Growth or Prosperity? Crash Course says Prosperity, I say Growth!

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EmperorNero's picture
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Growth or Prosperity? Crash Course says Prosperity, I say Growth!

I like to make a case for a part of the crash course coming to a incorrect conclusion.

In chapter 4 of the crash course, it is said that growth does not equal prosperity; any surplus from former growth can only be put into either growth or prosperity. That makes sense of course.

However the crash course goes on saying that investing in prosperity is to be chosen over investing in growth, because growth just means having "more" and prosperity means having "better".

That leaves out that more growth means more future growth and thus more future prosperity.

The crash course uses the example that if a family has an income increase, they can either invest that in an extra child - growth - or additional prosperity. Keeping with the example, the extra child will within a few years also be earning and adding to both growth and prosperity. Thus the family that invested in growth will in the long run be better off in regard to both growth and prosperity. Especially in a generation or two.

Essentially, the mess we are in today is due to our focusing on prosperity now over growth tomorrow. That's what the whole debt bubble does. It's odd that the crash course should point these things out, and then propose exactly it declared to be the problem.

 

If two nations start out with the same sized economy, and one focuses on growth, the other focuses on prosperity. Say they both have 3.5% growth available each year; growth nation puts 2% of it into more growth and 1.5% into prosperity, prosperity nation puts 1.5% of growth into more growth and 2% into prosperity.

This is a graph of the ratio between the two nations prosperity. Prosperity nation obviously in the beginning has greater prosperity than growth nation. And it's getting further ahead; the difference in prosperity grows. It's pie is smaller, but it can eat a bigger piece of it.

But growth nation keeps having a bigger growth pie, soon it starts being big enough to make up for it's lesser investment in prosperity. It's pie is big enough that a small piece of the big pie is bigger than a big piece of the small pie. First, the rate at which prosperity nation gains prosperity compared to growth nation soars, then it turns around. Then the rate hits below 1, marked with the red line. From there growth nation has much more prosperity than growth nation does.

 

Thus, a higher investment in prosperity only pays out in the short run

Investing in growth gets you more prosperity than investing in prosperity.

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...

My personal belief is you cannot borrow yourself out of debt anymore than you can bomb a nation into peace and prosperity.

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...
Thomas Hedin wrote:

My personal belief is you cannot borrow yourself out of debt anymore than you can bomb a nation into peace and prosperity.

 

I agree, and borrowing is prosperity now at the expense of future prosperity/growth.

We'll have to pay it back some day, thus we are just moving future consumption into today.

That doesn't really get at what I was saying though.

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...
EmperorNero wrote:

That doesn't really get at what I was saying though.

So how does a country with no inherent  prosperity fund its growth investment?

 

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...

Interesting points, EmperorNero. Most of this subject (growth vs. prosperity) is far too vague and philisophical for me to really understand, but one thing that you wrote stood out to me.

EmperorNero wrote:

Essentially, the mess we are in today is due to our focusing on prosperity now over growth tomorrow. That's what the whole debt bubble does. It's odd that the crash course should point these things out, and then propose exactly it declared to be the problem.

I suppose you're right. If we had collectively saved more and avoided taking on unecessary debt, we wouldn't be in the mess that we're in now. Then again, the US GDP is 71% consumption driven, so the "prosperity" you mention above also showed up as GDP "growth," median home price "growth," retail sales "growth" etc. This over consumption, which I agree was a big mistake, showed up as "growth" all over the economy.

I hope Chris or someone who understands "growth" and "prosperity" as he uses them in the Crash Course can first define those terms more clearly and then go on from there. Honestly I have a lot of trouble seperating the two. A stock of wheat grows and then is harvested. If you have wheat are you prosperous? If that's true then something had to grow in order for you to "prosper." I guess I really don't understand the difference, nor do I see how you can seperate one from the other.

 

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EmperorNero Wrote:

Thus, a higher investment in prosperity only pays out in the short run

Investing in growth gets you more prosperity than investing in prosperity.

 

The growth idea may have worked (temporarily) in the past, however the Crash Course points out that in a finite world with finite resources, exponential growth cannot go on indefinitely. Even growth at seemingly innocent annual rates of 3 or 4 percent create a “hockey stick” curve with shorter & shorter doubling intervals. Couple that with the absolute that our debt based monetary system requires perpetual growth to survive and we are caught without any simple answer -- except to rethink and re-design our economic system in a way that does not continue to require growth to survive.

Looks like the best we can hope for is a reasonable level of prosperity going forward

Jim 

 

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okubow wrote:

Interesting points, EmperorNero. Most of this subject (growth vs. prosperity) is far too vague and philisophical for me to really understand, but one thing that you wrote stood out to me.

EmperorNero wrote:

Essentially, the mess we are in today is due to our focusing on prosperity now over growth tomorrow. That's what the whole debt bubble does. It's odd that the crash course should point these things out, and then propose exactly it declared to be the problem.

I suppose you're right. If we had collectively saved more and avoided taking on unecessary debt, we wouldn't be in the mess that we're in now. Then again, the US GDP is 71% consumption driven, so the "prosperity" you mention above also showed up as GDP "growth," median home price "growth," retail sales "growth" etc. This over consumption, which I agree was a big mistake, showed up as "growth" all over the economy.

