Saul Eastlake is typical of the myopic economists that most of the equally myopic investors take notice of. He seems to think that economic growth is good and it can continue ad infinitum, enriching those who simply purchase the right securities without doing any productive work.

I ask the same question of Saul that I asked of Dr Craig Sheppard of National Economics a couple of years ago; he refused to answer. How can growth, any growth, be it economic, or other, ever continue in a finite environment? Is not Australia finite, is not the earth finite?

For a simple example of growth, put a bacterium in a Petri dish and watch the growth (the division and subsequent division again, and again). After a short period of time the Petri dish is so full of bacteria they cannot grow any more. Then they die.

Is economic, population or any other growth any different to the bacterium in the Petri dish Saul?

By chasing fanciful growth rainbows we are now stealing from our kid’s futures by unsustainably using up or degrading our finite life supporting assets; water, soil, and fossil energy, the only elements that really matter in the preservation of the life of the Selfish Big Brained Mammal (us) and other earth species by the way.

It was the discovery of fossil energy, what, a short 150 years back, that allowed us to begin growing our populations and our now “fanciful fiat currency” at such alarming rates. When the fossil fuels, particularly oil, are depleted or have reached their peak production (and some geophysicists believe that this has occurred already) growth will begin to stall and slip into decline. How can it be any other way? Cause and effect are the only things Mother Nature takes notice of. Not the scribblings on economists balance sheets. Mother Nature has never heard of economics.

Why doesn’t Saul tell us how growth can continue forever in a finite environment? Saul?

Bucko
Thought I might try to answer your question re: economic growth.
The economy is not finite, and is not restricted by a physical environment. Therefore it is different to the bacterium in the petri dish. Take the internet as an example, an economy that is thriving without a postal address. Are there any physical limits on the internet?
Growth in an economy is not solely reliable on fossil fuels, productivity (as discussed by Saul) is a key ingrediant to growth which also does not take up physical space in the petri dish.
Finally, alternatives to fossil fuels are available at the moment, but are an expensive alternative. Its only a theory, but when fossil fuel reserves are depleted the Selfish Big Brained Mammals will be forced to make a decision between eating raw meat, or formulating a way to to drive the cost of renewable energy down. My feeling is that the alternative of a world without power will be a sufficient incentive to do so. If this happens, will the economy continue to grow infinetly?
NickB

Bucko needs to readdress his introductory economics textbooks. To begin, financial economics is only a single area of a much larger discipline, so when he talks about myopic economists, he is casting a very general net. Likewise, similar views as Bucko's were expressed by Malthus in 1798. He believed, as Bucko does, that the earth could not sustain population growth into the future. Obviously he was wrong. It was his views that coined the term 'dismal scientists.' As food and natural resources become more expensive, there will be incentives to increase production to meet demand. It is possible that in the future that will come at the cost of biodiversity, but I imagine that is a price most people will be prepared to pay for the continued existence of the human species. As for indefinite economic growth, as long as humans have the capacity to increase their knowledge base, there will be continued productivity increases, leading to economic growth. The idea of a finite world is ludicrous, the only definite time limits we have is the end of the sun, and the end of the universe, both of which are to far away to impact planning now. And they call us the dismal scientists.

Thankyou 'Alex' and 'Nick B', you have each made the point very well. There may well be a limit to economic activities based solely on the depletion of physical or biological resources; but given the right incentives there is no limit on the ingenuity of humanity to create things - including services and ideas - which are of value to others.

By the way, 'Bucko', the name is 'Eslake', not 'Eastlake'.

NickB,

In regard to your certainty that alternatives to petroleum and other fossil fuels, can be found, I refer you to a post I made in a discussion in response to "In defence of Industrialisation and Mining" at http://forum.onlineopinion.com.au/thread.asp?article=5291#66063

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Anyone who imagines alternatives to oil and other fossil fuels can be found, which will enable more than 6,500,000,000 humans to maintain and increase their current material standards of living, I suggest he/she read "Peak Oil and the Preservation of knowledge" by Alice Friedemann at http://www.energybulletin.net/18978.html

Here are some excerpts:

"At one time, the Energy Returned on Energy Invested (EROI) for oil was at least 100 to 1. We are reaching the point where the EROI of oil will be 1 and no more drilling will take place. It was while the EROI of oil was high that most of our current infrastructure was built. ...

"Evidence suggests that the EROI of corn ethanol is less than one, which means it takes more energy to make than you get out of it – an energy sink.

"Even if the highest claim of a net energy for ethanol of 1.67 were true, a much greater EROI than .67 is needed to run civilization. The 1 in the 1.67 is needed just to make the ethanol. An EROI of .67 has 150 times less energy than oil when we started building American infrastructure."

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"The alternative of a world without power" to which you refer should be driving us now to reduce, as far as possible, our current and consumption of our dwindling finite stock of natural resources, instead of 'growing' our economy.

In fact, if we regard the economy, as we should, that is as encompassing all the earth's natural resources, including all that free captured solar energy which took at least tens of millions of years of biological and geological processes to store, then it is not growing at all. Instead, what we are doing is destroying that natural capital in return for creating artefacts and structures which will be of little, if any, benefit to future generations.

DEAR SAUL ESLAKE

You commented that "there may well be a limit to economic activities based solely on the depletion of physical or biological resources". I'm glad you acknowledge this but with respect it's actually a bit of an understatment. If we are concerned in any way at all about sustainability - the ability of human society to be sustained over a long term - we need to be aware of the first law of sustainability which is "population growth and/or growth in the rates of consumption of resources cannot be sustained". This is not a matter of opinion. It is plain arithmetic.

I BEG OF YOU to put aside 15 minutes or so of your time to listen to one of the world's most lucid speakers on this subject, Dr Albert Bartlett. He's at http://www.globalpublicmedia.com/lectures/461

You can read a transcript or watch a low-res version of his lecture. I would be most interested to hear your evaluation after you have given the good professor a careful hearing (you will need to bear with it as he goes over some pretty elementary stuff in building his case).

By the way I appreciate what you're getting at about economic activity that is not resource-intensive. However even in service industries each person takes up resources. For instance, the average Australian today takes up (staggering, but true!) 100 times his or her own body weight in water every day to be kept fed, washed, clothed etc. and this applies to each additional Australian, so the limits are coming up quite fast with our rapidly-growing population. The prudent course would be to stop growing our population so that our PER CAPITA consumption can remain as far as possible at current levels (hopefully a bit less for James Packer and a bit more for the soup kitchens) without running the environment into the ground and leaving our future generations a smoking hulk to try and live in.