[dredmorbius]

The problem with this, or any other hypothetical "decoupled growth" argument is that, well, it's purely hypothetical.

There's no evidence whatsoever that economic growth can be decoupled from resource, and most especially energy, usage. There are instances of increased efficiencies, which thanks to the Jevons Paradox increase overall resource utilisation (economically, efficiency is equivalent to a reduced price, and hence induces greater demand). And there are instances of outsourced resource utilisation (both in terms of inputs and of waste sinks), most notably that of China which has committed tremendous domestic resources and incurred immense environmental insult in providing "cheap goods" (that is: goods lacking fully-costed externality impacts) to developed countries.

But there's nary a trace of actual empirical evidence of substantive decoupling in the real world. Much handwaving and could-be's, however.

[snowwrestler]

It’s only hypothetical in that the future hasn’t arrived yet. Most predictions are hypothetical by that criteria.

We know the economy is decoupled from physical limits because we have built it to be that way. If you go to my bank right now, they are not going to have a physical pile of valuable objects there which is my account balance. They have a computer that stores numbers, and obviously it needs energy to operate, but it doesn’t cost 10x energy to store 10,000 instead of 1,000 in the database entry for my account balance.

[dredmorbius]

Qing Dynasty China had "decoupled" its currency from specie by way of the first paper-based currency I'm aware of. See: Richard von Glahn, Fountain of Fortune: Money and Monetary Policy in China 1000-1700 (1996).

But that has absolutely nothing whatsoever to do with decoupling the actual economy from its physical foundations. Long after Qing, China remained fundamentally dependent on rice and wheat harvests (and suffered tremendous population losses, as much as 8 million deaths) many centuries later.

The wealth-tracking representation has been decoupled from any substance with intrinsic value, but the economy has not.

Put another way: you could have a monetary system in which currency was entirely backed in precious gold and silver, and introduce huge quantities of same to your economy ... without increasing the actual wealth of the nation by Adam Smith's definition, "annual produce and labour of the nation". This was precisely the situation Spain found itself in following its conquest of the Americas and importation of vast quantities of South American gold and silver.

[snowwrestler]

> The wealth-tracking representation has been decoupled from any substance with intrinsic value, but the economy has not.

If you insist on measuring the economy solely in terms of "substances with intrinsic value," you will find the limit of economic growth at approximately the limit of those substances. However this is begging the question because it's not the only way (and not the currently accepted way) of measuring economies.

Anyway, it's not just the representation, wealth itself is increasingly nonphysical and hypothetical. For example not only is my $1,000 bank account just a database entry, my database entry is most likely offset by about $900 in loans to other people. So my saved cash is actually about 90% claims on future payments by other people. Or look at stocks; at a P/E of around 20 currently, 95% of the value of my SP500 index fund is hypothetical. And of course the whole point of a bond is future payments.

Market-winning behaviors are also becoming less physically correlated. Did Barbie take 5x as much energy as The Flash to make or present? Does a 3 bedroom row house in San Francisco use 5x as much energy as a similar house in Detroit? Does Apple use 3x as much energy as Amazon? Does it take twice as much energy to make a Mercedes C class as a Honda Accord? There are tons of examples like this. Rice and wheat harvests are a pretty small part of modern economies now.

Look, I agree that a certain level of energy usage is required to enable economic activity. If we were to cut our energy use too much, we would limit or perhaps crash the economy. People need food, clothes, shelter, plumbing, communications, etc. I'm just saying: that is not equivalent to proving that future economic growth is bounded by energy usage. One does not logically follow from the other.

[dredmorbius]

If you insist on measuring the economy solely in terms of "substances with intrinsic value" ...

I don't, and specifically pointed out precisely an instance where money was not grounded in material goods. However that is a red herring as money is not wealth but is instead a measure of wealth. My own theory is that the reason many monetary systems have been based on specie or some similar intrinsically valuable material has to do not with coupling/decoupling of production to physical inputs, but to trust. That is, when you have a money-issuing authority imbued with high trust, the need for metal-backed currency disappears. "Seigniorage" is then a measure of trust in the money-issuing authority, and fiat currency (with effectively infinite seniorage) implies complete trust.

