An argument in Favor of a Steady State Economy

[Elta]

The presentation is by Dan O'Neill Economist at the University of Leeds. It is a good introduction and argument for the Steady State Economy.


Link to video.

 

[Narz]

Elta thread!!!!!!!!!!!!!! Will watch video tomorrow or Thursday.

 

[Narz]

Ok, took a month but I finally watched this. Mostly it's information/arguments that I was already aware of.

I liked what he said @ 19:07 though about how people use growth as an excuse to ignore inequality/poverty (as long as there is growth, there is hope... except that more people are in poverty now than even existed a hundred years ago & rich people don't cancel out the homeless or impoverished).

His general argument is, of course, convincing but sadly policies aren't implimented based on logic & reason but based on short term benefits for politicians, businesses & lobbiests. Banks & governments will probably not voluntarily change the banking system, limit the wealth of the super rich or aim for steady-state economies or more economic equality. I hope I'm wrong of course.

The speaker sadly is too "nice guy" for most folks. Strangely people seem to prefer more to listen to raving dickwads like Rush Limlaugh, Bill O Reily & for the fringe right Alex Jones. The left is so depressed they can only handle their news funny (Colbert, Jon Stewart, etc.).

Thanks for sharing though Elta. I sent it to my mom, even though she's a libertartian with blinders on & will probably shut off when he talks about minimum & maximum wage.

 

[Narz]

Surprised no one has any interest in discussing this.

 

[Terxpahseyton]

Well it takes 35minutes of preparation until we can rant about our important views.
If it comforts you I got the video bookmarked. (it shouldn't though)

 

[Bootstoots]

Yeah, people who know more than I do about economics should discuss this, with or without watching the video.

Is a steady-state (growth rate ~0%) economy possible without leading to persistent high unemployment, poverty, and/or rapidly growing inequality? If such a system is possible, what does it look like? Assuming the country is reasonably well developed and poverty is rare, could this plausibly be considered a reasonable "next stage" of economic organization after growth-dependent capitalism?

It's not quite possible to prove that economic growth must slow down and end at some point because there's some fuzziness about what constitutes economic growth to begin with and to what extent it can "uncouple" from finite physical resources through technological advances. But I think this is something that mainstream economists should consider seriously. Otherwise, we may just blunder into a perpetual no-growth state without realizing it and keep trying to "stimulate" the economy back into growth with a bunch of unconventional policies that, rather than popping us out of the apparent mild depression, are themselves unsustainable against a background of ~0% long-term growth.

I'm not sure if that's where Europe, the US, and Japan are all now or if there's another burst of secular growth in the pipeline. But what we've seen since the 2008 crash: perpetual ZIRP, QE, and attempts at stimulus that all produce mediocre results, are exactly what I'd expect of a society in secular stagnation (or at best anemic growth) that hasn't yet realized that Keynesian and monetarist policies aren't going to bring long-term growth rates back to ~3%. Even if these economies do manage another burst of long-term growth, it might be worth considering the financial crisis a dress rehearsal for something that may happen later in the future.

 

[Hygro]

I don't think secular stagnation is a thing. We've been dragged back by high interest rates for decades and a lot of private debt interest drag. We had a different type of economy before the late 1970s. Right now, we have so many good ideas and so much technology to do it and we're not doing it because there are too few investors and not enough financing so people get wage/salary jobs instead. Growth could be faster than ever and that's right there in the model., let alone the empirical situation of our potential. It's just about financing more effectively.

But I can't comment on the video yet cuz I haven't watched it.

 

[amadeus]

I haven't been able to watch it since I'm at work, but put simply, how am I ever going to see an increase in my standard of living if economic growth is banned?

 

[Bootstoots]

I don't think secular stagnation is a thing. We've been dragged back by high interest rates for decades and a lot of private debt interest drag. We had a different type of economy before the late 1970s. Right now, we have so many good ideas and so much technology to do it and we're not doing it because there are too few investors and not enough financing so people get wage/salary jobs instead. Growth could be faster than ever and that's right there in the model., let alone the empirical situation of our potential. It's just about financing more effectively.

I don't doubt that our financial resources are misallocated, and I suspect that a rational market could have financed growth that continues at the expected clip for considerably longer than actually happened in real life, given the continued stream of technological advances that we have observed.

But there could be physical limits to long-term economic growth, beyond which further growth cannot occur except as unsustainable, short-lived bubble phenomena. If we experience this in the future, or if we are currently experiencing it (partly because of misallocated resources and an irrational financial system, partly because of physical limits that are beginning to appear), what would this economy look like, and what would be a rational way to proceed?

