Unlimited Growth and Innovation: Paradise or Paradox?

Abstract

Ever since the dire predictions of The Limits to Growth (Meadows & al. 1972) failed to come true on time, it's been all too easy to ridicule environmentally-based arguments against economic growth as pessimistic and Malthusian. In contrast, this paper accepts, for the sake of argument, the most wildly optimistic estimates for the continuity of economic growth, which range to the of years. It then asks: which is more ridiculous – a world with limits to growth, or a world without them? After some preliminary definitions (Part I), the paper briefly reviews the post-World War II rise of growth-based policies and academic growth theory (Solow 1956 and 1957; Romer 1990), and some of the rhetoric surrounding them (Part II), including the prospect offered by Paul Romer and others of growth continuing for billions of years. Next, a simple thought experiment involving an egg (Part III) demonstrates by reductio ad absurdum that even when environmental issues are ignored, visions of limitless growth don’t make much sense. In particular, they obscure difficult questions and paradoxes concerning the nature of what’s growing, and why that growth should matter. For example, within historical, rather than geological, time scales, either the real prices of everyday goods must increase by tens of orders of magnitude, or else the entire value of the economy must be ascribed to as-yet unknown goods and services priced at a similar multiple above those available today. Our infatuation with the Promethean myth of mastery over nature tempts us to ignore or to be indifferent to these implausibilities. We can shine a light on these problems with the help of Aristotle's Politics (Part IV). Its distinction between use value and exchange value was known, in a significantly altered form, to Adam Smith and Karl Marx; but even this watered-down version has been erased intentionally during the past 150 years of neoclassical economics (NCE). In the course of tracing this historical development, a simple but significant inconsistency between microeconomic theory and macroeconomic policy is exposed. Part V contrasts the explanatory power of NCE and Aristotle's distinction for resolving the paradoxes and difficulties uncovered in the previous parts of the paper. Aristotle's original conception of use value as a quality with ethical implications, rather than as a quantity, can help us not only to slice through these puzzles but to find an alternative to the meaninglessness of unlimited growth. The paper concludes by proposing that enhancing the use value available to communities should replace GDP growth as a policy goal, beginning in countries that are already wealthy today.