Economic Growth - Are We Approaching A Limit?

[Lisa99]

If we were able to take a peak back 100 - 200 years from now we wouldn't recognize our surroundings. Just think of all the technology that didn't exist even 20 years ago.

I like to think that if human kind hasn't managed to irrevocably damage the planet that some of today's most vexing problems will have been solved.

[ziggy29]

Part of the problem is that increased demand for labor no longer scales with the demand for goods.

If demand for automobiles doubles, for example, you will have to pretty nearly double the number of workers to produce twice as many vehicles. But in an information-based economy where products are ethereal zeroes and ones, if demand for a piece of software doubles, you don't need to hire anywhere near twice as many people. You don't need any additional developers to "build" more units of the same software program; you may need a small number of additional sales and support staff but that's about it. Revenues can grow fivefold and barely require hiring at all.

So the real question, IMO, is: How do we adapt to the increased irrelevance of labor in today's economy?

[samclem]

Quote:

Originally Posted by ziggy29 Part of the problem is that increased demand for labor no longer scales with the demand for goods.

A refinement. How about: "Part of the problem is that the subset of our economy that is based on information does not require a lot more labor to produce a lot more goods." We tend to focus on the "new" economy (software, electronic information sharing hardware and services, etc). Yes, this is important, but all the same old stuff will still be there and still needs to be done: designing, building, and servicing everything from houses to cars to dishwashers, etc. Providing services from neurosurgery to drain clearing, etc. We'll probably find ways to do much of it with fewer people (as was the case with farming), but there will be more new areas for the displaced people to spend their time producing useful goods and services.

[sheehs1]

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Originally Posted by grumpy A lot of what I have been reading in the financial press talks about the slowing of economic growth. In light of the old adage that "trees don't grow to the sky" are we approaching the point where world economic growth simply can't continue? That is, are we getting to the point where we simply cannot produce more goods and services (world wide) due to diminished natural resources, pollution, inability of organizations (both corporate and gov't) to manage operations on such a large scale efficiently? I don't see capacity to produce or the running out of natural resources as the problem. If we run out of one natural resource there will be improvisation of some sort. It will create a new business opportunity for someone. Logically, economic growth cannot continue infinitely. Is it possible for economies to exist in a stable state, without the engine of continued growth? Or is economic collapse unavoidable if growth is not sustained? Just as businesses have business cycles, economies have their cycles. There are ups and there are downs. Replenishment and growth happen during those cycles. I understand your question and concern...but don't think it is a straight line to implosion. In theory a business that does not grow implodes. Same for economies. But...there are so many variables with economies that affect growth and all would have to happen at the same time for implosion to happen so it seems unlikely. But as Midpack pointed out...it has happened...so... Opinions please.

Everyone have lots of babies or grandchildren.....because a key to demand to fuel growth is population growth!

[MasterBlaster]

The end is near !

Quote:

< from Wikipedia> A Malthusian catastrophe (also phrased Malthusian check, Malthusian crisis, Malthusian disaster, Malthusian fallacy, Malthusian nightmare, or Malthusian theory of population) was originally foreseen to be a forced return to subsistence-level conditions once population growth had outpaced agricultural production. Later formulations consider economic growth limits as well. The term is also commonly used in discussions of oil depletion. Based on the work of political economist Thomas Malthus (1766–1834), theories of Malthusian catastrophe are very similar to the Iron Law of Wages. The main difference is that the Malthusian theories predict what will happen over several generations or centuries, whereas the Iron Law of Wages predicts what will happen in a matter of years and decades. An August 2007 science review in The New York Times raised the claim that the Industrial Revolution had enabled the modern world to break out of the Malthusian growth model,[1] while a front page Wall Street Journal article in March 2008 pointed out various limited resources which may soon limit human population growth because of a widespread belief in the importance of prosperity for every individual and the rising consumption trends of large developing nations such as China and India.[2]

[sheehs1]

Quote:

Originally Posted by ziggy29 Part of the problem is that increased demand for labor no longer scales with the demand for goods. If demand for automobiles doubles, for example, you will have to pretty nearly double the number of workers to produce twice as many vehicles. But in an information-based economy where products are ethereal zeroes and ones, if demand for a piece of software doubles, you don't need to hire anywhere near twice as many people. You don't need any additional developers to "build" more units of the same software program; you may need a small number of additional sales and support staff but that's about it. Revenues can grow fivefold and barely require hiring at all. So the real question, IMO, is: How do we adapt to the increased irrelevance of labor in today's economy?