The video (and his book, which I also read) uses Herman Daly's concept of "uneconomic growth" in which economic growth continues for a while but destroys the ecological and geological support mechanisms we rely on (e.g. fisheries collapse, soil erosion, climate change, depletion of finite resources, etc) until overshoot and contraction become unavoidable. My main issue is that the proposed transition methods are implausible and rely on people forgoing their short-term interest, and I see no evidence that this is likely.

Feel free to dispute that we will reach physical limits to growth, but if that hypothesis were correct and long-run growth fell to ~0%, what would you recommend?

I haven't been able to watch it since I'm at work, but put simply, how am I ever going to see an increase in my standard of living if economic growth is banned?

Economic growth isn't banned by some sort of government fiat; it fails to occur because resource, environmental, and financial limits prevent it from happening on average.

As to how you could see an increase in your standard of living: it's quite possible that it could happen for you in particular. But it would make economics much more of a zero-sum game than it is commonly thought to be; your gains would generally have to come from others' losses. It is also possible that an expanded definition of "standard of living" may allow for increases in average well-being without economic growth. Although it is clear to me that growth to GDP of ~$25000 per capita (about 2X the world average) generally results in an increase in most measures of "well-being", it isn't clear that this relationship holds above this point.

If you're still in Japan, you're in a great place to witness what happens as economies stagnate. The Japanese economy has grown at a very slow (albeit slightly greater than 0) pace since ~1990, they have a declining population with very little immigration, and Abenomics goes well beyond anything the Federal Reserve and Congress are doing in the USA, with results that are generally disappointing so far. I've come to think that Japan and some European countries are trailblazers into a future of stagnation that will be closely followed by the US and the rest of Europe, and then the rest of the First World behind us along with other economies like China's.

To both of you: I hope I'm wrong, but I see no reason to consider to consider long-term stagnation or even decline implausible.

 

[Tahuti]

I haven't been able to watch it since I'm at work, but put simply, how am I ever going to see an increase in my standard of living if economic growth is banned?

Did you experience an appreciable rise in the standard of living when the country you lived in grew?

Economic growth isn't banned by some sort of government fiat; it fails to occur because resource, environmental, and financial limits prevent it from happening on average.

I think it would be better idea to render economic growth unnecessary first. The modern economy has to grow, because debts cannot be repaid otherwise.

 

[Winner]

I haven't been able to watch it since I'm at work, but put simply, how am I ever going to see an increase in my standard of living if economic growth is banned?

As the guy explains in the video, living standard has little to do with GDP growth once certain level of GDP per capita is achieved. After that, even stupendous increases in GDP translate in next to no increase in the (average) living standard.

On the other hand, taking measures promoting more social equality and better services in an economy where the goal is not GDP growth (which is a really absurd indicator of progress since the only thing it measures is the amount of money spent, for good AND ill) but increase in overall human happiness actually can produce far better results.

One illuminating term I carried off from this video is "status competition" - more inequality in society promotes status competition, i.e. buying stuff that you don't need just to advance yourself on the social ladder. Conversely, more equal societies are happier since the need for this competition is reduced, people are less stressed and better able to spend their time and resources wisely on things that truly make them happy.

 

[Cheezy the Wiz]

I haven't been able to watch it since I'm at work, but put simply, how am I ever going to see an increase in my standard of living if economic growth is banned?

By raping the Third World, like always.

We already have an enormous trade deficit; debt payments are really the only thing still keeping us in business, so continued economic growth for us will at this point only continue so long as our ability to dragoon developing nations into letting us abuse their workers and natural resources does.

That's what happens when you restructure your economy into becoming the global office managers of capitalism, because, surprise surprise, no wealth is generated by anything but labor, and when you never handle an unrefined product, you never contribute to wealth creation. But realizing that would mean something Marx said is true, and we just can't face that realization, now can we.

 

[amadeus]

Economic growth isn't banned by some sort of government fiat; it fails to occur because resource, environmental, and financial limits prevent it from happening on average.

I think it would have to be by government fiat; how else would they stop the economy from growing? (Besides trying to grow it themselves. )

As to how you could see an increase in your standard of living: it's quite possible that it could happen for you in particular. But it would make economics much more of a zero-sum game than it is commonly thought to be; your gains would generally have to come from others' losses. It is also possible that an expanded definition of "standard of living" may allow for increases in average well-being without economic growth. Although it is clear to me that growth to GDP of ~$25000 per capita (about 2X the world average) generally results in an increase in most measures of "well-being", it isn't clear that this relationship holds above this point.