I hope Chris or someone who understands "growth" and "prosperity" as he uses them in the Crash Course can first define those terms more clearly and then go on from there. Honestly I have a lot of trouble seperating the two. A stock of wheat grows and then is harvested. If you have wheat are you prosperous? If that's true then something had to grow in order for you to "prosper." I guess I really don't understand the difference, nor do I see how you can seperate one from the other

Thanks, and I agree.

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...
EmperorNero wrote:

I like to make a case for a part of the crash course coming to a incorrect conclusion.

In chapter 4 of the crash course, it is said that growth does not equal prosperity; any surplus from former growth can only be put into either growth or prosperity. That makes sense of course.

However the crash course goes on saying that investing in prosperity is to be chosen over investing in growth, because growth just means having "more" and prosperity means having "better".

That leaves out that more growth means more future growth and thus more future prosperity.

<snip>

EmperorNero,

As long as you leave out the fact that we operate in a finite environment this would of course be true. But when you add the constraints of a finite resource base then this statement only works to the point that the resources are used up. Then where is the prosperity? At the point of overshoot you have both negative growth and negative prosperity and little choice as to what you can do about it.

Choosing prosperity over growth prior to overshoot could bring about a sustained prosperity ....... if one was really clever and understood the predicament that would unfold if growth were chosen over prosperity.  This is what I took away from the Crash Course and as such ....is only MHO!

Coop

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ckessel wrote:

As long as you leave out the fact that we operate in a finite environment this would of course be true.

 

We don't operate in a finite environment, we can colonize Mars. The universe is pretty big.

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EmperorNero wrote:

We don't operate in a finite environment, we can colonize Mars. The universe is pretty big.

Do you suppose they'll discover Dilithium Crystals on Mars?  Sorry couldnt resist, I know a person I have been trying to show hime th CC and he invariably ends up talking about future discoveries.  It would be interesting however if someone would do energy and materials requirement calcs on colonizing anywhere in space to see what the impact would be on the remaining (fossil) fuels here for us earth-bound plebians and how much cheap energy (and water) we would have to find out there that we can cost-efectively utilize; but this isn't a thread about outer space, is it?

CM mentioned that the growth we have become accustomed to is due to the fact that we have used up quite a bit of the earth's resource in cheap energy - oil.  A gallon of gasoline can do an amazing amount of work.

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EmperorNero wrote:

We don't operate in a finite environment, we can colonize Mars. The universe is pretty big.

Umm, ok.... so how do you get the resources and means to bring millions of people over there?  The distances and other difficulties involved in getting more than a handful of people there and keeping them alive would be very costly to even a large nation like the US.  It's like where some people say there's a bunch of oil still left untapped; it is technically true, but fails to mention the very high cost of getting most of that oil out of those deeper, more remote oil reserves.  The point is that our environment is EFFECTIVELY finite because our range or ability to operate in it is limited.  There's no reason that we can't explore and eventually colonize and extract resources from Mars or other areas of the solar system, but the time it would take for costs to go down enough to actually get a return on that investment would probably be best measured in DECADES.  Even something considered semi-feasible in the near-term, like satellites collecting solar energy and beaming the power down to Earth, would require a huge investment now and take a long time to pay itself off (if it ever does).  So it's no solution to our imminent energy and resource crunch.  Though IMO it's still well worth doing for a number of reasons (much better to extract raw resources from lifeless rocks and gas giants than continute tearing up a living planet); we'd just need to accept the return on investment would take a long time to be realized, and that it doesn't represent a solution to our current energy and resource problems.  If you're curious about some of the actual possibilities and difficulties involved, try reading Robert Zubrin's "Entering Space" and "A Case For Mars".

- Nickbert

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Seriously, how many times per week do you guys watch Total Recall? Be honest . . . .

Abundant natural resources, aliens, women with three breasts . . .

"Get Ready for a Big Surprise!!!"

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okubow wrote:

Seriously, how many times per week do you guys watch Total Recall? Be honest . . . .

Abundant natural resources, aliens, women with three breasts . . .

"Get Ready for a Big Surprise!!!"

"My tricorder seems to be detecting some snarkiness in the vicinity, Captain..."

okubow -

Actually I know a lot about this stuff because I happen to be an aerospace engineer, and astronautics is one of my interests even if it's not part of my current job.  Exploring and even colonizing certain areas of the inner solar system is possible and within our near-term technical grasp, it would just require taking a very long-term approach and involve a much bigger investment in the space program.  Though that 'big investment' would still only be a small fraction of the current DOD budget.  As with many other things, the raw potential of the United States is often eclipsed by the incompetence and short-sightedness of our "leadership".

(BTW I actually find that movie kind of annoying.... entertaining in parts, but I find the technical flaws so bad it largely spoils it for me.  Same with "Armageddon")

- Nickbert

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Just an attempt at humor, Nickbert. Not trying to be snarky. I think someone else mentioned the dilithium crystals. I both hated and loved Total Recall for all of the reasons you've mentioned. "Get ready for a big surprise" is a line from the movie. 