I understand your concern about technology replacing some of the demand for labor but I wonder if the demand for labor has really gone down. I presume they have here in the U.S. starting with the steel mills, etc.
How do we get information on the number of labor hours that exist today..globally and compare it to 20 years ago. I think it's possible we might find labor hours have actually increased...just perhaps not here. So many of ours ...are not here anymore.
ummmm..might have to look into that...

[ziggy29]

Quote:

Originally Posted by sheehs1 How do we get information on the number of labor hours that exist today..globally and compare it to 20 years ago. I think it's possible we might find labor hours have actually increased...just perhaps not here. So many of ours ...are not here anymore. ummmm..might have to look into that...

Well, here's the thing -- hours worked by a full-time employed individual may well be up even as the "average" is down due to unemployment and underemployment. Which makes sense from a strictly business point of view -- if you have 5 people working 40 hours a week, why not make it 4 people working 50 hours and save the cost of one person's employee benefits? At least until they burn out, then you can discard them (as labor is being treated more and more as a disposable commodity) and pick another desperate applicant for even lower wages. Lather, rinse, repeat...

[MasterBlaster]

Quote:

Originally Posted by ziggy29 Well, here's the thing -- hours worked by a full-time employed individual may well be up even as the "average" is down due to unemployment and underemployment. Which makes sense from a strictly business point of view -- if you have 5 people working 40 hours a week, why not make it 4 people working 50 hours and save the cost of one person's employee benefits? At least until they burn out, then you can discard them (as labor is being treated more and more as a disposable commodity) and pick another desperate applicant for even lower wages. Lather, rinse, repeat...

Dogbert ? - Is that you ?

Why stop at 4 people when 2 people each working 100 hours would be even more profitable.

I should be in upper management.

[Retch The Grate]

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Originally Posted by clifp I disagree because so much of the future growth will be in the increased efficiency of delivering services and much of that will be in a virtual world.

As a game designer I heartily agree, and it is one of the things that gives me great hope for our ability to continue to create wealth with less impact on the physical world, but, if you check out the link, at some point with exponential growth, we start hitting fundamental power limits of the solar system. If we go entirely virtual and convert the entire solar system into computronium, there is a hard upper limit to how many calculations we can perform a second, and that is inescapable, and the scary thing is that with exponential growth, we get there shockingly fast. The final upswing is really really quick.

Also, the rise of virtual wealth runs into some interesting issues that the author of the linked articles discussed, it is worth reading them and thinking about it (basically if our virtual economy becomes 99.999999999% of our wealth, then physical goods become magically cheap relatively speaking. So the scarce stuff becomes trivial next to the essentially infinite computational stuff. This seems rather unlikely).

[kyounge1956]

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Originally Posted by GregLee I agree with your disagreement. As I understand it, the argument that there are necessarily limits to growth, assumes that the demands of growth on resources are exponential, while the mitigating factors of increased efficiency and increasing resources are merely linear. Given those assumptions, perhaps it does follow that growth necessarily has limits, but why should we assume that the mitigating factors grow only linearly?

The argument that there are limits requires only that some material essential for growth is available in finite, rather than infinite, quantities. It does not require that demand increases more rapidly than efficiency, only that growth uses up a non-renewable resource at some rate, or uses a renewable resource more rapidly than it is able to regenerate.

[grumpy]

Part of what I was thinking when I started this thread was the demand for growth that investors put on the stock of a company. Every analysis I see of a business and its stock addresses the company's prospects for growth. Why wouldn't we want to invest in a profitable company whose business is stable - not growing, not shrinking, especially if it pays a decent dividend.

[rescueme]

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Originally Posted by samclem We'll all be sitting on our sofas, hyped up on Soma, watching animations designed by the megacyber. Our robots will tell us anything we need to know, and throw bon-bons into our mouths at frequent intervals.

Ever see the movie "WALL-E"?

[Midpack]

Quote:

Originally Posted by grumpy Why wouldn't we want to invest in a profitable company whose business is stable - not growing, not shrinking, especially if it pays a decent dividend.

As you know, it's because growth companies provide much better returns. Of course picking the best growth companies while they are still a bargain is not easy, so most of us settle for stable companies with decent dividends (hoping for some capital appreciation along the way).

What are the 4 parts of the business cycle? Creation, rapid growth, maturity and ultimately decline (replacement technology/creative destruction) or something like that. The cycle may accelerate, but I don't see how it could change...