I guarantee you I'd be much closer to self-actualization at $90,000 than at $30,000. And I already have my definition of a standard of living, I don't need anyone to redefine it for me.

If you're still in Japan, you're in a great place to witness what happens as economies stagnate. The Japanese economy has grown at a very slow (albeit slightly greater than 0) pace since ~1990, they have a declining population with very little immigration, and Abenomics goes well beyond anything the Federal Reserve and Congress are doing in the USA, with results that are generally disappointing so far. I've come to think that Japan and some European countries are trailblazers into a future of stagnation that will be closely followed by the US and the rest of Europe, and then the rest of the First World behind us along with other economies like China's.

To both of you: I hope I'm wrong, but I see no reason to consider to consider long-term stagnation or even decline implausible.

Well, it's a fairly poor existence for those on the bottom of the Japanese income ladder at this point. The country's conservative corporate governance and corporate tax and regulation regime that drives multinationals to avoid Japan like the plague are not good things.

Did you experience an appreciable rise in the standard of living when the country you lived in grew?

Too many personal variables. I wasn't financially independent until I was 21 and I've been in Japan for a majority of the time since then.

As the guy explains in the video, living standard has little to do with GDP growth once certain level of GDP per capita is achieved. After that, even stupendous increases in GDP translate in next to no increase in the (average) living standard.

I doubt without growth I'm going to see much in terms of career advancement. So private sector growth is absolutely good.

By raping the Third World, like always.

Vast numbers of people have been lifted out of poverty since the end of the Cold War. It's just a shame that socialism held so many of them back for so long.

We already have an enormous trade deficit; debt payments are really the only thing still keeping us in business, so continued economic growth for us will at this point only continue so long as our ability to dragoon developing nations into letting us abuse their workers and natural resources does.

Trade deficit? Who cares? And the debt isn't too large to not be serviceable.

That's what happens when you restructure your economy into becoming the global office managers of capitalism, because, surprise surprise, no wealth is generated by anything but labor, and when you never handle an unrefined product, you never contribute to wealth creation. But realizing that would mean something Marx said is true, and we just can't face that realization, now can we.

So why are the Chinese so eager to give us their microwaves in exchange for little worthless green pieces of paper?

 

[Cheezy the Wiz]

Vast numbers of people have been lifted out of poverty since the end of the Cold War. It's just a shame that socialism held so many of them back for so long.

The phrase you're looking for is "plunged into poverty." You know, what happens when your social safety net is dismantled and your industries sold off?


Observe Russia's life expectancy. It plunged with the dissolution of the Soviet Union, and took 20 years to return to pre-1990 levels.

Do I need to remind you that it was socialism that brought about universal medical care and universal education in the former Russian Empire? No one was hungry, no one was homeless, no one went bankrupt from getting sick or from getting an education, no one became impoverished with old age or worked until the day they died.

Yeah, I'm sure they're real thankful for all this "freedom" they have. I almost wish someone had asked them about it.

http://www.gallup.com/video/28735/Life-PostUSSR.aspx

It's capitalism that's holding the world back, by siphoning the wealth of the Third World into the hands of a tiny fraction of the First World. We'd all be better off without them, or it.

http://www.forbes.com/sites/laurashin/2014/01/23/the-85-richest-people-in-the-world-have-as-much-wealth-as-the-3-5-billion-poorest/

 

[Ironsided]

It's capitalism that's holding the world back, by siphoning the wealth of the Third World into the hands of a tiny fraction of the First World. We'd all be better off without them, or it.

I don't think enough people understand the weight of this. This is why we have terrorism. This is why we throw good men and women and incredible amount of capital in the bin. A bin laden with <snip>.

 

[amadeus]

The phrase you're looking for is "plunged into poverty." You know, what happens when your social safety net is dismantled and your industries sold off?

You mean seventy years of socialism ruined Russia? You didn't need a graph to tell me that!

 

[Ironsided]

Once upon a time there were three kids with an ice cream cone each. One was told to eat in moderation. One was told to eat and enjoy. One was encourage to eat as fast as possible because there were no moral rules to rob the others of their ice cream when you are done.

 

[amadeus]

Good thing for you that boys with ice cream cones and economies are perfectly analogous.

 

[Ironsided]

I never said they were boys that's your analogous assumption.

 

[Narz]

I guarantee you I'd be much closer to self-actualization at $90,000 than at $30,000.

What does that mean to you? Just curious.

And I already have my definition of a standard of living, I don't need anyone to redefine it for me.

Not to question your dream but are you sure it's you alone who's defined your dreams, not influenced in any ways by advertisements & culture.