Infinite Growth in an Economy

Written on:January 24, 2012
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Does the idea of ever-economic expansion make sense? If so, how can that be possible…

The concept that the economy can grow infinitely isn’t at odds with a finite world. As far as humans are concerned, there really is no limits to how much we can produce. In fact, it would be naive to make estimations too far ahead in the future to try to capture some grasp of how far ahead we will be within the next 25-50 years, because a new technological shift could occur, driving up productivity even further. I mean, look at it this way—much of the world is still underdeveloped; there are still people living in poverty (not even relatively, I’m talking about caloric intake). So the worlds potential output isn’t even close to being met at today’s technological level. Luckily, we don’t live in a  zero-sum world. True, the current amount of resources available today are indeed limited (today, there might only be 500k tons of steel available for manufacturers–so indeed, manufacturers are limited to shares of that 500k tons of steel). The real economic problem isn’t about the allocation of scarce resources– allow me to humbly suggest that the core of the economic problem is more about how to allocate current resources now in order to have the best position for later.
In the late 1700′s and early 1800′s, an influential scholar, Thomas Malthus, postulated that at the (then) current rates of consumption in England, there would not be enough food to go around and that society would collapse, because there would be a limit to England’s production. His model suggested that by the 1970′s, the population of England would reach 1 billion. What he didn’t account for, or understand, is that technological advances increase a nations productive output. For example, in the US, only 3% of labor work in the agricultural sector (in the old days, most economies were agrarian in nature!). This major shift demonstrates that as technologies advance, labor becomes specialized, etc., fewer inputs are required to make additional outputs. In the old days, it probably took quite a few workers to build an automobile–nowadays, most of the construction is done electronically (via robots), which further illustrates that point. There’s a very long way to go before we will arrive at any close estimation of our maximum potential output–which will only be correct for that certain time segment (because tomorrow, it may expand as new tech. is found)…
(repost from FB)

Have a Question about Economics or Markets?

Written on:December 15, 2011
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Feel free to ask me! I’ll be answering the top 10-15 questions I get. To submit a question, either make a comment on this post, or email me: admin@corporus.net Hope to hear back from you soon!   -Economister  

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Written on:December 4, 2011
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Written on:November 24, 2011
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