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Why Economic Growth Will Fall

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Re: Why Economic Growth Will Fall

#131

Post by psadri »

riskneural wrote: post #119
tome wrote: post #111

Earlier quoted context omitted.

OK, that's a rough argument that needs fleshing out. Has the rigorous argument actually been made and is widely accepted by economists or is this just a meme that's accepted and repeated without much basis?

Adam Smith makes the argument well in A Wealth of Nations. Essentially, the only reason to invest is that you expect to earn something above on top of the risk. Then add that up over everybody in the system. They cannot all get something extra, unless there is growth. That growth is spread over everybody as return on investment. So, if there is no growth, then investment stops earning that extra, so there no point in…

You may invest to meet your basic needs. People used to build a house so they could be sheltered from them elements, not just to flip it.

Re: Why Economic Growth Will Fall

#132

Post by tome »

allendoerfer wrote: post #130
tome wrote: post #129

Earlier quoted context omitted.

OK, so that raises the next question: why do we need to stop deflation?

Because you liquidate all your assets if there is deflation. No companies, no jobs, no food. Edit: Obviously I am speaking in very extreme terms and ignoring the fact that there is a government acting and that not everything will happen instantly. These are just long-term forces.

Do I? Why? What can I do with all that cash that I got from liquidating my assets? I can't spend it on consumption all at once.

Re: Why Economic Growth Will Fall

#133

Post by danbruc »

TheCoelacanth wrote: post #123
danbruc wrote: post #87

Earlier quoted context omitted.

If you increased our energy consumption by 1 % per year, we would all be dead in less than 1000 years because at that point the surface temperature of the Earth would have reached the boiling point of water. EDIT: In case the down votes are for the numbers. The total emission of an ideal black body with surface area of 510.1 million km² at 373.15 K is 560,791 TW. The world total primary energy supply in 2012 is estim…

If we increased our energy production to 20000 times our current production (roughly 1000 years at 1% growth), I highly doubt we would still be stuck on Earth.

Leaving Earth does not really help that much - the number of stars and planets you can reach only increases with the third power - assuming an homogeneous distribution - and after some time more like with the second power due to the flat shape of the Milky Way and is in consequence quickly overwhelmed by exponential growth. You would not really get that far from Earth before you would already have to consume all the resources of the galaxy assuming some constant rate of growth on the order of 1 % per year.

Re: Why Economic Growth Will Fall

#134

Post by allendoerfer »

psadri wrote: post #131
riskneural wrote: post #119

Earlier quoted context omitted.

Adam Smith makes the argument well in A Wealth of Nations. Essentially, the only reason to invest is that you expect to earn something above on top of the risk. Then add that up over everybody in the system. They cannot all get something extra, unless there is growth. That growth is spread over everybody as return on investment. So, if there is no growth, then investment stops earning that extra, so there no point in…

You may invest to meet your basic needs. People used to build a house so they could be sheltered from them elements, not just to flip it.

But houses are already there. Especially when populations are shrinking.

Re: Why Economic Growth Will Fall

#135

Post by allendoerfer »

tome wrote: post #132
allendoerfer wrote: post #130

Earlier quoted context omitted.

Because you liquidate all your assets if there is deflation. No companies, no jobs, no food. Edit: Obviously I am speaking in very extreme terms and ignoring the fact that there is a government acting and that not everything will happen instantly. These are just long-term forces.

Do I? Why? What can I do with all that cash that I got from liquidating my assets? I can't spend it on consumption all at once.

You don't have to, it will be worth more next month. It would be stupid to invest into your retirement fund if cash is increasing in value faster, so you take the cash. It makes total sense individually, but when everybody does it, the system will collapse.

Re: Why Economic Growth Will Fall

#136

Post by tome »

allendoerfer wrote: post #135
tome wrote: post #132

Earlier quoted context omitted.

Do I? Why? What can I do with all that cash that I got from liquidating my assets? I can't spend it on consumption all at once.

You don't have to, it will be worth more next month. It would be stupid to invest into your retirement fund if cash is increasing in value faster, so you take the cash. It makes total sense individually, but when everybody does it, the system will collapse.

