Economic growth is NOT about doing more and more of the same thing. If it were, the limits-to-growth apocalyptics might be right.

This is why is economic growth possible in a world of finite resources:

Dematerialisation – as we become more prosperous, an increasing proportion of the economy is non-material or minimally material, e.g. services.

Substitution – as things become scarcer, their prices rises. As their prices rise, it becomes worthwhile to look for alternatives, and economic to produce them. The telecommunications revolution was not choked off by lack of copper for wires because we developed alternatives using cheap abundant materials (silicon) or needing no physical transmission at all (satellite etc). This substitution effect is not a happy coincidence but one of the key benefits of competitive markets.

Most importantly, innovation – economic growth derives primarily from finding new, more valuable, ways of combining resources.

Paul Romer is a growth economist who articulates this extremely well. He argues:

“Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

“Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply.”

Hi Rhian,
great quotes, and I'm sympathetic to many of the ideas there. Witness the rise and rise of renewable energy now growing much faster than coal, the spread of new ideas about transport and fast rail, etc. Witness concepts about living without cars in "mainstream" walkable communities, not just ecovillages for the hard corps greenies.
See http://villageforum.com/index.php?option=com_content&view=article&id=39&Itemid=58

However, surely there is a point where ideas alone cannot support a trillion people on planet earth when all the ecosystems around the world are currently in decline, where we are utilizing so much of the good land for agriculture, where more human beings are born each day than the total number of all great apes in the wild?

Surely there ARE limits, and we'd better use the precautionary principle and slow down the growth in human numbers by humane means, or nature will do it for us?

Hi Bazz,
have you read this post? It's all about whether or not growth is caused by the way we loan money into existence with interest.
http://eclipsenow.blogspot.com/2009/03/steady-state-money.html

I agree with Ludwig and disagree with Mikk. We can’t get rid of capitalism. Siting the flaws in capitalism and then saying we have to get rid of capitalism is like saying Germany had the Nazis, so we need to get rid of all Germans. Capitalism has problems but not enough to scrap it. We need to make use of the the profit motive in an efficient way. It exists everywhere anyway.

Ludwig is right about the kind of growth that promotes new technologies. We need improved energy efficiency, new ways to save water, better ways to recycle the things that we are wasting now, etc. If a farmer who is now growing 3 tonnes of wheat per hectare on his land learns how to grow 3.3 tonnes per hectare without any extra fertiliser or expensive equipment or extra water, then his part of the economy grows by 10% just through his brainpower. I don't think that will be easy to do, but where we can do it, we should. We don’t want to do anything to limit that kind of growth.

Rhian - Why not get the best of both worlds: Wonderful new innovations and a stable population. Why should modern civilisation's primary goal be to cram as many people onto the planet as possible? I don't think it is best to just close our eyes and think that everything will be okay because it has been since WWII (at least in the rich world). Where is the innovation that brought us the cure for cancer? It seems smarter to slow down and wait for the brilliant innovations to come and then expand in the clear understanding that we haven't stuffed everything up for our kids. It's like spending more money than you earn and then saying "don't worry, I'll get a great new job soon, that pays twice as much." It seems smarter to save money now and then spend it when the great new job comes.

Economic theory does not claim that one can have infinite growth on a finite base. The author’s premise, and therefore his conclusion, are fundamentally mistaken.

The subject matter of economics is precisely the scarcity of resources, i.e. where the same thing cannot be used for more than one competing purpose. If we had an infinity of a resource, there would be enough to satisfy all purposes. There would be no need to choose one use over another, no need to sacrifice another value, and hence it would not be an economic good.

The author seems confused over whether or not he is in favour of a higher standard of living. On the one hand he decries the fall in the purchasing power of wages in the USA in recent history; on the other he alleges that we are on verge of an ecological catastrophe. Well, is it good for human beings to enjoy a higher standard of living, or not?

