A more accurate definition of economic growth would be any change in the relation between the throughput and renewal rates, for a given resource for which throughput exceeds renewal, in which change the ratio of the throughput rate to the renewal rate falls, or conversely the ratio of renewal to throughput increases.
Thus economic growth, if redefined as proposed here, can be achieved by three means:
(i) Increasing the wealth base by reafforestation, farm land restoration, saving endangered species from extinction, to give a few examples. Note that discovering more oil, for instance, doesn’t increase the wealth base. The oil was not brought into existence by discovery; it was already there, already part of the wealth base. Discovery only added it to the human-made list of “known reserves”.
(ii) Economic growth is achievable by reducing the throughput rate, if throughput exceeds renewal for a particular resource. Examples are: restricting fishing or other cropping to allow stocks to build up; changing farming methods to reduce degradation and erosion loss of topsoil; cutting (by rationing or taxing) the consumption of fresh water, motor fuel, and other goods whose rate of use in many countries is far in excess of what is need to achieve the purpose of the consumption.
For example, if you only want to move one person a few kilometres you don’t need a tonne or two of powerful machinery to do it, nor do you need to water large stretches of road for several hours a day just to keep a small piece of lawn green.
Other examples are:
Reducing, again possible by tax and price manipulation, the acidification of fresh water bodies by vehicle fumes and industrial fuel burning. In this case the “throughput” of the lakes and rivers is reduced by preventing their pollution with acid emissions.
Reducing the waste and pollution of often scarce and important habitats on the fringes of cities caused by using them to dump excessive quantities of “rubbish’, much of which needn’t be discarded or needn’t even be manufactured and purchased in the first place. In this case the throughput of wetlands and natural areas near cities is reduced.
(iii) If the throughput rate of a resource exceeds its renewal rate, then its renewal rate can be increased. This can be done by adding human renewal systems to natural ones or by increasing existing human ones. For instance metals, for whose ores the natural renewal rate is very low, can be recycled instead of piling up in dumps. There is no reason why most of the metal consumed today cannot repeatedly be recovered and re-used. There are technical difficulties due to corrosion and mixture with other metals and non-metals, but there is no reason why these cannot be surmounted.
The issue of recycling being often ‘uneconomic’, according to present economic concepts, will be discussed later.
It might seem that points two and three, reducing throughput and increasing renewal, are the same thing as point one, increasing the wealth base; or that points two and three amount to the same thing. It is true that the three points are interrelated but it is necessary to draw a distinction between on the one hand, physically increasing the quantity of a resource, and on the other, changing the rates of use, and of regeneration of a resource. In point one we are dealing with the quantity, in two and three with its differentials.
So we arrive at a definition of economic growth quite different from the current one, which means increasing the throughput rate of as many resources as possible without regard to their quantities or renewal rates. The proposed new meaning would be, increasing the quantity of wealth or lowering its rate of depletion, often by reducing the throughput rate.
Many countries have believed themselves to be enjoying economic growth for years and to be getting ever richer. But in resource terms they have been undergoing depletion and getting poorer.
To return to a qualifier added to the original definition of economic growth above, any change in the relationship between the throughput and renewal rates for a given resource for which throughput exceeds renewal, in which change the ration of throughput to renewal falls or that of renewal to throughput rises, is economic growth.
The point here is that if the throughput rate for a resource is less than its available potential renewal rate, then any increase in the throughput rate up to the renewal rate should not affect the overall quantity of the resource. It is only when the throughput rate exceeds the available renewal rate that change in the relation between the two rates affects the quantity of the resource or wealth species.
Posts in this Series
- Review of 1988 edition of Economics for a Round Earth
- Ends and Means
- Evolution Not Revolution
- Notes on Evolution Not Revolution
- Concepts and Terms – What is ‘wealth’?
- The Throughput Chain
- The Derivatives of Wealth
- Global Inequalities in Wealth
- Economic Growth Redefined
- Misconceptions in Practice
- Borrowing to Invest to Get Rich
- Environment versus Economic Progress
- Digression: Pollution Red Herrings
- Digression: Depletion and Inflation
- Value Inflation – the Trigger, not the Bullet
- Living Standard and Quality of Life
- Digression: Resource Consumption, Jobs, and Hands Off
- When the Boom comes
- The Effect of People’s Expectations
- Hard Work – Virtue or Vice?
- Who needs the Snail Darter?
- More Dollars for Conservation?
- Non-renewable Resources – Leave Them in the Ground?
- Digression: Fast Breeder Nuclear Fission Reactors
- Minerals in National Parks – Leave Them in the Ground?
- Population and Wealth
- Left, Right and The Environment
- Digression: “So Long As We Profit, Costs Elsewhere Aren’t Our Problem”?
- Limits to Growth?
- Solar Energy – a Special Case
- The Solar-Powered Car
- Money Supply, Throughput and Inflation
- Real and Money Wages: Living Standards
- Digression: Caution about “Increases” and “Decreases”
- The Idea of Proportionate Flows Applied to Wages: the Great Depression
- Deficit Financing
- The Optimum Proportionate Flow Condition
- Digression: Thrift versus Spendthrift
- Digression: the Private Motor Car – a Basic Necessity?
- The Idea of Proportionate Flows Applied to Wages – the Stagflation of the 1970’s and 80’s
- Excessive Wages Can Cost Jobs
- Fight Unemployment or Inflation First?
- Digression: Work and Jobs
- Other “Job Creation” Schemes
- Visual and Noise Pollution
- Digression: Renewal and Recycling of Resources; Wages and Jobs
- Ratio Distortion and Consumption
- Aggregate Demand – Components and Internal Ratio
- The Slave Economy
- Employment and the Steady State
- Consumer-Led Recovery
- Interest Rates and Ratio Distortion
- Demographic Trends and Living Standards
- Digression: Bad Economics Good for Conservation?
- Coping with Aging Populations
- Stabilising the Human Population
- Costs – What Really Costs Us and What Doesn’t?
- Digression: Other Comments on Statements in UN Report
- Discussion of Costs Resumed
- Budget Balancing Methods – Cost or Gain?
- Digression: Government Expenditure – Government Employees
- Expenditure on Weapons