[Midpack]

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Originally Posted by MasterBlaster Dogbert ? - Is that you ? Why stop at 4 people when 2 people each working 100 hours would be even more profitable. I should be in upper management.

You joke, but that's what upper management has to do to stay competitive. It's easier to reduce headcount/increase productivity than to reduce hourly wage rates. It's not as if it's a moral choice, it's a matter of survival for many industries. The choice is to save some but fewer good jobs vs losing them all. Sorry, not something I can joke about after many years forced to make those decisions, and all the sleepless nights that go with it. Flame away...

[Hamlet]

The problem we have now is that most of the displaced people in this country will not be getting new jobs that are above subsistence wages.

The new jobs in this country that pay more than $10/hr require you to be smart (say top 20-40%) and well-educated (at least a bachelor's degree).

If someone on an assembly line gets replaced by a machine, they aren't getting a job designing the machine. The jobs that they are qualified to do pay <$10/hr for the most part.

I see a world of pain in the future for the less than brilliant in this country. You can't turn the ex autoworkers into engineers, lawyers, or software developers. Their future pretty much involves asking whether you want fries with that.

Quote:

Originally Posted by samclem A refinement. How about: "Part of the problem is that the subset of our economy that is based on information does not require a lot more labor to produce a lot more goods." We tend to focus on the "new" economy (software, electronic information sharing hardware and services, etc). Yes, this is important, but all the same old stuff will still be there and still needs to be done: designing, building, and servicing everything from houses to cars to dishwashers, etc. Providing services from neurosurgery to drain clearing, etc. We'll probably find ways to do much of it with fewer people (as was the case with farming), but there will be more new areas for the displaced people to spend their time producing useful goods and services.

[rescueme]

Quote:

Originally Posted by Midpack You joke, but that's what upper management has to do to stay competitive. It's easier to reduce headcount/increase productivity than to reduce hourly wage rates. It's not as if it's a moral choice, it's a matter of survival for many industries. The choice is to save some but fewer good jobs vs losing them all. Sorry, not something I can joke about after many years forced to make those decisions, and all the sleepless nights that go with it. Flame away...

+1

After retiring from the automotive industry after almost 30 years, I also had a lot of sleepness nights when the required cutbacks needed to be made and I was the person that had to make the decision of who/what positions were to be cut.

That, along with losing a lot of good folks to offshore (after being acquired by a large multi-national, based in Europe) and seeing a lot of work being sent to countries that could do it cheaper (notice that I did not say faster, or with better quality), of IT services (area I was in) when projects were sourced to India, Poland, China, Mexico, and South America (we had plants, including in-house/contract developers in all these countries).

That's one of the things I'm reminded of when folks would comment on me (and those on my level) were making the "big bucks". When it's your (required) decision to impact a person's financial life, along with their family it results in a lot of emotional pain, much more so then I was ever compensated for.

Funny thing is, I could "feel the pain" of those above me who had to make the same decision on reducing the ranks on my level. Just because you are classified as "management" dosen't mean you don't operate on the same level of concern for your j*b than those below you. Remember, everybody has a boss...

[GregLee]

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Originally Posted by kyounge1956 The argument that there are limits requires only that some material essential for growth is available in finite, rather than infinite, quantities.

If you have two gallons of gas, you need one gallon in the first year to run your device, but each year you double its efficiency, how many years will it be until you run out of gas?

[kyounge1956]

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Originally Posted by GregLee If you have two gallons of gas, you need one gallon in the first year to run your device, but each year you double its efficiency, how many years will it be until you run out of gas?

Unless the device is under 50% efficient to start with, its efficiency can't be doubled even once, and once efficiency exceeds 50% it can't be doubled at all. Since it is mathematically impossible to double the efficiency every year indefinitely, eventually the increase in efficiency will slow, and the gasoline will be used up. I can't say exactly how long this would take, because that depends on how efficient the device is at the beginning of the process. But there is no way the device can give an infinite output from a finite input of gasoline.

[Col. Klink]

I also believe that new technologies can continue growth. However, I am concerned that, as we are seeing in the UK, civil unrest will continue to mount unless we can find meaningful employment and opportunity for all of our young people. When the masses are disenfranchised and angry, growth won't be sustainable.

[GregLee]

Quote:

Originally Posted by kyounge1956 But there is no way the device can give an infinite output from a finite input of gasoline.

Yes, but there was nothing in my example that implied an infinite output.