Infinite growth

[jcd]

This post want to be a reflection on Economic Growth, I’m not an economist but I want to summarize what I know.

Economic Growth is important because it allows everyone to reshape their situation for the better and improve their lives.
As Mustachian’s we all want to invest and take advantage of stock market growth that, in the long term, is correlated with Economic growth, even if there are many other factors.
I want to question the feasibility of “Infinite economic growth” for another 50 or more years.

Factors that helped growth

1. Population growth - ~1.7 Billion 1920 - 7.8 billion 2020
2. cheap energy (coal,oil,…)
3. Breton Woods and subsequent Money and debt creation
4. Globalization - free market for goods and services.
5. Huge consumption of goods
6. Long period of relative peace (after ww2)

Today negative factors

1. population growth rate is reducing + population aging
2. Earth resources cannot sustain the same consumption
3. Energy cost increase (at least until nuclear fusion)
4. Huge debt - Money “borrowed from the future”
5. (partial deglobalisation/nationalism)
6. Last but not least: consumerism is still mainstream but losing ground ( shift of moral values, Frugal way-of-life ,…).

Hopes for the future
economist thinks we can “decouple” growth from consumption of goods, shifting to services. It will be enough?

Personally I’ve hard time to understand how we can make it. Even if we can create some growth I don’t think we will witness the same Global growth as in the past century.
I would like to know your view on this topic

[Cortana]

In short: innovation. Selfdriving cars and autonomous transport in general, robotics, AI and space industry. To name a few.

[rolandinho]

Yes, same as @Cortana, innovation, technology, automation, ok although I don’t feel autonomous driving is a key growth factor. If AI ever arrives, this could even increase growth rates above the 20th century levels.

Then less population growth implies less growth yes, but massive population numbers who are now “poor” but who want to live like the First World (= only approx Top 10% at the moment). Consumption will still grow for a while due to this catching up. These groups don’t care about Greta, nor is frugality gonna be trendy for them until a generation of theirs has lived in excess.

[Zerte2]

The “huge debt” factor is being addressed more and more by money creation. Basically new debt is just going to central banks in exchange of fresh cash. Central banks don’t need the cash back and can roll over debt indefinitely, so debt is not actually a burden. Of course other problems than debt itself can arise with this method.

Central banks are also more and more active creating growth (on paper at least) and “wealth effect”. People seem to be happy with that. They want to see growth and get it. So, why not? Perhaps it is part of the “decoupling” you are mentioning.

[Cortana]

This. Population increased by 6 billion in the last 100 years, but the vast majority isn’t really consuming anything besides food and used clothes. There is still potential left to sell 10 times as many iPhones as today.

I hope we get some breakthroughs with AI. This might increase returns to levels we’ve never seen before.

[Bojack]

You raise some good points, but I don’t agree with all of them, so let me point them out.

@jcd

Breton Woods and subsequent Money and debt creation

Cheap debt is only good if the money is allocated wisely. If it’s jus spent on consumption then it leads to wasting resources.

@jcd

Huge consumption of goods

I do not believe that consumption is the motor behind economic growth. Yes, you can build a bigger factory and achieve economies of scale, but the effect is limited. It’s mostly new technology that allows more efficient use of resources.

@jcd

Energy cost increase (at least until nuclear fusion)

Renewables, like solar and wind already start competing with fossil fuels. Especially if you take the total/hidden cost of fossil fuels.

@jcd

Huge debt - Money “borrowed from the future”

Money is not borrowed from the future. People who do not have are borrowing from people who do have. You could say that the people who put themselves in debt turned themselves into slaves. They will have to work in the future in order to pay off their debt. I would say that people who consume less and work more should have a positive effect for the economy.

[nabalzbhf]

@Bojack

Money is not borrowed from the future.

There’s difference between household debt and institutional/company debt though (and it isn’t as incorrect for the latter, repaying their debt shouldn’t really be a goal for a country).

Debt has existed for millennia, and has always been a key factor for economic growth. Many achievements could not have been achieved without it.

