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.

Dr. Eslake,

As an economist you would have had extensive training in mathematics, which would have included exponential functions. Let's use population as an example, although the same applies to growth in consumption of any material commodity. dP/dt = rP, in other words, growth in population numbers is proportional to population, with r the fractional (percentage) growth rate. With a population of 100 and an annual growth rate of 1% you would have 101 people at the end of the year and 101,000 if you started with 100,000. The solution to this equation (as can be confirmed by any differential equations textbook) is P(t) = P(0)exp(rt), where P(t) is the population at time t since some arbitrary starting point when the population is P(0).

Now lets assume that there was a population of 2 people 10,000 years ago and that it continued growing at 1% per year up to the present. This is less than current Australian and global growth rates (1.3%). A little work with a scientific calculator shows that we would now have a global population of about 5.4 x 10^43 people. The density of human flesh is about 1000 kg/m^3, the same as water, so assuming 60 kg per person, if all those people were packed into a sphere centered at the sun, the radius would extend 92 billion kilometers, more than 10 times as far as Pluto at its furthest from the sun. There is no imaginable technology that would make this possible.

Staying closer to home, we can check the CIA World Factbook for populations, land areas, and growth rates of different countries, then work out the time to standing room only for each of then. a little over 400 years for the Solomon Islands, assuming present growth rates.

You are arguing with the laws of mathematics, not Malthus, although Haiti and Rwanda are pretty good arguments that he was correct.

Your idea of exterminating other lifeforms to turn our beautiful planet into a factory farm for people fills me with horror.

Divergence ,
“then work out the time to standing room only for each of then. a little over 400 years for the Solomon Islands, assuming present growth rates.”

You need to think outside of your (middle class) square:

You have left Australia out of your calculations.
When faced with the inevitable collapse of Solomon Islands( & others) The UN & others will simply arrange for them to transmigrate to Australia.

Haven’t you been told that we are responsible for such problems through our contribution to global warming etc.

And take a look around you -we have such extravagance lifestyle .
We have the Royal National Park to the south of Sydney which can house by third world standards a city of 1 million…we have Kuring-gai to the north & even the botanical gardens -all could be used to alleviate human suffering & feed & house the needy.

I’ll bet you, Tim Costello is already writing his speeches, & Bono & Peter Garrett have already penned a few songs to remind us of our debt to the new arrivals.

I took up "Thermoman"'s suggestion and read tDr Bartlett's lecture. Though it's well put together and his mathematics is unimpeachable, it amounts to little more than an elegant re-statement of Malthus.

Undeniably, if the world's population continues to grow at a constant rate then the world will, at some point, 'run out' of various things.

However, the world's population is not growing at a constant rate. According to the UN's World Population Projections (see http://esa.un.org/unpp/), global population growth peaked at just over 2% pa during the 1960s, has slowed to 1.3% pa over the decade ended 2005, and will slow further (on the UN's "Median Variant" projection) to 0.42% pa over the decade ended 2050.

Why is it slowing? Because of greater material affluence (in almost all cultures, the richer people get, the fewer children they have); because of advances in health care - in particular, declining infant mortality (the more confident people are that the children they have will survive, the fewer they have); and because of improvements in the education and status of women (the more educated and empowered a woman is, the fewer children she has).

Second, Bartlett makes no allowance for the signalling function of markets. In general, as things (land, oil, other resources) becomes more scarce, their prices rise - unless governments intervene to prevent market forces from operating. Higher prices prompt people to economize on their use of, to find new sources of, and to find alternatives to, the things which are becoming scarcer.

There is an important exception to this generalization - and that is where markets do not (for a variety of reasons) - assign a price to something which is becoming scarce. Examples include clean air, biodiversity, etc. In these circumstances - which economists call 'market failure' - there is a perfectly legitimate role for government intervention to assign a price to those things (for example through taxes). Contrary to the image which some people have of economists as heartless, uncaring types, most economists (including this one) support goverment interventions of this nature.

Saul,
"However, the world's population is not growing at a constant rate. According to the UN's World Population Projections (see http://esa.un.org/unpp/), global population growth peaked at just over 2% pa during the 1960s, has slowed to 1.3% pa over the decade ended 2005, and will slow further (on the UN's "Median Variant" projection) to 0.42% pa over the decade ended 2050."

The above is a bit misleading. What is occuring could be better characterised as a REDISTRIBUTION of population.While much of western of Europe & Japan -who could most sustain population increase- is experiencing zero to negative pop. growth (Russia for example is LOOSING 800,000 each year). Many centres in the third world -who can least afford population growth - eg Yemen are growing at 3%+ pa.

And its not as benigh as the UN figures initailly suggest.
Even in good times this carries with it major economic & social costs -especially for Europe.But factor in climate change & you have big problems -for everyone (except of course those in that growth industry -refugee resettlement).

'Horus', if the population of countries which have above-average rates of resource use (Western countries, in general, though this category would also include Russia and China) is growing at a slower rate than that of countries which have below-average rates of resource use, then surely that further weakens the argument that the world as a whole is about to 'run out' of resources.

Dear Saul Eslake

I'm very pleased that you took the time to look up the venerable Dr Bartlett. I do believe that you might have misrepresented him a little - I don't think he proposed that current rates of growth would continue unabated - in fact he stated quite clearly that they would not, because they cannot. He did say that unless population growth slows by means of smaller families, the alternatives would all be unpleasant - war, famine, disease etc.

Your argument about price signals is the standard response of the economics profession. It is correct, in the short term, and we will see it in operation soon as the price of oil goes through the roof. However it just means that once one resource becomes scarce, we will turn to another until they all run out. The cupboard only has so many shelves in it, even if you only clear them out one by one.

Can I just ask you to conduct the following thought exercise - supposing the deomgraphic transition you (quite rightly) say happens as countries become prosperous, women educated etc.. supposing such a transition had occurred globally in 1955 when the population was only 2.5 billion? Don't you think the world would be a more pleasant place to live in? Perhaps we would not have 25,000 people a day dying of starvation, as we do now. Perhaps we would not yet have climate change - perhaps our resources would not have such pressure on them. Perhaps there would not be such glaring inequity between poor and wealthy. Same for fish stocks, land clearing, forests, biodiversity, water etc. I say perhaps because the species is so peverse that it might well find things to fight about anyway.

The current water "shortage" that will find us drinking recycled sewage is, if you look at the other side of the coin, just a result of more and more people demanding a scarce resource. Wouldn't it make more sense to stop the population growth, rather than having to try to deal with its consequences all the time?

Regards