The Limits of Growth
Sometimes I think that economists live in a fantasy world.
Before the pandemic started, I was thinking about economic growth and wondering how much richer future generations will be.
If you extrapolate small growth rates into the future, you eventually see huge increases.
Suppose the US economy grows at 2.3% per year. 100 years from now, it will be 10 times as large. People will be 10 times as rich. The wealthiest will be trillionaires, but even the poorest will be rich by today’s standards. A minimum wage worker today might make $15,000 a year, but in 100 years they’ll be making $150,000. An average worker of the future could make $500,000. A skilled worker would make millions.
I’m not just talking about inflation. Growth predicts that people should be 10 times richer, in terms of the amount of goods they can buy.
An old article in Slate took this to a more extreme conclusion.
As of this writing, Bill Gates’ estimated net worth is $24 billion. On the conservative assumption that he’s earning 3 percent after taxes and inflation, his investment income is about $2 million a day.
It’s difficult for one to even imagine what it would be like to have that kind of pure income. But it won’t be as difficult for your grandchildren. If U.S. per capita income manages to grow in real terms at a plausible 2 percent per year, then in just 400 years, the average American family of four will enjoy a daily income of $2 million. And those are not some future, ravaged-by-inflation dollars–I’m measuring everything in the dollars of today.
That’s right — in 400 years everyone can afford their own mega-yacht:
The author concluded that we shouldn’t waste time on conservation:
So each time the Sierra Club impedes economic development to preserve some specimen of natural beauty, it is asking people who live like you and me (the relatively poor) to sacrifice for the enjoyment of future generations that will live like Bill Gates.
He thought that we shouldn’t prioritize the future, because future generations will be rich. For instance, cutting down the redwoods is a good thing:
Taking from the poor and giving to the rich is the opposite of income redistribution as it is usually practiced. If we were consistent, we’d insist that those wealthy future generations owed us something, not the other way around. If some moral principle allows the tax collector to confiscate 40 percent of Gates’ income, that same moral principle should allow the unemployed lumberjacks of Oregon to confiscate your rich grandchildren’s view of the giant redwoods.
That’s right, today’s lumberjacks are poor and the only way they can possibly get richer is to cut down trees. Why not the redwoods? You shouldn’t worry because your descendants will be cruising the ocean in a mega-yacht, they will have no need for trees.
I’m picking on one dumb article written years ago, but I’m doing it for a reason. The author is a professor of economics, and this is the same logic used by most economists. It’s how they think about economic growth and global warming. One economist actually won a Nobel prize for thinking exactly the same way.
William Nordhaus and the Nobel prize
Nordhaus won the 2018 prize for economics, for his work on the economics of climate change.
That was the same year that the IPCC put out a special report on limiting global warming to 1.5 degrees Celsius.
Nordhaus’ work did not endorse the 1.5 degree limit, he came up with a different goal. He spent time building economic models of climate change and the effects it will have on the economy. He figured that climate change will have some drag on economic growth. But he estimated that preventing climate change would also slow down the economy.
He tried to chart a course, balancing out the benefits of growth and the harms of climate change, the perfect balance to make us all as rich as possible.
After crunching all the numbers, he came up with a recommendation for just the right amount of global warming: 3.5 degrees Celsius by 2100.
It’s better than doing nothing, where Nordhaus predicts a 4.1 degree temperature increase.
The main differences would be in the century after that. With no mitigation, Nordhaus predicts temperatures would be 6 degrees warmer by 2200.
With mitigation, we would be almost done emitting carbon by 2100, things should stabilize, maybe 4 degrees will be the upper limit:
Bjorn Lomborg endlessly repeats Nordhaus’ arguments.
He argues that climate change mitigation is harmful, because it’s costly and people will be 5–10 times richer in 100 years.
Lomborg goes beyond Nordhaus’ recommendation to slow down and says we should burn even more oil, gas, and coal over the next century:
Notice how this is just the same as the argument in Slate magazine — that author concluded we ought to cut down the redwoods today, because our grandchildren will be rich enough to do without trees.