But indeed, not sure there’s much benefits to household debt for pure consumption, debt should serve a purpose with higher expected returns than the cost of debt.

[Bojack]

@nabalzbhf

Debt has existed for millennia, and has always been a key factor for economic growth. Many achievements could not have been achieved without it.

It’s essential to understand what debt is. If you take money out of the equation, a trade is an exchange of resources or work. If you would like my resource (e.g. a brand new TV), but currently you don’t have anything of value to me, you may offer your work or resources in the future.

So yeah, taking a loan, especially for consumption, will make you poorer in the future, but that does not apply to the whole economy.

[Your_Full_Name]

In short: innovation. Selfdriving cars and autonomous transport in general, robotics, AI and space industry.

In one word: TSLA

Oh, we already have a thread on that. But I couldn’t resist mentioning it since it suits this thread’s title so well? Sorry for derailing …

[Julianek]

I guess an often-heard reformulation of your post could be:
“How can we sustain historical exponential growth if the world we are living in has limited resources?”

That is a fair question, but it relies on the assumption that you always need the same amount of resources to create the same amount of goods and services. So if we need 100 units of resources to create X units of goods, you will need 110 units of resources to create 1.1 X units of goods next year.

Another way of seeing what has happened until now is that to the contrary, we need less and less resources to create the same amount of goods and services. Look at the historical trend: first wealth was created by owning land (most of history), then by owning capital (i.e stored work) during the industrial revolution, and now the trend is to create copious amount of wealth through software.

Software has of course very little marginal cost of replication, so the main cost is only the energy needed to run the server. Instead of needing 1.1 units of resources to have 1.1 X units of goods of services, now maybe you need 1.01 units of resources.

So in reality, on one side you have a strong growth, but a declining resource intensity to create this growth. I don’t know how the two balance each other, but the overall result is less grim than the picture usually depicted in newspapers.

Regarding energy needs, i am not that pessimistic. Either solar and renewables will work out (which would be nice), or we will resume nuclear research that was abandoned 30 years ago for political reasons (for instance, thorium-based fission could deliver energy for enough centuries that all this discussion becomes irrelevant).

As for the rest of the world, 9 out of 10 persons live currently in a developping country. I can assure you that they won’t give up growth for the planet’s sake. They will want to get rich first.

[Bojack]

I think, since we’re talking about the future, we also need to address AI. If we finally create AI as intelligent as us, and then we use this AI to improve on itself, it will probably become smarter than we can imagine within months. This is known as technological singularity and I think it can happen within our lifetimes. So does Elon Musk and he is super afraid of it, because there are only two possible outcomes:

1. AI solves all our problems, cures all diseases, does all the work etc
2. AI kills us all or turns us into slaves

[Cortana]

Well looking forward to your 1st option

I wonder how this would affect the stock market? Which companies will profit? Will there even be a need for private companies anymore? From Wikipedia:

Dramatic changes in the rate of economic growth have occurred in the past because of some technological advancement. Based on population growth, the economy doubled every 250,000 years from the Paleolithic era until the Neolithic Revolution. The new agricultural economy doubled every 900 years, a remarkable increase. In the current era, beginning with the Industrial Revolution, the world’s economic output doubles every fifteen years, sixty times faster than during the agricultural era. If the rise of superhuman intelligence causes a similar revolution, argues Robin Hanson, one would expect the economy to double at least quarterly and possibly on a weekly basis.

So 400%/year returns instead of 7%/year?

[1000000CHF]

@Bojack

Cheap debt is only good if the money is allocated wisely.

When debt is too cheap (cheaper than the price of debt determined by equilibrium of supply and demand), then resources will be allocated inefficiently (there’ll be too much borrowing leading to malinvestments, asset pricing bubbles, eventually economic downturn due to a deficit of saved capital, and all sorts of negative spillovers of the capital market disequilibrium).

