"Can Economic Growth Continue Forever? Of Course!" by Tim Harford on the fun Freakonomics website
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You might well respond that even if population growth stops, growth in the economy – in GDP – will continue, and fall foul of the rice-on-the-chessboard problem. But I think that here we find a serious gap in the logic of the exponential doomsayers. They’re looking at exponential growth in physical processes—things like heating, cooling, lighting, movement. This is understandable, because they are, after all, physicists. Tom Murphy’s blog post is particularly startling on this point. He points out that if our energy consumption grows at 2.3 percent a year—less than historical rates but enough to increase energy consumption tenfold each century—then the entire planet will reach boiling point in just four centuries. It’s not the greenhouse effect at work; it’s irrelevant to Professor Murphy’s point whether the energy comes from fossil fuels, solar power or fairy dust. This is simply about the waste heat given off, inevitably, when we use energy to do useful work. And it’s pretty hard to argue with the laws of thermodynamics. The calculation sounds shocking, but it’s just the rice on the chessboard all over again.
Here’s the logic lapse: energy growth is not the same as economic growth. GDP merely measures what people are willing to pay for, which is not necessarily connected to the use of energy, or any other physical resource. True, since the beginning of the industrial revolution the two have tended to go hand in hand, but there’s no logical reason why that tendency needs to continue. Indeed, it appears to have stopped already. Would you like to take a guess at energy growth per person in the United States over the last quarter of a century?
It’s not just less than 2.3 percent. It’s less than zero. The same is true for other developed economies such as Germany, Japan and the United Kingdom. Now this is partly due to offshoring to China – but the offshoring effect just doesn’t seem big enough to explain what is going on. It’s also about the changing nature of what is bought and sold in a modern economy.
Think of New York City. It’s a high-income place, and has for more than a century been a creative powerhouse: publishing, music, fashion, art, finance, software, you name it. But energy consumption per person in New York City is lower than in the United States as a whole—in fact, it’s lower than the average in any American state. Ultimately, we can do a lot of the things we value—including value in the grubby pecuniary sense of “are willing to pay lots of cash for”—without expending vast amounts of energy."
-- an exercpt from the article