Nordhaus seems vaguely aware of the environmental damage that 3.5 degrees of warming will bring — he likes to ski, and he’s a bit concerned that global warming will melt all the snow. But he’s also noted that energy can be used to build snow-blowers, so he thinks it’s fine. The ski resorts can burn fossil fuels to make artificial snow.
Lomborg and Nordhaus both agree that we ought to keep burning coal today — if we do, our grandchildren won’t end be as rich.
Both arguments are flawed in that they are trading permanent damage to the environment for faster economic growth now.
But there might be an even bigger flaw. Permanent exponential growth only exists on paper. It isn’t possible in reality.
Our society runs on energy. Right now that’s mostly fossil fuels, in the future it might be solar or nuclear. If we want to grow the economy 10 times larger in the next century, we also need more energy. Perhaps 10 times as much, perhaps a little less if we improve efficiency. Can we find 10 times as much oil?
The limits of oil
15 years ago, environmentalists were concerned with peak oil. Today, we don’t hear as much talk about it.
Fracking in the United States helped the world keep pace with increasing oil consumption.
But that doesn’t mean that oil reserves are limitless.
With the world’s known reserves, and the current rate of consumption, we have maybe 45 years of oil left. With more exploration, it will drag out longer, but there will be a limit. It won’t go on for hundreds of years. If the economy grew 10 times, we might run out in a decade.
After we’re done with oil, we can move on to coal. With our current use, we won’t run out until after 2200.
But the supply of coal is still limited. With 100 years of energy growth, we could be burning through the supply 10 times faster.
We might just be able to get 100 years of economic growth with fossil fuels.
We will definitely run out before 400 years of growth. The world where everyone is as rich as Bill Gates requires that we use 10,000 times as much energy.
The limits of solar
Rather than burn a finite amount of fossil fuels, can’t we just use a limitless amount of renewable energy?
In another article, I came up with an estimate of how many solar panels we’d need to power America:
But the economists want us to keep growing at 2.3%. In 100 years, the national solar farm would be bigger. It’s not impossibly large, but we have used up 4 states:
In 200 years:
I couldn’t find a place to fit the rectangle in the country, I stole a bit of space from Canada and some of the panels ended up in the Atlantic ocean.
The solar array would be 3,100,000 square miles. the US is 3,500,000 square miles. Instead of making that rectangle, you could find just enough land for the solar panels, with a little bit left over for people to live on.
Other countries are going to want growth, so they’ll also be turning their whole countries into solar farms.
That’s only 200 years of growth. Our descendants aren’t as rich as Bill Gates yet, we need another 200 years of growth and 100 times more power before we’ll get there.
Physicist Tom Murphy has run the numbers further into the future. At 275 years into the future, every square inch of land on the planet will have to be a solar panel.
Those were just modern solar panels with 20% efficiency. If we could somehow make panels 100% efficient, that buys 70 more years of growth.
Maybe we could somehow cover the entire oceans with solar panels too? then we get 55 more years of growth.
Now we’re at 400 years of growth, every last bit of the ground and oceans are covered by solar panels and your descendants are finally as wealthy as Bill Gates.
There’s only one problem: there’s no ocean left for their mega-yachts.
The limits of nuclear
Even nuclear power might struggle to keep up, it has it’s own limits. The most abundant power source would be nuclear fusion.
Could we keep growth going with fusion?
Tom Murphy has done the math on that, as well.
The problem is, you’re now talking about using an energy source that makes as much power as all the sunlight hitting the entire planet. It’s going to generate as much heat as that. Not with carbon dioxide, but simply with the actual use of that much power.
If you start to make more power than the sunlight, the power created by the fusion reactors will start to heat the planet:
At 350 years of growth, the planet would be too hot to live on. After 450 years, all the water would start to boil.
What about space travel?
