Crash Course Chapter 5: Growth vs. Prosperity

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Now I’m going to introduce the second Key Concept, and it is far enough out of the mainstream that I’m going to get a little backup from a 19th-century philosopher.

Here’s the quote.

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.

This great quote comes from this happy guy down in the corner. (Arthur Schopenhauer)

At some point over the next 20 years, this next concept I’m about to introduce will be “self-evident.” But for now, I think it would be safe to say that a lot of people would consider it to be ridiculous.

And it centers around growth.

Growth is good, right? We all want a growing economy, I guess? Why? Well, because a growing economy means that we are becoming more prosperous. Growth offers opportunities, and we are all for opportunities. At least I am. And this is the dominant story of our day.

So, many people would say that growth equals prosperity.

But is this actually true? And what if it’s not?

Growth is actually a consequence of surplus, if we think about it. For example, our bodies only grow if it has a surplus of food. With an exact match between calories consumed and calories burned, a body neither gains nor loses weight. A pond will only grow deeper if more water is flowing in than is flowing out.

So, it can be said that growth is actually dependent on surplus.

Similarly, prosperity is dependent on surplus. Here’s another example. Imagine that you are a family of four, your yearly income is $40,000, and at the end of the year there is no money left – at the end of the year, there are zero extra dollars. But then a 10% raise comes along, which equals $4,000, and your family can EITHER afford to have one more child OR you can enjoy additional prosperity by spending a little bit more on each person. But you can’t do both. There is only enough surplus money in this example to do one thing, so you have to choose – will it be growth, or will it be additional prosperity? And what is true for a family of four is equally true for a town, a state, a country, and, yes, our entire world.

Through this example we can tease out a very simple and utterly profound concept, that growth does NOT equal prosperity. For the past few hundred years we have been lulled into linking the two concepts, because there was always sufficient surplus energy that we could have both growth AND prosperity.

That is, we didn’t have to make any hard choices between the two.

The economist Malcolm Slesser, of the Resource Use Institute of Edinburgh, Scotland, has calculated that over half of the world’s energy is now used to simply grow.

So here’s the question: What’s going to happen when 100% of our surplus money or energy is being used to simply grow? The result is going to be stagnant prosperity.

And what happens if there’s not enough surplus to even fund growth alone? Well, when that time comes, we will experience both negative growth and negative prosperity – not exactly the sort of future I am looking forward to.

This, then, is the greatest challenge of our times – properly recognizing where we want our remaining surplus to go and getting that story out. I, for one, want to see continued advances in energy efficiency, medical technology, and everything else that modern society can offer. This is what we place at risk if we allow ourselves to do what is easy – that is, take the path of least resistance and simply grow – instead of doing what is right, which is directing our surplus towards a more prosperous future.

So there it is: Key Concept #2: Growth does NOT equal prosperity.

Now that you have these two in hand, we are ready to explore this thing called “money.”

Comments

jacobk's picture
jacobk
Status: Member (Offline)
Joined: Jun 17 2012
Posts: 2
growth vs prosperity

It would be more accurate to say that: surplus*(growth) + surplus*(prosperity) = surplus

where  - growth+prosperity = 1 , 0<growth, prosperity<1 .

So we need to choose between growth and prosperity, but not in a binary sort of way ...

Abi Drew's picture
Abi Drew
Status: Member (Offline)
Joined: Mar 18 2014
Posts: 5
binary or not...

Actually your first equation reduces to one of your conditional equations and the second conditional equation becomes pretty much self evident... therefore your conditions are superfluous and unnecessary.

Since the above is true, surplus factors itself out of the system and it DOES become a kind of binary equation.

surplus*growth + surplus*prosperity = surplus
surplus(growth+prosperity) = surplus
growth+prosperity=surplus/surplus
growth+prosperity=1
growth=1-prosperity, prosperity=1-growth

The 'binary' of it is that it solves into what is basically inverse binary functions and no numbers greater than 1 work in the system of equations thus arrived at.

If your equation IS correct, then if we put in, for example, .5 for prosperity you get .5 for growth, which is the current fiction we are under that claims perpetual growth with prosperity is possible.

Therefore, I disagree with you based on observed phenomena. Mathematics be damned, if it goes completely counter to what we are actually seeing it's time we come up with a new mathematical model.

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