NationStates Jolt Archive

I'm not so interested in whether people feel we are too materialistic, or out of touch with nature or something like that. I'm already pretty sure that's true. What I am interested in is whether anyone can provide an economic reason why production growth is so great.
In other words, if every single company in the world never increased production, or only increased production in proportion to population, would anything bad actually happen? I ask as someone who has no formal training in economics, but an elementary understanding. It just seems that making production the focus of the economy is a little outdated. My quality of life is a little better than my parents, but the amount of things I can buy is much greater than what they could. Why?

This is actually something I do think about, mainly from a long-term perspective. My conclusions are as follows:

A certain degree of production growth is necessary to offset inflation, material depreciation and also to ensure the economy does not fall in to a zero-sum state, which is highly negative from any standpoint; in a zero-sum economy, you cannot succeed or improve your condition without costing someone else. This pretty much destroys meritocracy and the ability of everyone to maximize their own potential, producing a condition far worse for all involved than any existing economic system; not only will income inequality worsen over time, but there will be no way to easily recoup it.

A completely zero-growth economy is not at all desirable. An economy that grows steadily within an environmentally sustainable range is the long-term optimum for all involved; for example, if your productivity increases at 3% per year, a growth rate of 3% would ensure continued prosperity without significantly increasing raw material consumption (if at all). I've read that economic growth of 3-4% per year is the maximum ecologically sustainable amount, with that level varying depending on external factors (a more developed economy can tolerate a higher growth rate without much added environmental cost).

Now, individually, our desired economic growth is effectively in line with what we want from the economy; I tend to want an economy that produces faster increases in its technology and knowledge base, so my desired economic growth would be faster than someone who desires a slower rate. However, I desire a lower rate of economic growth than someone who desires an increase solely in available goods and services, mainly because the bulk of my utility does not come so much from accumulating goods as it does from my desired level of growth in additional knowledge and technology.

I'm not so interested in whether people feel we are too materialistic, or out of touch with nature or something like that. I'm already pretty sure that's true. What I am interested in is whether anyone can provide an economic reason why production growth is so great.
In other words, if every single company in the world never increased production, or only increased production in proportion to population, would anything bad actually happen? I ask as someone who has no formal training in economics, but an elementary understanding. It just seems that making production the focus of the economy is a little outdated. My quality of life is a little better than my parents, but the amount of things I can buy is much greater than what they could. Why?

In terms of economics and maintaining a healthy economy, possibly, even probably.

In personal terms, no. It's just stuff to clean and find storage spaces for. Eventually, you wonder why you bought it and either throw it away or have a yard sale so some other sucker can wonder, a year or two down the line, why he/she bought it. The only stuff that I find indispensible are books.

In terms of economics and maintaining a healthy economy, possibly, even probably.

I ask because I recently read a book that argues the contrary, The Affluent Society.
This is actually something I do think about, mainly from a long-term perspective. My conclusions are as follows:

A certain degree of production growth is necessary to offset inflation, material depreciation and also to ensure the economy does not fall in to a zero-sum state, which is highly negative from any standpoint; in a zero-sum economy, you cannot succeed or improve your condition without costing someone else. This pretty much destroys meritocracy and the ability of everyone to maximize their own potential, producing a condition far worse for all involved than any existing economic system; not only will income inequality worsen over time, but there will be no way to easily recoup it.

A completely zero-growth economy is not at all desirable. An economy that grows steadily within an environmentally sustainable range is the long-term optimum for all involved; for example, if your productivity increases at 3% per year, a growth rate of 3% would ensure continued prosperity without significantly increasing raw material consumption (if at all). I've read that economic growth of 3-4% per year is the maximum ecologically sustainable amount, with that level varying depending on external factors (a more developed economy can tolerate a higher growth rate without much added environmental cost).

Now, individually, our desired economic growth is effectively in line with what we want from the economy; I tend to want an economy that produces faster increases in its technology and knowledge base, so my desired economic growth would be faster than someone who desires a slower rate. However, I desire a lower rate of economic growth than someone who desires an increase solely in available goods and services, mainly because the bulk of my utility does not come so much from accumulating goods as it does from my desired level of growth in additional knowledge and technology.
Thank you, this is very helpful. Are you an economist, or at trained as one?

I'm not so interested in whether people feel we are too materialistic, or out of touch with nature or something like that. I'm already pretty sure that's true. What I am interested in is whether anyone can provide an economic reason why production growth is so great. In other words, if every single company in the world never increased production, or only increased production in proportion to population, would anything bad actually happen? I ask as someone who has no formal training in economics, but an elementary understanding. It just seems that making production the focus of the economy is a little outdated. My quality of life is a little better than my parents, but the amount of things I can buy is much greater than what they could. Why?
Because the Chinese and Indians now have a healthy middle class to rip off.

