (e.g. 0) averaged over a 10 year window. This probably means we should assume its trade partners are in the same boat.

What outcomes would you expect for any or all of:

* Social mobility and wealth distribution

* Energy consumption distribution

* Employment rates (and what professions)

* Bank base rate, plus the rate a retail saver would experience.

* Frequency and nature of Bank failures and financial crises

* Expectations for velocity of money

* Market metrics like volatility, corporate landscape, corporate borrowing rates, equity valuations

* How house purchases would be funded and would move from hand to hand. If mortages, at what interest rate would they typically be available? If mortgage lending is not available to the majority, how does that affect house prices, rents and some of the other factors above?

Note that because real GDP (which defines growth) and energy consumption are very closely correlated (near 100%), it is probably NOT reasonable to assume an increase in the energy per capita budget given the constraints above. Efficiency savings MAY be posited, but then it needs to be considered whether that leads to growth and how it affects any of the factors above, and whether the economy in question benefits from the energy savings or whether some foreigner or owner of capital benefits.

Thoughts?

Too long a question to deal with all of.

The crux is, what do you define as growth?

The advance of technology has brought us labour-saving devices. Be it the hi-tech manufacturing plant or the washing machine in the home, less labour is required and people have more time for other things, including leisure. Is that growth? Economically no, but it frees up resources for growth.

What do people do with all that time? In part, we enjoy it. We have consumer devices like the telly, or debating pointlessly on HPC, to help consume that time. Is that growth? You can measure the cost of a telly or an ISP subscription, but those are on a long-term downward trend.

In part, people use that time productively, bringing us new service industries or extending elite services to the masses. Eating out, taking a weekend break, going to the gym, health spa, or salon. Is that growth? Yes - these are things you pay for, hence measurable economic activity, and this growth is a direct result of society as a whole getting richer.

But it also has negative effects. Growth in a finite world drives up competition for finite resources like land, so where there's competition in a resource class, ever more wealth focuses there. And if you think HPI is a problem, you need to be a whole lot more worried about more basic resources like energy and food where it's only a matter of time before global crisis hits.

What automation does for human-driven resources, we can also posit for energy. Low-energy light bulbs free up energy. In a world without growing population and expectations, that would be an unalloyed Good Thing. But as with the human resources it's more complex than that.

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Too long a question to deal with all of.

Sure, but good start anyway. Cheers.

The crux is, what do you define as growth?

I don't want to advance my own definition at this point, since I'm interested in testing what the range of expectations is rather than have people debate mine. How would you define growth? You have kind of started to tackle this question but not actually given a definition. I agree that having a definition is important. The definition I think looks very different from the perspectives of the individual and the whole nation, but in general I suggest that the latter perspective will tend to be more critical in influencing most of the metrics I gave in my OP.

Another alternative is to approach it from the perspective of how politicians are defining it.

Another approach is to pick the subset of metrics in my OP above (and maybe others I may have missed, such as leisure time or general contentment) that are felt to be most important and then define growth such that these metrics are maximised. Then one can stand back and see if that looks like a sensible definition of growth or not.

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its growth for the few...its pie sharing for the rest of us.

Even in Switzerland or Germany - is this how they would tackle it you think?

In any case, in flat land, even growth for the few is ruled out (unless that is compensated for by an ever diminishing pie for the rest).

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So are we assuming nobody will ever have a better idea than the ones that already exist and we will stop accumulating information about natural phenomena i.e. no technological or scientific progress?

Edited by Dorkins

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If unpayable debts are written down and people are incentivised to save again, growth will return.

The last 5 years could not more clearly illustrate this point (just look at the UK GDP charts, take out the imputed rents (hat tip to those who mentioned this previously) and the GDP figures are a disaster), and of the fallacy of creating extra units of currency to stimulate economic activity.

* Edit * Just to add, the "Flat Land" you talk about is the result of the actions of those who have made mistakes to try and maintain their situation as before through political influence.

Also, it would be fairer to say that "politicians should stop chasing growth".

Edited by GradualCringe

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When you say flat, do you mean the entire world economy, or just the UK? Staying flat in a growing world might be easier than staying flat in a flat world.

And then there's the question of demographics. How do we stop the population exploding?

And income inequality? Should we seek to preserve a Pareto optimal income distribution in a zero-growth economy?

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If unpayable debts are written down and people are incentivised to save again, growth will return.

The last 5 years could not more clearly illustrate this point (just look at the UK GDP charts, take out the imputed rents (hat tip to those who mentioned this previously) and the GDP figures are a disaster), and of the fallacy of creating extra units of currency to stimulate economic activity.

Include the understated inflation measures (thus falsely lower GDP deflator to get real GDP after infaltion) and you can see that we are going backwards fast.

That imputed rent thing.. l knew it existed l thought it was like sub 1%. It boggles my face.

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"What outcomes would you expect for any or all of:" - surely any outcomes are possible depending on the design and management of institutions and incentives, from tyrannical beurocracy to hippy liberal sharing to cut throat business competition to scarcity and desertification?

I dont see that the level of "growth" has much effect on this - except for how it interacts with the currently constituted institutions and social-political-economic systems.

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Growth, in my humble opinion, comes from either productivity increases or innovation.

Govt. spending should not be counted in these equations (GDP, etc.) and the real inflation rate needs to be discounted (not the fantasy one based on the prices of health insurance, ipads and Bentleys).

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The advance of technology has brought us labour-saving devices.

