Uneconomic growth

Uneconomic growth (or economic degrowth), in human development theory, welfare economics (the economics of social welfare), and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the incipient idea. [Daly, H. 2007. Ecological economics: the concept of scale and its relation to allocation, distribution, and uneconomic growth. Pp. 82-103 in H. Daly. "Ecological Economics and Sustainable Development: Selected Essays of Herman Daly". Cheltenham, UK: Edward Elgar.] [Daly, H. 1999. Uneconomic growth and the built environment: in theory and in fact. In C.J. Kibert (ed.). "Reshaping the Built Environment: Ecology, Ethics, and Economics". Washington DC: Island Press.]

The cost, or decline in well-being, associated with extended economic growth is argued to arise as a result of "the social and environmental sacrifices made necessary by that growing encroachment on the eco-system." [Daly, H. 1999. Uneconomic growth in theory and in fact. The First Annual Feasta Lecture, Trinity College, Dublin, 26th April. Available from: http://www.feasta.org/documents/feastareview/daly.htm. Accessed 28 March 2008.] [Daly, H. and Farley, J. 2004. "Ecological Economics: Principles and Applications". Washington: Island Press.] In other words, " [u] neconomic growth occurs when increases in production come at an expense in resources and well-being that is worth more than the items made." [Daly, H. 2005. Economics in a full world. "Scientific American" 293(3): 100-107.]

Good vs. bad growth

Uneconomic growth often reflects poorly developed or poorly planned growth, rather than growth that is inherently bad. For example, if one assumes that Atlantic hurricanes and Pacific typhoons have intensified in recent years due to human-caused global warming, then a rapid surge in automobile ownership in China, Brazil, and India could be seen as uneconomic growth. This is based on the assumption that significantly increasing the number of internal combustion engines worldwide would increase global warming, and that the economic damage from global warming would more than offset any economic growth brought about from the increase in automobiles; however, if the new automobiles were ethanol- fuelled or hydrogen-fuelled from non-greenhouse-gas-producing energy sources such as solar, wind, or nuclear instead of petroleum-fuelled, the effect on global warming might be very minor and not uneconomic at all. Note that the hypothetical surge in automobiles might be 'uneconomic growth' from a global perspective, but 'good economic growth' from those countries' perspective (an example of an externality).

Difficult to detect

However, this demonstrates two central problems with theories of uneconomic growth. First, they are necessarily global in scope while nations are not, and second, typically they rely on long-term longitudinal studies that can be performed only looking backwards across relatively long spans of time, while many political decisions must be made quickly with limited data.

The limits to growth

The "limits to growth" debate is essentially a form of 18th-century Malthusianism. Much of the debate in recent times was prompted by the 1972 Club of Rome study "Limits to Growth", which considers the ecological impact of growth and wealth creation. Many of the activities required for economic growth use non-renewable resources. Many researchers feel these sustained environmental effects can have an effect on the whole ecosystem. They argue that the accumulated effects on the ecosystem put a theoretical limit on growth. Some draw on archaeology to cite examples of cultures they say have disappeared because they grew beyond the ability of their ecosystems to support them. [cite journal | last = Brander | first = James A. | authorlink = James A. Brander | coauthors = Taylor, M. Scott | year = 1998 | month = March | title = The Simple Economics of Easter Island: A Ricardo-Malthus Model for Renewable Resource Use | journal = The American Economic Review | volume = 88 | issue = 1 | url = http://papers.ssrn.com/sol3/papers.cfm?abstract_id=57468 | accessdate = 2006-03-12 ] The argument is that the limits to growth will eventually make growth in resource consumption impossible.

Others are more optimistic and believe that, although localized environmental effects may occur, large-scale ecological effects are minor. The optimists suggest that if these global-scale ecological effects exist, human ingenuity will find ways of adapting to them.

The rate or type of economic growth may have important consequences for the environment (the climate and natural capital of ecologies). Concerns about possible negative effects of growth on the environment and society led some to advocate lower levels of growth, from which comes the idea of uneconomic growth, and Green parties which argue that economies are part of a global society and a global ecology and cannot outstrip their natural growth without damaging them.

Canadian scientist David Suzuki argued in the 1990s that ecologies can only sustain typically about 1.5–3% new growth per year, and thus any requirement for greater returns from agriculture or forestry will necessarily cannibalize the natural capital of soil or forest. Some think this argument can be applied even to more developed economies.

The role of technology, and Jevon's paradox

Mainstream economists would argue that economies are driven by new technology—for instance, we have faster computers today than a year ago, but not necessarily physically more computers. Growth that relies entirely on exploiting increased knowledge rather than exploiting increased resource consumption may thus not qualify as uneconomic growth. In some cases, this may be true where technology enables lower amounts of input to be used in producing the same unit of product (and/or it reduces the amount or hazardousness of the waste generated per unit product produced) (e.g., the increased availability of movies through the Internet or cable television electronically may reduce the demand for physical video tapes or DVDs for films). Nonetheless, it is crucial to also recognise that innovation- or knowledge-driven growth still may not entirely resolve the problem of scale, or increasing resource consumption (see Jevons paradox). [Jevons, W.S. 1865. "The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal-Mines". London: Macmillan and Co.] [Czech, B. 2006. If Rome is burning, why are we fiddling? "Conservation Biology" 20 (6): 1563-1565.] For example, given that expenditure on necessities and taxes remain the same, (i) the availability of energy-saving lightbulbs may mean lower electricity usage and fees for a household but this frees up more discretionary, disposable income for additional consumption elsewhere (an example of the "rebound effect") [Binswanger, M. 2001. Technological progress and sustainable development: what about the rebound effect? "Ecological Economics" 36(1): 119-132.] [Herring, H. 2000. Is energy efficiency environmentally friendly? "Energy & Environment" 11(3): 313-325.] and (ii) technology (or globalisation) that leads to the availability of cheaper goods for consumers also frees up discretionary income for increased consumptive spending.

ee also

*Zero growth
*Economic growth
*Measuring well-being
*Genuine Progress Indicator
*Moral purchasing
*Human development theory
*Ecological economics
*De-growth

References

Related reading

*cite journal | last = Baker | first = Linda | year = 1999 | month = May–June | title = Real Wealth: The Genuine Progress Indicator Could Provide an Environmental Measure of the Planet's Health | journal = E Magazine | pages = 37–41
*cite journal | last = Cobb | first = Clifford | coauthors = Ted Halstead, Jonathan Rowe | year = 1995 | month = October | title = If the GDP Is Up, Why Is America Down? | journal = Atlantic Monthly | pages = 59–78
*Takis Fotopoulos: "The Multidimensional Crisis and Inclusive Democracy", Athens 2005. English online version: [http://www.inclusivedemocracy.org/journal/ss/ss.htm]
*cite journal | last = Rowe | first = Jonathan | coauthors = Judith Silverstein | year = 1999 | month = March | title = The GDP Myth: Why 'Growth' Isn't Always a Good Thing | journal = Washington Monthly | pages = 17–21
*cite journal | last = Rowe | first = Jonathan | year = 1999 | month = July–August | title = The Growth Consensus Unravels | journal = Dollars and Sense | pages = 15–18, 33

External links

* [http://www.steadystate.org/PositiononEG.html Center for the Advancement of the Steady State Economy]
* [http://www.degrowth.net R&D : Research & Degrowth]
* [http://worldinbalance.net/agreements/ec-degrowth.html Declaration on Degrowth] at the Center for a World in Balance