Thank you, this is very helpful. Are you an economist, or at trained as one?

I'm actually studying to be an accountant, but I'm taking economics courses both as part of my degree as well as for a minor in the subject.

From my perspective - our quality of life (as in my family) seems better and looks to be slowly but surely getting better as the years stroll by. I am inclined to say that our personal quality of life as individuals within a family depends more heavily on social interaction with one another rather than the results of productive growth from corporations etc. Although I 'd also add that a fair chunk of our improvement in quality of life would be due to easier access to technology; which is a result from productive growth & development of said corporations.

From an economical perspective - I would agree with Vetalia :]

I suppose we don't 'need so much stuff' though, after all we'd just adapt - it's what we seem quite good at.
:p

Prices would increase dramatically.

well Sparta pulled it off-ish, however to enact such a radical change in human society would prove difficult to say the least especially since it fundamentally changes everything that has gone before

I think if a damn good reason was given such as the human race having the flushed turned on in this toilet bowl beyond sheer survival, what would be the point:confused:

well Sparta pulled it off-ish, however to enact such a radical change in human society would prove difficult to say the least especially since it fundamentally changes everything that has gone before

I agree, and I think to an extent we do need to reach a certain level of production. However, I think that demand for necessary goods is finite. Increased production now means increasing the number of luxury goods, which seems a little wasteful. Here is the line from The Affluent Society that always gets quoted:
The family which takes its mauve and cerise, air-conditioned, power-steered, and power-braked automobile out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards, and posts for wires that should long since have been put underground.
They picnic on exquisitely packaged food from a portable icebox by a polluted stream and go on to spend the night in a park which is a menace to public health and morals. Just before dozing off on an air mattress, beneath a nylon tent, amid the stench of decaying refuse, they may reflect vaguely on the curious unevenness of their blessings.

I agree, and I think to an extent we do need to reach a certain level of production. However, I think that demand for necessary goods is finite. Increased production now means increasing the number of luxury goods, which seems a little wasteful. Here is the line from The Affluent Society that always gets quoted:

Milton Friedman made an excellent critique of Galbraith's hypotheses by simply asking him what he considered to be necessary goods; not surprisingly, Galbraith's choices reflected the goods and services he liked, rather than any kind of objective necessity.

The biggest problem is that one person's luxury is another's necessity, and vice versa; e.g., having five computers might be a luxury to one person, while to a computer enthusiast or programmer it is a vital part of their interests and activities. Mankind has not consumed solely on the basis of necessity since long before we evolved in to a modern form; even in hunter-gatherer societies there are luxuries and goods not directly related to survival. To attempt to do so is to go against our very nature; it would require such a total stifling of our interests that we would barely have a civilization, let alone anything resembling our lives today. These fulfill a very important part of our personal happiness and utility, and without them we would not be capable of realizing our interests, happiness or our goals in an meaningful fashion.

Many people have worked for a very long time to even define necessity, and truth be told they simply can't do it because there is no true universal standard for necessity, other than perhaps air, water, and a basic amount of food.

Milton Friedman made an excellent critique of Galbraith's hypotheses by simply asking him what he considered to be necessary goods; not surprisingly, Galbraith's choices reflected the goods and services he liked, rather than any kind of objective necessity.

That's true. In fact, I've even seen environmentalism being described as a "luxury good." The family in Brazil that needs money and can only get it by chopping lumber isn't going to quibble about the levels of CO2, even though most Americans are horrified so much forest is being wasted.

That being said, that doesn't invalidate the hypothesis. It simply means that necessary goods are difficult, if not impossible, to objectively determine.
Galbraith spends the rest of the book describing why he believes the goods he describes as necessary are so, and I think he does a pretty good job. He also makes sure to point out that his ideas really only apply to a post-World War II United States. He makes no claims of their universality; in fact, he often criticizes the idea that fixed laws of economics that last forever even exist. I happen to believe the "rules" he describes are applicable today too, but there is plenty of room for disagreement. But I don't think one can disagree that the government, at least, should focus on necessities, and not luxuries.

I'm not so interested in whether people feel we are too materialistic, or out of touch with nature or something like that. I'm already pretty sure that's true. What I am interested in is whether anyone can provide an economic reason why production growth is so great.

When people have more spending money, they buy things they didn't buy before, as well as buying the recurring things they need or were accustomed to buying anyway.

That creates opportunities for profit in new industries ... and I suppose more career opportunities too, for those willing to speculate with their own training.

The similarities to technological change are probably a sign that it's technological change which is driving economic growth, not "better management" or "harder work."

