Current economics assumes a world of unlimited resources, unlimited wealth. No matter how rapidly a resource is used, either (i) “They” will always find more, or (ii) substitute resources will always be found to serve to any required extent as well or better in place of the depleted resource.
Such conditions would characterise a flat world extending indefinitely in every direction, clearly not the world we live in. In such a hypothetical world, economic systems of any kind would be unnecessary. The very existence of economic systems on earth results from the fact that all resources, however abundant, are limited in five ways – in quantity, in potential extraction rate, in concentration, in accessibility and in renewal rate.
Two kinds of limits may be defined, ultimate and potential.
The ultimate limits to a resource are, the total quantity, known to humanity or not; the concentration and distribution; and the limit to the possible rates of extraction, throughput and renewal.
The practical limits at any time are the quantity known to exist with its known concentration and distribution, the extraction and throughput rates potentially available with existing technology, and the currently available natural and human-assisted renewal rate.
The practical limits can of course be extended, approaching closer to the ultimate limits, but never exceeding them. Current economics recognises some practical limits (though quite leaving out the renewal rate) but assumes that they can be extended indefinitely.
It is argued in other posts that this false and indefensible, though usually unconscious assumption is at the root of much of the world’s present economic trouble and disappointment.
The throughput rate exceeds the renewal rate for many vital resources, as discussed earlier. There is only one way to a sustainable economy; limit the throughput rate of every resource to the currently available renewal rate. Maybe this would allow the limit to be raised from time to time, maybe it must fall steadily for a long time, but there must always be a limit.
If the quantity of a resource is large compared to its throughput and renewal rates but throughput exceeds renewal, the resource is being depleted. Its large quantity is no reason to continue this; it merely allows more time to reduce the throughput rate, allowing priority to be given to resources whose depletion rate is dangerously high compared to their quantity.
In the past, some have spoken of “Limits to Growth”. This is misleading; actually there are limits to throughput. Economic growth, if redefined, need not be limited.
Economic growth is of two kinds: quantitative, as explained earlier, and qualitative. The latter is achieved by improvement in the ratio of performance to cost of goods and services, cost being measured in terms of resource throughput.
The same amount of material that made a simple desktop calculator in 1973 made a powerful computer thirty years later. Many diseases as time goes on can be cured more effectively with less effort and medication. More various and better quality polymers can be made from the same throughput of fuels and organic minerals compared with fifty years ago. Aluminium could once be made only with high throughput and labour for each kilo, but now it is (do not assume I approve) throwaway packaging.
All these are examples of qualitative economic growth, which has no definite limits.
The current understanding of economic growth, being in fact an increasing rate of throughput of wealth, is put forward as a solution to world economic troubles, but it clearly cannot be sustained and trying to force it to continue in the face of multiple resource depletion (actually = economic shrinkage) has actually caused world economic troubles and will continue to aggravate them.
Economic growth as redefined in these posts would help the world.
Incoming search terms:
extending the limits to growth;
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