[Pedro]

Bojack AI not exist please go read true article about this subject. We are at 0% for AI development so forget to trust adverts about that it’s just a trend like green thing. Musk made “green” (not really if you take all) but go to space on the other side without electrical power and a rocket isn’t a simple car

Actually a computer can’t write and read one single line of code for be processed by his own processor so AI 0% yet. When this first line can be processed we reach 0.01% of development
Some people speak about neuronal network but we still not know how really work our own brain.

Money isn’t unlimited so if you print more and more money value decrease so much than worth nothing. 1b of nothing still worth nothing

[CryingSofa]

@Pedro

Actually a computer can’t write and read one single line of code for be processed by his own processor so AI 0% yet.

Ever heard of a Quine?

@Pedro

Bojack AI not exist please go read true article about this subject.

Btw, @Pedro I think a little less harsh black and white thinking would help your arguments a lot.

[jcd]

Thank you all for the answers, yes I know I’m too pessimistic
I think is always good to question ourselves/our beliefs, so we will stay “on earth”.

I’ll try to answer some points.
[EDIT: added citation sources and minor corrections]

In short: innovation. Selfdriving cars and autonomous transport in general, robotics, AI and space industry. To name a few.

@Cortana
AI surely is a disrupting technology, it can change everything.
It seems too far away to me, I don’t have the technical skill to understand how close to it we are?

Regarding Space industry, we are not even close. Not before newer and stronger propulsion (safe/not chemical) and advanced robotics.
If we are all so wealthy, who (skilled) will risk his life to explore?

massive population numbers who are now “poor” but who want to live like the First World. Consumption will still grow for a while due to this catching up.
These groups don’t care about Greta, nor is frugality gonna be trendy for them until a generation of theirs has lived in excess.

@rolandinho
Good point, it is in fact the basis why we need growth.
yet it seems to good to be true/positive. If 7 billion people succeed to consume as us, the Earth is surely not enough.

The “huge debt” factor is being addressed more and more by money creation. Basically new debt is just going to central banks in exchange of fresh cash. Central banks don’t need the cash back and can roll over debt indefinitely, so debt is not actually a burden. Of course other problems than debt itself can arise with this method.
Central banks are also more and more active creating growth (on paper at least) and “wealth effect”. People seem to be happy with that. They want to see growth and get it. So, why not? Perhaps it is part of the “decoupling” you are mentioning.

@Zerte2
thanks for the clarification , I see the mechanism.
as those are newer financial “tools”, we still don’t know the consequences.
I can guess a debt competition like what happened in 2010-12, Frugal states VS Indebted states

Cheap debt is only good if the money is allocated wisely. If it’s just spent on consumption then it leads to wasting resources.
I do not believe that consumption is the motor behind economic growth. Yes, you can build a bigger factory and achieve economies of scale, but the effect is limited.
It’s mostly new technology that allows more efficient use of resources.

@Bojack
When you have the technological capability you will create an order of magnitude more.
Actually the economic growth of the last 70years is fully based on consumption.
The American way of life, new cars for everyone, newer bigger houses, lot of meat, iphones, newer and better healthcare, fast fashion,…

Facebook/google are making 90% of their profits on ADS, ads of things to be sold.
Yes even services/software but mostly goods.

Software has of course very little marginal cost of replication, so the main cost is only the energy needed to run the server. Instead of needing 1.1 units of resources to have 1.1 X units of goods of services, now maybe you need 1.01 units of resources.

@Julianek
Software can for sure sustain the growth rate and be the main driver for growth.
However it will not resolve the fact that resources are limited. We cannot replace basic needs like Housing,food,transportation… Those are the first things everyone will want to improve their lives.

Regarding energy needs, i am not that pessimistic.
Either solar and renewables will work out (which would be nice), or we will resume nuclear research that was abandoned 30 years ago for political reasons (for instance, thorium-based fission could deliver energy for enough centuries that all this discussion becomes irrelevant).

@Julianek
We’ll need to resume nuclear research for low radiation, but it will take at least 20-30years to have 1 reactor built. In the meantime half the world population will install AC unit, to be like us, and we will need 100 power plant.
Another issue in that democratic nations will stay behind, I think now is really hard to persuade the population for nuclear again. Just look at what happens with 5g…

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sorry for the long post

[Bojack]

Offtopic: how did you manage to quote people without showing who you quote? Normally you select some text and then a quote button appears. It shows who wrote the quote and this person is also notified that you quoted them. The way you do it, nobody knows you’re replying to them.