Economics also does not claim that economic goods provide an increase in happiness, in the sense that one ends up at a higher long-term level of overall happiness. All it says that in preferring A to B, man attaches more value (or “happiness”) to A than to B, that’s all. The author’s argument is based on simple misunderstanding.

There are two main fallacies underlying the common idea that our management of the earth is leading to ecological catastrophe.

The first fallacy is that “we” are managing the earth. Who is this “we”? There is no aggregate decision-making entity, there is no central planning directorate in charge of the world’s life. The ‘economic growth paradigm’ is not because of some central government policy decision, it is because of the actions of six billion human beings in billions of transactions individually tending to prefer more life and well-being over poverty, sickness and death.

Nor should there be such a global central planning authority, subjugating all wills and judgments to his own. The choice is not between market economics or a better alternative based on forced reduction of consumption by centralised planning.

It is between market societies on one hand, and much greater economic and environmental destruction on the other. If you don’t understand why, then you need to find out why before re-publishing third-hand much-refuted quasi-Marxist errors.

You can read the definitive argument here: http://mises.org/econcalc.asp

The second fallacy is the idea we are facing an ecological catastrophe, which is not supported by the evidence: see The Skeptical Environmentalist by Lomborg http://books.google.com.au/books?id=JuLko8USApwC&dq=lomborg+skeptical+environmentalist+books&printsec=frontcover&source=bn&hl=en&ei=7b41SuKIB4_6kAWky7mPCg&sa=X&oi=book_result&ct=result&resnum=5#PPR11,M1

It is not valid to proceed, as the author and his linked article assume, by simply and linearly extrapolating current trends forward. That’s the mistake Malthus made 200 years ago. That’s what Ehrlich did in the 1970s. They were both proved spectacularly wrong.

10,000 years ago there were not enough caves to support a population of 6 billion people. Does it matter? No.

To regard the failure of the Jeremiahs’ predictions to happen, as proving the underlying theorem that we can’t have infinite growth on a finite base, is doubly fallacious. The theorem is a misrepresentation of the case the author is intending to refute. And an unfalsifiable belief is irrational.

Economics is about the processes and the consequences of people’s choices concerning scarce resources, including time, human effort, and natural resources. Thus the knowledge set of global justice should properly include economics. There is no virtue in ignorance. I respectfully suggest that you need to acquire a basic understanding of the principles of economics that you misunderstand, misrepresent, and fail to refute.

A good start is the very readable Economics in One Lesson by Henry Hazlitt: http://www.amazon.com/exec/obidos/ASIN/0517548232/ref=nosim/librarythin08-20

Otherwise you’re just displaying an ignorance deplorable in one who aspires not just to understand the subject, but to teach others.

"We can't eat money." The poorest in the world would suffer first, should we have chronic food shortages moreso than we have seen over the past 2 years.
Agriculture underwent a revolution with boosted productivity a few decades ago. They now say we need a greater revolution in half the time, this time around. And then there's climate change.
Yet in the first world, we seem to be ramping up the consumerism and wealth to a point which could be seen as disgusting, by those who have to go without, because there is only so much to go around.
How about we all just slow down a bit? Would that mean the end of the world, if we only used the car when absolutely necessary?
Would our communications break down completely if we stayed off the electronics a bit more? Could we try to break the addiction of 'shop till you drop', replacing it with a walk around places where shops don't exist? How about cooking at home instead of buying take-away food? Minimising use of gas and electricity where possible?
I worked full-time through tertiary education part-time: B.Comm (Accountancy) and CPA, but now after attaining home ownership, work only 20hrs per week at less than $18 per hour, keep the grocery bill to a minimum, don't 'shop' unless it is completely necessary, and manage to get by. Have a small car and only drive when needed. I also live in the country. Perhaps all of us, myself included; could continually strive to cut back on what some assume to be necessities. They are luxuries. Look at them from a global perspective. Maybe we just need a re-think about everything. From where I stand, there is an horrific amount of wasteful practises in our world, and it is not in the 3rd World. It is in the 1st World, where we should know better. Will we ever learn? I am not hopeful.