You can't have technological advance in a no-growth society. That would put people out of work and require new businesses to hire them, which might cause growth.

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Well there is certainly some issues here in defining what we are talking about. On the one hand we have some responses along the lines of growth will always happen if the conditions are right, and others along the lines of "it depends how you define it".

In terms of the latter I see three options:

a) Growth defined in the biological sense - more human biomass and/or more of some combo entity that is some combination of man plus his tools (e.g. machines and cities and instituions of various kinds etc). Perhaps this can loosely be defined as 'more complexity'.

b ) growth defined as that which is required to keep existing social/political/financial architecture tenable in both the short and long run.

c) growth defined as being some inner quality of life experience which must necessarily vary from person to person and could never be quantified let alone be targeted by policy.

My personal preference for a definition is (a), b is a plausible line of response. Not sure about ©.

Are there any other ways in which a definition could be reasonably constrained?

Edited by scepticus

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a) Growth defined in the biological sense - more human biomass and/or more of some combo entity that is some combination of man plus his tools (e.g. machines and cities and instituions of various kinds etc). Perhaps this can loosely be defined as 'more complexity'.

Biomass has little to do with it. 'Economic growth equals increasing complexity of social organisation' seems to me like the definition you are looking for. In ecosystems this complexity resides largely in the genomes of the organisms occupying that area. Humans have genetic complexity plus large amounts of cultural information stored in our brains and documents.

So if you are saying there is to be no economic growth, you are saying there is to be no increase in the complexity of human society. Since it is relatively easy to store the information that underlies that complexity (Einstein's published papers are what, a few hundred pages at most?) I assume Flat Land is going to need some kind of information police to go around destroying new information e.g. by preventing people from learning from their mistakes and communicating that information to others etc.

Edited by Dorkins

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This is an interesting question. If growth is tied to energy, and energy is limited, then I can see reason to think hard about zero growth or about growth without increasing enrgy usage.

But I'm not sure we are anywhere near the limit of energy consumption. We could just build loads of nuclear and renewables to more than replace dwindling fossls fuels. Would it matter if 50% of the population worked in the energy industry?

I might define my measure as sustainable energy usage, but I'd be looking for growth on the assumption that energy usage leads to quality of life.

Edited by opt_out

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This is a very interesting subject. What are drivers of growth, how are they connected and can they be regulated/will they regulate themselves? Off the top of my head there is -

- Technological advance/increase in efficiency

- Population growth

- Monetary expansion

- Energy use - as has been mentioned by scepticus before, but which I haven't understood fully yet.

- Marketing-driven consumerism?

I'm sure there are more, but I haven't much time to post now.

As population growth slows with increased wealth, it may not be a 'problem' in a no-growth economy in the future.

Monetary expansion? Not something I understand fully enough, to be honest.

The question has already been raised about spare time increases due to technological efficiency - I see this as one driver of growth that is 'unnatural' as in it is a function of how the economy is currently organised - surpluses are driven into further growth because the choice of increased free time has been made unavailable for most, due to capture of land and rent-seeking.

It is also generally assumed that growth is positive, but I don't think we really question enough why this is. In particular technological advancement is lauded, but are resources (allowed to be) well directed? Is creating the next smartphone the best use of a product designer's time? I'm no fan of work for work's sake, but when a skilled occupation is automated, is something lost in terms of the satisfaction of manual craft and the mental and physical benefits it brings?

Of course none of the above should be taken to suggest that I am in favour of forcing or regulating economic changes - quite the opposite in fact.

The above is getting a bit off-topic I know, but I can see much benefit in the concept of a no-growth economy.

Edit to add - would a no-growth economy be the natural state of a totally free market? I've suggested this above, but I feel that most people's natural tendency would be to use the opportunity of techological advancement to do less - would this balance out in the long term?

Edited by shipbuilder

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The product of growth unerringly finds itself in the offshore accounts of the superrich, all £31 tillion of it by all accounts. If we did not have this "growth", all people apart from the super rich will be far better off.

Edited by jammo

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You can't have technological advance in a no-growth society. That would put people out of work and require new businesses to hire them, which might cause growth.

Only if the choice is to work for another business or starve, due to insufficient access to land.

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So are we assuming nobody will ever have a better idea than the ones that already exist and we will stop accumulating information about natural phenomena i.e. no technological or scientific progress?

I don't think so. My experience is that given the chance, most people will choose to use labour-saving to actually do less.

Or of course they may do other things creative, inventive, or in pursuit of knowledge, but there's no reason to believe that those things will necessarily result in more economic activity - a hobby woodworker may not wish to sell his creations, for example, or he may decide to substitute his current job for woodworking.

My personal belief that only a small proportion of the population are truly ambitious in terms of power, influence or money, while the rest of us are happy to 'make a living' or less if we can.

Edited by shipbuilder

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Only if the choice is to work for another business or starve, due to insufficient access to land.

We've long since outgrown the level where we could sustain ourselves by everyone having a plot of land.

Cities outgrew it with the coming of civilisation. The countryside outgrew it as the industrial revolution enabled a much larger population, and that was one of the main drivers for emigration in the days of a growing empire.

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So are we assuming nobody will ever have a better idea than the ones that already exist and we will stop accumulating information about natural phenomena i.e. no technological or scientific progress?

That depends on what you define as growth. Some people deny that having lots of material things - from labour-saving to entertainment - makes them better-off.

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  • 242 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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