[Neville]

@jcd

Another issue in that democratic nations will stay behind, I think now is really hard to persuade the population for nuclear again. Just look at what happens with 5g…

Did you know that the law in Switzerland not only bans fission nuclear plants but also fusion power plants?

You can read it here: “nuclear energy means any form of energy that is released following the fission or fusion of atomic nuclei”.

We have banned a technology that doesn’t even exist.

[Bojack]

@jcd

Actually the economic growth of the last 70years is fully based on consumption.

Do you base this statement on some economic model? I would be careful about such statements, because the reality can be very counter-intuitive. It also depends how you look at it.

• Does the desire for higher consumption push technological research? Consumers want more, so we need to find cleverer ways to give it to them at a decreasing cost.
• Or is it the desire for profit? Owners of capital want to earn more, so they look for cheaper ways to produce
• Or maybe it’s state-funded academic research, non-profit oriented?

It’s hard to say without proper analysis. All I can say, is that to me high consumption demand without technological improvement can only be satisfied by economies of scale: building bigger factories, improving infrastructure. But this is very limited. You talk about 70 years. 70 years ago there were no computers, smartphones, internet. People could not afford to travel. Cars were dangerous. Many diseases were still uncurable.

I would argue that you don’t need high consumption to improve quality of life. You don’t need to buy a new phone and car every year. You will be much better off putting that money into research and after 10 years you will be able to get a much better product.

[Pedro]

You know IDIAP ?
Work on this subject and their reply if AI exist really it’s simply NO that’s just marketing. You can send an email and ask them if something have change now but not view anything on my side yet.

Kinect some people call that AI but just processed an impressive amount of data to create a unique person recognition that matches ~9x% of the population. Some people can’t be recognized because only one leg one arm and not match this unique image after an human should improve this image for match more people but it’s stop there. Computer isn’t AI and not “recognize” you just a unique image of you who match or not.

What you view everywhere and calling AI are just complex human algorithms with a LOT of data for try to recognize a face or a voice signature but they are always bypass with a simple picture for the first or recording for the second. It’s pretty hard to solve these simple issues due to computer and limited sensor.
The human has another unknown dimension where we can feel things at a distance without seeing without touching. We’ll probably learn how it works with the advancement of quantum physics.

I have just checked Quine you have view the size of the article ? (before read)
Just with that I can say you that’s not yet AI. The first ever who found a way to write modify and execute AI code blow the size of article.

But I read this article for you :
Ok a quine can self replicate (high level language not a low machine language) but it’s still programmed by an human and made always same thing without any modifications. Our current language are made for that if X there you go to Y and loop. They can crash due to memory error or empty file or sensor not plugged but that’s all even the basic random function is pretty hard to develop because random just not exist in actual computer. You have already read the difficulty to create a true random function ? (https://en.wikipedia.org/wiki/Random_number_generation)

The first advancement in AI :

• A computer should be able to modify one line of code of his own (compiled yet) program/algorithm.
• You can say me Java isn’t a compiled language but functions are limited to the Java language interpreter itself and too slow for AI who need a lot of computing speed and a lot of change.
• We need a new language/way to process codes/processors itself without need of compilation or interpreter just codes can be modified on the fly and processed by the CPU so that a computer could modify its own lines of code based on the data from these sensors.

I’m sorry but stop to dream stop playing the sheep in front of marketing and go learn or just develop true AI.
Before made anything with AI we need to understand how work our own brain, plants/animals interactions and probably understand how work exactly quantum physics we speak about remote communications without cable or electric carrier. After that we can really go to AI with new CPU and probably other way than binary for process that and new languages.

Sorry but for this subject no grey area just white or black. I’m no one but ask a true AI researcher if it’s not just algorithm developed by human IDIAP probably respond to you if you ask