What do we want the world to have MORE of

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What do we want the world to have MORE of?

• Everybody says Growth!
• What is growth?
• Does it make us happier?
• How much of it can we have?
• If not growth, what? And how?

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What is Growth?

• Definition of economic growth A positive
  change in the level of production of goods and
  services by a country over a certain period of
  time. Nominal growth is defined as economic
  growth including inflation, while real growth is
  nominal growth minus inflation. Economic growth
  is usually brought about by technological
  innovation and positive external forces.

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Growth Positive change in GDP

• GDP, a measure of production, is also called
  income. That is why we want more!
• Although the stuff we care about is goods and
  services, we measure in money, so we can add
  apples and oranges (and rice and haircuts and
  sneakers and machine guns)
• So GDP stuff x prices
• Increases in GDP come from more stuff or
  better-quality stuff

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How is GDP measured?

• The Bureau of Economic Analysis (BEA), a division
  of the US Department of Commerce, measures GDP.
• 2 ways of counting, should be equivalent
• Sales of final goods
• Income to factors of production (labor capital)
• BEA uses many different sources and statistics to
  estimate GDP

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?GDP does not count inflation

• To remove the effect of a change in prices
  unrelated to quality improvement from ?GDP, we
  carefully measure inflation.
• Main measure of inflation is the Consumer Price
  Index (CPI)
• Measured by Bureau of Labor Statistics (BLS)
• Prices of about 80,000 items used to calculate
  the CPI are collected in 87 urban areas
  throughout the country and from about 23,000
  retail and service establishments each month.
  Data on rents are collected from about 50,000
  landlords or tenants.

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Does ?GDP makes us happy?

• No. There seems to be a diminishing marginal
  utlility to stuff.
• In developed countries, the correlation between
  income and subjective wellbeing is smallfrom 2
  to 5.
• The richer the country, the smaller the
  correlation between income level and individual
  happiness.

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Happiness stuff in the U.S.
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Why are we not more happy?

• Adaptation once adapted to a new level of
  affluence, it takes more to rejuice joy.
• Evidence from lottery winners
• Comparison we compare ourselves with others
• Usually those just above not Bill Gates, not
  starving people in China
• Advertising 117.3 billion spent in 2002.
• Growth in money spent on advertising outpaces
  inflation, growth in GDP

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So what is happiness the point?

• Amartya Sen argued noif our freedoms are
  greater, we are better off (even if we are
  ungrateful).
• Example life expectancy. On average, nearly 10
  years have been added to since 1950.
• Still some problems with equity see graph

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Great!So can the rest of the world achieve our
standard of living?

• Not if it depends on level of consumption.
• The U.S. population (4.6 of world pop.)
• accounts for 22 of world energy consumption
• emits 18 times the CO2 per capita as people in
  low income countries
• ecological footprint is 24 hectares per person
• only 4.5 hectares per person are available
  worldwide

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(Whats an ecological footprint?)

• Counts and adds six mutually exclusive uses of
  the planets bioproductive surface that compete
  for the Earths available biologically productive
  space
• Absorbing Carbon Dioxide Emissions
• Growing Crops
• Grazing Animals
• Harvesting Timber
• Catching Fish
• Accommodating Infrastructure

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Composition of average U.S. footprint
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What happens if we keep this up?

• At current population growth rates, there will be
  roughly 22 billion people in 2100
• At 2 children/couple, 8.5 billion
• Either way, more people less land per person
• Scarcity may lead to conflict

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Can Growth Save Us?

• Maybe if we count it right
• We call GDP incomenot a precise concept. What
  exactly do we want more of?
• Hicks says income is what we can consume today
  and still be able to consume in the future.
• Just as rise in GDP due to inflation is not
  real, so rise in GDP at cost of future
  consumption should not count as real
• Alternative measures of GDP
• Index of Sustainable Economic Welfare
• Genuine Progress Indicator

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Good growth vs. bad growth

• (sounds like cholesterol!)
• Daly calls good growth development.
• Definition development is an increase in
  services without an increase in thruput
• Services the satisfaction experienced when wants
  are satisfied
• Thruput taking materials from the world and
  throwing pollution and waste back out

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Thruput is entropic

• The hourglass is an isolated system.
• S is entropy, disorder, less ability to do useful
  work.
• The second law of thermodynamics states that the
  ?S of the system plus the ?S of the surroundings
  is equal to or greater then 0.
• Entropy is not conserved, like energyit can only
  increase.

Entropy hourglass (Georgescu-Roegen)
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Empty world and Full world
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We want more services!

• Two ways to get more services
• More thruput
• More efficient use of non-changing
  thruput(increase the right-hand ratios)

The two ways of getting services together are
growth Only the second is development
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When to worry about thruput?

• In an empty world, thruput has virtually no
  effect on natural capital services
• In a full world, it does have an effect.
• To balance benefits against costs, look at 4
  efficiency ratios

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The 4 ratios

• Service how much satisfaction we get from our
  machines
• Maintenance how long our machines last before we
  need to replace them
• Growth how much replacement stuff we can get
  from our natural capital stocks
• Ecosystem how much gettable stuff the world can
  produce without breaking down
• Example pine trees vs. mahogany

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The question of scale

• Daly we have three main economic goals
• Allocation (leave this to the free market)
• Distribution (needs social intervention)
• Scale (havent figured out how to regulate yet)
• Thus the MMKgain/NKloss ratio is not the only
  thing to worry aboutOverall volume matters too
• Especially since losses are not monotonically
  increasing e.g., aquifers, ozone, etc.

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Reaching the limits to growth

• Any physical system has limits.
• Two choices for reaching them
• S-shaped growth
• Overshoot collapse
• Examples Easter Island, shrimp fisheries

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Next steps

• Investing in Natural Capital
• Improving Efficiency
• Looking beyond efficiency to total scale
• Social dimensions of final impact
• Impact PAT (Population x Affluence x
  Technology) (people x consumption per capita x
  efficiency)
• Requires more change than engineering alone