After all, the fastest rates of growth are in developing economies ... and it's there that the most dramatic upgrading of technology is occurring.

Do We Need So Much Stuff?

Yes. http://www.youtube.com/watch?v=MvgN5gCuLac :)

After all, the fastest rates of growth are in developing economies ... and it's there that the most dramatic upgrading of technology is occurring.

Of course, what's good about faster technological development is that you can produce more for less, reducing environmental impact and markedly increasing quality of life. It's also the only thing that can really offset diminishing marginal returns; without technological growth, your output will slow and eventually outright decline as labor and capital increase.

Simply put, an economy cannot continue to grow at any kind of desirable or sustainable rate without continued increases in its technological base.

Thank you, this is very helpful. Are you an economist, or at trained as one?He isn't on NSG, he just plays one in real life. :p

I think if communications were improved and nutty dictators like (see other thread on mad South African candidate for President), and a few less wars reduce need for nuclear weaponry being developed, and terrorist idealogy vanished it might be possible, but to get even those things to happen there's a greater chance of discovering an alternate reality where people don't feel the need to fight every couple of days because they can't control their hormone problems.
So its a yes and then a alternate reality more yes, if you accept the first yes.

the only stuff i need are those things that make survival possible or easier and those which are useful for creating and exploring with.

if it were up to me, if i didn't ever have to live with anyone who felt differently, those, and thing things i created with them, would be all i would ever have or want.

and i really wish i was living by myself and living that way. in a very small 'house' out in the woods, with the computer and a good internet connection and lots of 'book' shelves, but very deffinately without credit cards, cell phones, the automobile as we know it, and a great many other things a lot of people seem to take for granted.

yes i'd wan't a refrigerator too, and some kind of a stove, and what it takes to run those things, but that can be done off grid just fine. or on, to shaire whatever surplus solar cells and home windmills might generate.

i wouldn't mind walking half a mile to get on some kind of cleanly propelled little narrow gauge m.u. if i needed or wanted to go further, or just ride it for the fun of doing so.

we, or at least i, definately do NOT need anything who'se only purpose would be to try and impress anyone. i can't think of anything more useless, ungratifying and wasteful crap then that.

one way media like television, video games that offer no way to be creative with, recorded entertainment and even corporate controlled radio like clear channel, are pretty useless too.

indipendent local radio occasionally tells you things that are actually useful to know about that you might not otherwise, but that's about it for that.

getting togather in a park somewhere to share live music is good.

but boom boxes and loud sound systems in cars driving arround is crap.

and i don't think guns are very useful either. all the excuses for pretending they are, really apply only in very few and relatively unusual circumstances.

individual scale means of cleanly generating and storing energy to run things i'm all for. but easier and more efficient 'human powered' ways of doing things for yourself are good too.

ALL tools don't HAVE to be 'power tools'.

and basically things we're never going to actually USE to be creative or explore with, i'm not really impressed by people aquiring just to hang on their walls, when someone else actually could and would be using them creatively.

oops, ok. that's what i get for not reading the o.p. i'll get back with my thoughts on that after i've had a chance to think about them and fraime cogent arguments, but generally, i think so called economic growth is mostly not only nonbennificial but even quite often counter bennificial.

=^^=
.../\...

This is actually something I do think about, mainly from a long-term perspective. My conclusions are as follows:

A certain degree of production growth is necessary to offset inflation, material depreciation and also to ensure the economy does not fall in to a zero-sum state, which is highly negative from any standpoint; in a zero-sum economy, you cannot succeed or improve your condition without costing someone else. This pretty much destroys meritocracy and the ability of everyone to maximize their own potential, producing a condition far worse for all involved than any existing economic system; not only will income inequality worsen over time, but there will be no way to easily recoup it.

A completely zero-growth economy is not at all desirable. An economy that grows steadily within an environmentally sustainable range is the long-term optimum for all involved; for example, if your productivity increases at 3% per year, a growth rate of 3% would ensure continued prosperity without significantly increasing raw material consumption (if at all). I've read that economic growth of 3-4% per year is the maximum ecologically sustainable amount, with that level varying depending on external factors (a more developed economy can tolerate a higher growth rate without much added environmental cost).

Now, individually, our desired economic growth is effectively in line with what we want from the economy; I tend to want an economy that produces faster increases in its technology and knowledge base, so my desired economic growth would be faster than someone who desires a slower rate. However, I desire a lower rate of economic growth than someone who desires an increase solely in available goods and services, mainly because the bulk of my utility does not come so much from accumulating goods as it does from my desired level of growth in additional knowledge and technology.

Excellent explanation. Thank you for making economics not sound like a pseudo-science for the first time ever.