Can’t we just leave the Earth, grow to other planets? Maybe your descendants can be as rich as Bill Gates, they’ll just have to live on Mars.
Space travel is incredibly resource intensive.
But, even if we could figure it out, we’d still hit limits.
We could deconstruct the Earth and build a Dyson sphere around the sun to collect all the energy it produces:
Even if you could figure out how to build that, it only buys us a thousand years. With 1400 years of growth, we’d be using up all of the sun’s energy and we’d need to grow to other solar systems.
With 2500 years of growth, we’d have to build a sphere around every star in the galaxy:
Exponential growth has to end
We’re not going to get another 400 years of growth.
I’m not sure we’ll even get another 100 years of growth in energy use.
It looks like a huge challenge to just replace the fossil fuels we use today with green energy. Nuclear energy might work, but it also needs new technology.
The arguments by Lomborg and Nordhaus are that we should prioritize the next 100 years of growth over solving global warming, but the real problem we should be solving is figuring out how to sustain the lifestyles we have.
Lomborg does a bit of a bait and switch, in his articles. He argues that quality of life is low, in the 3rd world, and people there need fossil fuels to improve quality of life. He also argues for policies that increase fossil fuel usage in the 1st world, without noticing that wealthy people are consuming too much.
It’s a bit like pointing out hunger in Africa and then saying that people in America need to eat more food.
I’d say, we need a better model of the future — we need to know exactly how 100 years of climate change will harm the planet. But we also need a good understanding of what 100 years of economic growth looks like, and what we will actually gain from it.
In 2019, I looked at what 100 years of growth would be like in America. I concluded that the economy could grow 10 times but some things still wouldn’t be cheap. We wouldn’t all have 10 times more of the things we really want.
Part of this is a problem called Baumol’s cost disease.
Economic growth increases the efficiency of some things, like factories. It doesn’t increase the efficiency of human labor. It still takes an hour to teach an hour long class. It still takes an hour to do a therapy session, it still takes just as long to play a musical concert. It still takes a doctor just as long to make a diagnosis.
The only thing we can grow is production of material goods.
This distorts prices. As the price of goods gets cheaper, the price of services gets more expensive. People are able to buy more cars or computers, but things like education and health care get seemingly more expensive.
Other things might not get cheaper, either. Housing is limited by space, in many cities. Many people want to live in places like San Francisco or Seattle or San Diego, and there’s only so much land available. We could change zoning laws, build taller buildings. We could have cities sprawl out into larger suburbs. But, without any changes, houses will simply get more and more expensive as people get wealthier.
If everyone is rich, there will be less people willing to work for you. Right now, if you’re moderately wealthy, it’s easy to have someone cook food for you and deliver food. That relies on having relatively poor people that need that job.
If everyone can make $150,000 per year, then no one is going to deliver your food for $5. You would need to pay much more to have someone cook and deliver your meal.
Bill Gates is wealthy enough to pay anyone to work for him. But if we were all as wealthy as Bill Gates, no one would want to do any of the work.
Wealth requires an underclass. We need to maintain that situation. Prices would have to go up for human labor.
The only way out is to build robots to do all the work, a new form of digital slavery to satisfy all of our needs. Hopefully the robots won’t mind. And hopefully they won’t rebel.
The economists’ fantasy future doesn’t check out
On paper, economists say we’ll all be 10 times richer in 100 years, and thousands of times richer in 400 years.
In reality, it will be just as difficult for future people to buy a house, go to college, or get healthcare.
We can keep up growth by building more stuff: more cars, more electronics, more possessions.
But we will warm the planet 3 or 4 degrees just to keep buying more things.
And it’s not the least bit clear we can grow energy use to sustain that standard of living.
Maybe the answer is not more growth, but less.
My suggestion would be to not wreck the planet for a bit more money. To not cut down the redwoods, but enjoy them as something priceless.
Go for a walk in them.
Enjoy the quiet. Stop and look up. We may all get richer, but the future will not be any better than this.
