Economic Growth - Are We Approaching A Limit?

[sheehs1]

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]

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]

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]

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]

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]

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]

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]

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.

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]

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]

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]

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]

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.

 

[haha]

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.

There is no safer bet than that there cannot be everlasting exponential growth on a finite planet. One day this verity will smack us in the face, and there will be chaos and likely world war.

Ha

 

[HFWR]

There is no safer bet than that there cannot be everlasting exponential growth on a finite planet. One day this verity will smack us in the face, and there will be chaos and likely world war.

Ha

We should have a poll...

 

[haha]

We should have a poll...

Really, these things are clearly best understood by majority opinion, which as we know is always correct.

Ha

 

[ziggy29]

There is no safer bet than that there cannot be everlasting exponential growth on a finite planet. One day this verity will smack us in the face, and there will be chaos and likely world war.

+1

 

[MichaelB]

There is no safer bet than that there cannot be everlasting exponential growth on a finite planet. One day this verity will smack us in the face, and there will be chaos and likely world war.

Ha

Either war or extraterritorial expansion and habitation beyond planet earth.

Jeremy Grantham has written his last two quarterly newsletters on the challenge humanity faces as population continues to grow while resources do not. The can be seen here and here (free registration required).

 

[Hamlet]

True, but it is possible that we are nearing the end of population growth on this planet.

The population growth of the developed countries is near zero when you take out immigration. As India and Africa and the rest of the developing world get wealthier and more educated, I expect that they will experience the same leveling off of population growth.

We may reach our near peak population as a planet within 100 years, and it may not involve anything all that Malthusian.

There is no safer bet than that there cannot be everlasting exponential growth on a finite planet. One day this verity will smack us in the face, and there will be chaos and likely world war.

Ha

 

[Brett_Cameron]

True, but it is possible that we are nearing the end of population growth on this planet.

The population growth of the developed countries is near zero when you take out immigration. As India and Africa and the rest of the developing world get wealthier and more educated, I expect that they will experience the same leveling off of population growth.

We may reach our near peak population as a planet within 100 years, and it may not involve anything all that Malthusian.

+1
That has been my observation. There are few things that have historically reduced human population: disease, genocide, starvation, ice ages, multi-generational prosperity. The last one is preferable.

 

[haha]

True, but it is possible that we are nearing the end of population growth on this planet.

The population growth of the developed countries is near zero when you take out immigration. As India and Africa and the rest of the developing world get wealthier and more educated, I expect that they will experience the same leveling off of population growth.

We may reach our near peak population as a planet within 100 years, and it may not involve anything all that Malthusian.

This may be true (or not), but it is only an article of faith that increased resource pressure must depend on population growth. Economic growth alone is all it takes. For example, the worldwide oil supply rate is likely at some zone of criticality. This will tend to create recurring economic slowdowns, based on oil price pressure. This will tend to make politico-economic stability that might tend to lower population growth rates in third world countries (not China, but Africa and the Near East).

It would take a Panglossian degree of optimism to look at Africa and the Near East and expect long term peaceful development and falling birth rates.

Ha

 

[Hamlet]

I agree that the rise of the undeveloped world is likely to put some upward pressure on commodity prices. It may cause disasterous problems, or we may be able to increase production, shift to other resources, and improve efficiency enough to deal with it, much the way we have for the last 200+ years.

My main point is that we don't have to grow to infinity.

This may be true (or not), but it is only an article of faith that increased resource pressure must depend on population growth. Economic growth alone is all it takes. For example, the worldwide oil supply rate is likely at some zone of criticality. This will tend to create recurring economic slowdowns, based on oil price pressure. This will tend to make politico-economic stability that might tend to lower population growth rates in third world countries (not China, but Africa and the Near East).

It would take a Panglossian degree of optimism to look at Africa and the Near East and expect long term peaceful development and falling birth rates.

Ha

 

[kyounge1956]

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.

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

Your example is ambiguous. You didn't say how long the doubling of efficiency continues. If there is always another year, and the efficiency of the device doubles every year, then an infinite output is exactly what you are implying. Doubling the efficiency means cutting the fuel consumption in half for the same output; if every year you use half of the remaining gasoline, you will never run out. The result is an infinite output from a two gallon input. If the doubling of efficiency does not continue indefinitely (and I've already pointed out that it is impossible for it to do so), then eventually all of the gasoline will be used up.

And in the case of oil anyway, I think that long before it is absolutely used up, it will be effectively used up—that is, locating, extracting and refining the next barrel of oil will use more energy than the oil yields when utilized.