(The concern that such authorities occasionally abuse their trust, and/or run up against circumstances in which deflating the currency becomes a financial and economic necessity, is a separate issue. That problem isn't limited to fiat currencies, however, as the devaluation of specie-based currency such as the Roman denarius illustrates.)

The relationship between economic output and material inputs, specifically energy inputs, has been identified by several authors, in particular Steve Keen and Robert U. Ayres, "A Note on the Role of Energy in Production":

Energy plays no role in the standard Cobb-Douglas Production Function (CDPF), and a trivial role in a three-factor CDPF where it is treated as a third input, independent of labour and capital. Starting from an epistemological perspective, we treat energy as an input to both labour and capital, without which production is impossible. We then derive an energy-based CPDF (EBCDPF) in which energy plays a critical role. We argue for the redefinition and measurement of real GDP in terms of exergy. We conclude that the “Solow Residual” measures the contribution of exergy to growth, and that the exponents in the EBCDPF should be based on cross-country comparative data as suggested by Mankiw (1995) rather than the “cost-share theorem”.

<https://www.sciencedirect.com/science/article/abs/pii/S09218...>

As Keen and Ayres note, including energy along with capital and labour in the Cobb-Douglas production function accounts for virtually all of the "Solow Residual", the amount of productivity not accounted for by capital or labour, and which was previously attributed to "total factor productivity". Keen & Ayres reduce that almost entirely to energy input.

Your sojourn into prices as opposed to wealth creation (in the real economic sense, rather than the somewhat more familiar, but irrelevent in this case, financial sense) is yet another red herring. Asset prices are not intrinsically grounded in production costs, particularly for price-inelastic goods such as real estate. Rather than being defined by costs of production, they're defined by surplus value, and following the theory of rents first expressed by David Ricardo, the seller will tend to accrue surplus consumer value of such assets. That is, real estate prices rise to match the income potential of that location.

Information-heavy good such as luxury brands (Apple, Mercedes), entertainment (cinema), are based on a combination of manipulating tastes (advertising and marketing, reputation), constraining supply (particularly in real estate), and in competition for a limited resources (cinema screenings vs. cinema audiences). Note that in the case of cinema, costs of production are independent of viewings, so the industry is very interested in both total budget and ticket sales. But individual ticket prices tend to be relatively uniform across titles, what varies instead are the number of butts in seats. (This varies somewhat: Imax theatres may claim higher prices, but again, this tends to be across all titles, and matinee or off-peak screenings may offer lower prices, but again, uniformly for titles.)

Rice and wheat, as well as oil, gas, and coal, are commodity goods, not assets in the sense of real estate and gold. They're subject to supply and demand, but prices are determined by the marginal or surplus producer, depending on market circumstances. Where demand is less than total production capacity, the surplus producer, that is, the producer who can choose to sell more or less product at will, determines price based on their own production quotas. From 1931--1972, this was the United States, managed through the US Department of Interior (via "certificates of clearance")[1] and the Texas Railroad Commission (through drilling and production quotas)[2]. Since 1973, control has effectively resided with Saudi Arabia, as the US passed domestic peak oil and no longer had surplus production capacity.

Where demand exceeds production capacity, it is the marginal producer of oil, that is, the one whose costs just allow operating profit at the present market price.[3] As market prices rise and fall, those marginal producers enter and leave the market, literally turning on or off well pumps, with the cost of running the pump often dominating their own production costs of their "stripper wells".[4]

Because fuels, and foods, literally power the rest of the economy, as prices for either rise, there is less profitable activity to be undertaken by utilising them. If we express national productivity in terms of $GDP/barrel-oil, there is a range of roughly $300--400 at the low end to ~$3000 at the high end, with the US coming in at about $1,200/bbl of GDP.[5] If oil costs $50/bbl, then that is $1,150 of net productivity per barrel. Should the price rise to $100, the productivity falls to $1,100. The US can afford this reasonably well. A country netting only $250 profit at $50/bbl however falls to $200, or a loss of 25% of economic productivity. (India and China were at about this mark.)