Yes, I can see why a deflationary shock can cause behaviour that is individually rational but destroys the economy in the long term. I do not see why there cannot be a steady state with no growth. Presumably if this is widely accepted by economists there must be a standard textbook reference that you can give me?

Re: Why Economic Growth Will Fall

#137

Post by crimsonalucard »

placebo wrote: post #11
crimsonalucard wrote: post #2

This. Finally. People on HN think that startups, technology and economic growth have unlimited potential. This is pure stupidity at its finest. Observations of the natural world show a general trend: that everything, from physical resources to energy has limits. It is a mistake to believe that this general observation does not apply to technology and the human imagination. While we can comprehend what a limit in oil…

While it's definitely true that many a time certain crowds tend to have lost touch with reality regarding the potential of a specific activity (as illustrated in repeated economic bubbles), to say that economic growth is limited suggests that economy is in principle a zero sum game. I don't believe that to be the case. Any attempt to predict the absolute limits of economic potential is an attempt to limit the potenti…

All observations point to limits and thus suggest that reality and therefore the economy is a zero sum game. You talk as if limiting reality doesn't make any sense when scientific observation describes a reality that is in fact limited.

Conservation of energy, conservation of mass, the speed of light, these are limits built into the fabric of existence.

Re: Why Economic Growth Will Fall

#138

Post by Retric »

paganel wrote: post #115
hx87 wrote: post #98

Earlier quoted context omitted.

> air conditioning It's just a pet peeve of mine, but why is so much blame placed on air conditioning, when heating uses an order of magnitude more energy?

I don't necessarily "blame" air-conditioning, it's just that in order to have AC you need to have a functional power distribution network that works at country level, which in turn requires having the initial capital for building it and then (I say most importantly) the necessary political and economical stability in place in order to raise the power distribution poles and, generally speaking, keeping the power distr…

Solar powered AC works just fine without a power distribution network and even tends to track production and demand. Heating on the other hand needs power in the darker parks of the year and needs fuel, much larger investments, or a power distribution network.

Re: Why Economic Growth Will Fall

#139

Post by allendoerfer »

tome wrote: post #136
allendoerfer wrote: post #135

Earlier quoted context omitted.

You don't have to, it will be worth more next month. It would be stupid to invest into your retirement fund if cash is increasing in value faster, so you take the cash. It makes total sense individually, but when everybody does it, the system will collapse.

Yes, I can see why a deflationary shock can cause behaviour that is individually rational but destroys the economy in the long term. I do not see why there cannot be a steady state with no growth. Presumably if this is widely accepted by economists there must be a standard textbook reference that you can give me?

I am not an economist and would be interested in such a reference, too.

My guess is that as long as there is even tiny growth, central banks can react with negative interest rates/taxing cash. It will take quite a while until there is no growth at all on the whole world. I think even Western countries have room for growth by mandating green standards.

When less and less growth is possible any more, I imagine we would have to start socializing industries, which reached that point, so they are taken out of the equation. People would then get a basic income and use it to pay for state provided services, which would not deflate, because the state does not have to care about market prices, it can just regulate competition. I think the problem here is more to find the right time for it, not the solution itself.

Re: Why Economic Growth Will Fall

#140

Post by quadrangle »

wil421 wrote: post #84
quadrangle wrote: post #78

Earlier quoted context omitted.

For most cases, no. Tuition rates have skyrocketed since only 10 years ago. http://www.usnews.com/news/articles/2013/10/23/charts-just-h... https://www.bloomberg.com/news/articles/2014-08-18/college-t... http://www.huffingtonpost.com/2014/06/18/college-tuition-una... Whether obscure deals or aid make things possible today, I don't know. Put simply: today's students are not looking at the same options as those just a…

I graduated 3 years ago and what the parent said is definitely still an option. Especially if you transfer in to a larger school after 2 years.

Thanks for the anecdotal data, glad to know there are still options. The overall stats in the chart may be skewed by the expensive institutions becoming that much more expensive, but still… my anecdote is that the regional state school I graduated from in 2004 (not a community college, but not a top-ranked place) is in the $5k-$6k range for 15-credit in-state semester today. And I checked that its below average for in-state tuition, all the state schools are in that range.

If your "transfer…" comment refers to community college, that's a smart financial decision but not exactly the topic of the post I was replying to.

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