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The Limits to Growth

By Matthew Yglesias  

"The Limits to Growth"

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Commenter Ted says there’s a revival of “limits to growth” arguments in the UK, typified by this web video, and wants to know what I think:

I’d say the main issue here is that I don’t think anyone actually denies that there’s some theoretical limit to the possible extent of human aggregate economic growth. The laws of physics and the process of entropy, at a maximum, set some kind of limit on what’s possible. The question is whether there’s some reason to think that actually existing human society is pushing up against the limits to growth in some meaningful way.

I would say the answer is no. People normally think about this in the context of resource-scarcity in the energy sector. Note, however, that the energy intensity of our economy is steadily declining:

energy

And this has been during a period when there’s been no real policy emphasis on improving efficiency and energy has generally been cheap, offering a limited economic rationale for efficiency. Many developed countries are far less energy-intense than the United States even with existing technologies, and over time technology will improve. It’s also the case that we’ve really only begun to exploit the energy-generating potential of solar and wind power, that there’s more that can be done with hydro and geothermal power, and that it’s very logistically possible (albeit expensive) to build more nuclear plants. And of course there’s a lot of coal that could be burned.

Talk of coal, of course, raises the question of whether we’re facing a climate-related cap on growth, rather than one that pertains to running out of resources. But the answer is no. It’s worth emphasizing that most research indicates that the world in 2050 will be richer than the world in 2010 regardless of whether environmentalists or the pollution lobby get their way:

A comprehensive report by former World Bank chief economist Nicholas Stern undertaken on behalf of the UK government documents both the costs of climate change and of options for mitigation and adaptation. The Stern report estimates the cost of a changed climate could be from 5 percent to 20 percent of global GDP. Costs include those related to losses from declining agricultural production, heat-waves, droughts, flooding events, extreme precipitation, biodiversity loss, disease spread, and soil erosion. Conversely, the study estimates that a stabilization at 500-550 ppm CO2equivalent (CO2e, a measure of the contribution of six key greenhouse gases) will cost the global community roughly 1 percent of GDP by 2050. Necessary changes would include decarbonizing 60 percent the power sector. Policies called for in the Stern report include a strong carbon signal through taxes, trading, or regulation, and research and development into low carbon-intensive technologies. In addition, Stern suggests that activities to curtail greenhouse gas emissions will be substantially more expensive if action is delayed rather than initiated in the near future: if we fail to act within the next decade or two, stabilization at 550 ppm CO2e may be too challenging to achieve at all.

The IMF is forecasting 3.9 percent global economic growth for 2010 and 2010 is going to be a bad year. Which is just to say that the overall growth trend ought to swamp either the costs of avoiding a climate catastrophe or even the much higher costs of simply coping with one.

The real risk, both ecological and political, is not that we’ll reach a point in the foreseeable where we “can’t grow” anymore. Rather, there’s a risk of catastrophe. There are real low-probability climate outcomes in which things spiral totally out of control and destroy the world. There’s a risk of nuclear war. There’s a risk of cataclysmic asteroid collision. Things could go very badly wrong. But those aren’t the “limits to growth.” A growing economy isn’t like a giant hamster that eats up more and more food—it can innovate. There is a finite quantity of matter in the universe so there’s got to be some kind of limit out there. But what’s realistically happening right now is that people are (rightly!) concerned about global warming and (rightly!) concerned about the fact that the developed world is in a bad economic situation. These are, however, problems that can be solved, not “limits.”

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