The low price of food and energy masks their true value to the economy, because it is precisely the differential in price and output which is what determines the scale of the rest of the economy. Take away fuels and foods, and you'll find that total productivity falls by far more than the previous total exchange value of those goods.

________________________________

Notes:

1. See Daniel Yergin, The Prize, (1992), particularly chapter 13.

2. Yes, the Texas Railroad Commission controlled global production of oil. Because Texas.

3. Or, in cases, not even profit but cover non-fixed costs, and thus encourage the producer to operate at a net loss.

4. See: <https://en.wikipedia.org/wiki/Stripper_well>

5. As of ~2015 when I last looked at this.

[XorNot]

Conversely the people who argue against growth never have any answers they want to elaborate on. They have "well we can't have endless growth" and that's where the conversation stops.

They never want to examine the consequences of that thought (no growth means we're into a zero-sum game) or whether they think we're even plausibly close to the limit (instead they want to have a proxy argument about environmental damage or global warming, and are very uninterested in any specific solutions to their go to examples - i.e. "we can't possibly stop emitting CO2 from power generation, we must simply use less power!").

[salawat]

...No crap it's a zero-sum game! We've been screaming it from the bloody rooftops while economists and charlatans have gone on and on chasing alpha, instead of really focusing on breaching the most critical breakthroughs we need. Near limitless clean power, closed cycle industrial processes, and bloody innovations in either transport, agri-husbandry, or medicine.

But no.

War. War, real estate, and more pretend finance for finance sake. Either that or mass producing the tools of tyranny.

[XorNot]

You have just given a list of achievable technologies which would allow growth within the current resource constraints. What do you think "new energy sources" are if not economic growth?

[bliteben]

At some point unlimited growth would mean the heat death of earth. Remember all used energy no matter how green the source emits heat.

Even stars have limits to their energy. If you don't believe in limits then you aren't accepting physical reality.

[kbenson]

The optimal strategy now for unlimited growth and some future limit on growth bei g hit when there are competitors are likely the same. Take advantage of it as much as possibly for as long as possibly.

Given two countries where one lints it's economic growth and the other doesn't, if they're given another few hundred years before a limit is hit, which one is in a better place to respond when that limit is hit? Does the country that minutes itself even still exist as it did, or was it taken over by a stronger one (whether economically, militarily or culturally)?

[dredmorbius]

I'd really like to see you point to specific instances of this.

I could point to any number of examples refuting this, but really prefer you lay your cards on the table first.

[XorNot]

I mean you're doing that right now. You seem to believe we can't have infinite growth. Okay...and? Do you have anything more to add other then a mathematical reductio ad absurdum talking about 1000 year timespans? What tangible actions and economic model do you believe this should inform in the next 5 to 10 years, which you as a citizen of a democracy have some role in choosing and advocating for?

[dredmorbius]

<https://news.ycombinator.com/item?id=37386474>

Again: I have sources. You?

I'm reading this as you don't.

[dredmorbius]

Update: <https://news.ycombinator.com/item?id=37399144>

[XorNot]

Linking to a half-dozen separate arguments, and presenting no original conclusion or summarizing thought on what you took from those works isn't an argument. In fact it's very much not an argument - it's you presuming that I haven't read those, because otherwise how could I disagree?

My question was quite specific: what do you think we should do in the next 5 to 10 years? Apparently you've read widely on this topic! So widely that when asked this question, the only thing you did was throw book titles and author names around and talk about how great they are. Rather then anything about what they say.

I mean presumably all these distinguished luminaries drew some actionable conclusions right? Because you are calling for actionable things to happen - such as?

[dredmorbius]

Again, I'd really like to know who specifically you are referring to with "the people who argue against growth never have any answers they want to elaborate on".

I've mentioned numerous specific examples refuting that here: <https://news.ycombinator.com/item?id=37399144>