Degrowth is Good Economics

An ecological economist explains why the hype around green growth is scientifically unfounded.

Kamiel67 via Pixabay

“Green growth” is far from green.

The second point brings that battle into the realm of theory. Sure, decoupling doesn’t work in practice, but does it work in theory? Some economists argue that growth can be greened but this is tautological because the very assumptions built into their theories and models state that natural resources only play a marginal role in production. I think these assumptions are wrong, and that if we were to change them, we would realize that “green growth” is far from being green.

Reality check about green growth

Noah Smith writes that “in the past, GDP and resources use have always been tightly correlated. But this is just drawing a line through some data — it’s not based on any deep theory.” Let’s start here: the line has been drawn many times — 1,157 times according to the systematic review of the decoupling literature conducted by Helmut Haberl and fifteen colleagues in June 2020. Findings: “we conclude that large rapid absolute reductions of resource use and GHG emissions cannot be achieved through observed decoupling rates.” Regardless of your theory and whether you think it is deep or not, this result is the most solid empirical fact we have: GDP and environmental pressures have until now always been tightly coupled.

Have we managed to decarbonize growth? Not really.

So, the author is mistaken when he writes that “currently, rich countries are increasing their GDP while decreasing their resource consumption.” First, the focus on resource consumption is too narrow. A “sustainable” economy in any meaningful understanding of the term must consider all the complex interactions it has with ecosystems, and not only carbon. The CO2 cases of decoupling are ambiguous and worth debating (I’ll get to that in a second), but the decouplings of other forms of environmental pressures are more difficult to assess because they’re hardly studied (80 percent of all decoupling studies only focus on either primary energy or CO2 emissions). What we do know is that the state of ecosystems is worsening at an increasing pace, with all measures of environmental degradations on the rise.

Ecological economics

It is time to admit that green growth optimists are losing the numbers game and that the burden of proof is now on their side. If you want to show that growth can be greened (or that wealth trickles down, or that Earth is flat), it’s on you. Waiting for that, there is another game we can play, one about theory. According to Noah Smith, saying that “GDP and resource use have always been tightly correlated” is “not based on any deep theory.” This reminds me of the old joke where an economist says to a physicist: “sure it works in practice but does it work in theory?” Reality tells us that growth is not green, but that means nothing, because in some simplistic, Sims-like economic model, it can be green. But here is the catch: most economic models keep nature out of their production functions, and so, of course, in theory, an economy can grow forever without impacting nature.

Nature holds non-negotiable market power and humans can only use whatever nature supplies.

What do the growth-sceptics have to offer against this theory? Let me introduce Romanian-American mathematician and economist Nicholas Georgescu-Roegen (1906–1994) who, at the beginning of the 1970s, laid out one theory so disruptive that it led to the creation of a new school of economic thought: ecological economics. His main idea, exposed in The Entropy Law and the Economic Process (1971), was that economic organization is a continuation of biological organization. Why? Because all machines are necessarily made of materials and use energy, and because all labour involves our biological bodies, which are also made of materials and use energy. The economy is — unavoidably — a bioeconomy, which means it is a subsystem of the larger finite and non-growing ecosystem that is the Earth.

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Writing by team-members, guest contributors, and Fellows of the Post Growth Institute (PGI).