I know that we're talking about very serious stuff here, but in the long run we're all dead no matter what we do! I thought it would be funny so I went for it. Didn't think it would come across as an attack. 

I'm interested in space, but I don't know much about it.

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okubow wrote:

Just an attempt at humor, Nickbert. Not trying to be snarky. I think someone else mentioned the dilithium crystals. I both hated and loved Total Recall for all of the reasons you've mentioned. "Get ready for a big surprise" is a line from the movie. 

I know that we're talking about very serious stuff here, but in the long run we're all dead no matter what we do! I thought it would be funny so I went for it. Didn't think it would come across as an attack. 

I'm interested in space, but I don't know much about it.

My apologies.... it was hard for me to interpret the tone of the post, and I thought there was a mocking edge to the joke.  It's common for me to encounter snide remarks when I've talked about realistic possibilities for space exploration and utilization; there's a lot of people who think it's all a total waste of time and money, and instead of even trying to frame a logical argument they more typically resort to derisive remarks about people like me watching too many sci-fi movies or Star Trek.  So it's easy for me to get defensive.... again, sorry about that.

- Nickbert

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...

Emperor Nero - are you an economist?  I ask because you've made the most common mistake made by economists - assuming that there is sufficient surplus ("stuff") available for any and all ideas that humans might think of.  I admit it is a hard concept for most people to really hold in their minds because it is not yet a commonly or widely held idea.

In an infinite world your example makes perfect sense.  The Crash Course endeavors to reveal that we live in an imperfect world where resources are finite if not dwindling.

Take your example, move it to an island, and imagine that growth and/or prosperity come from fish in the local waters.  Now imagine that the fish can either be sustainably harvested ('prosperity') or depleted to the point that they crash ("growth").

Now rerun your graph.  It should look very different. 

Best,
Chris

 

 

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cmartenson wrote:

Emperor Nero - are you an economist?  I ask because you've made the most common mistake made by economists - assuming that there is sufficient surplus ("stuff") available for any and all ideas that humans might think of.  I admit it is a hard concept for most people to really hold in their minds because it is not yet a commonly or widely held idea.

In an infinite world your example makes perfect sense.  The Crash Course endeavors to reveal that we live in an imperfect world where resources are finite if not dwindling.

Take your example, move it to an island, and imagine that growth and/or prosperity come from fish in the local waters.  Now imagine that the fish can either be sustainably harvested ('prosperity') or depleted to the point that they crash ("growth").

Now rerun your graph.  It should look very different. 

Best,

Chris

No, I'm not an economist. I'm just a internet theoretician. ;)

I agree with everything in the crash course, and what I read on this website. I just thought I make a comment about this detail.

Thank you for answering Chris, you are absolutely right about current state on earth. We face dwindling resources, and just more growth isn't the best strategy in that environment.

But what your side of this argument always assumes, is that we're stuck on this one finite 'island'. But there's another one. And by reducing growth, we may lose the capability of getting to it.

My point is that if resources are going to run out on earth, it is the only answer to get to colonize other planets and get to those resources. If we crawl up, downsize, don't grow and limit populations we're just stretching the time until we inevitably run out of resources.

Lower population growth doesn't just mean fewer people to use resources, it also means we're older as an average because fewer young people are added. And if you look at any successful society in history, they had an abundance of young people.

A bunch of old people won't have the vitality to colonize Mars.

There's another island, and we won't have the capability to get to it if we downsize.

Regards

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Nero,

The way I read the Crash Course was that it was making a case for more efficient use of energy and resources not because soon there will be no more to be had, but rather that our access to the remaining resources is limited.  This applies to helium-3 from the Moon or metal ores mined on Mars or elsewhere beyond the Earth just the same as it does to the very deep oil reserves or shale oil deposits.  We can get to them, but the difficulty and energy cost is high and you wouldn't be able to extract as much.  To use the island analogy, it's like canoeing 50 miles to the next island just to collect coconuts because your island has already harvested all theirs, and in doing so you burned twice as many calories paddling back and forth than you get from eating the coconuts.  Now eventually we will improve our 'canoes' to a point we can tap those resources at a reasonable cost and perhaps see a new period where both increasing growth and prosperity can be had again, but to be realistic that is very long term.  And I think that is beyond the time frame of the focus of the Crash Course (i.e. the next 20 years), so I can see why it would not be mentioned.  We are hitting a hard wall of energy and resource availability now, too soon for resources beyond our planet to allow us to continue growing at our current standard of living. 

Furthermore I would argue that to attempt to grow further now would actually do more damage to any such efforts than a voluntary scaling-down of economic and population growth.... hitting a hard resource limitation while using more resources (the pro-growth model) will without a doubt allow for much less (if any) resources to be used for space-based industries, as it will be a challenge for most nations just to supply the bare essentials for survival.  We can still carry out and expand space exploration and space-based industries with a smaller economy; it is more about proper allocation of resources rather than growth.  Heck, one can argue the space program accomplished a lot more in the 1960's and early 70's than it's currently accomplishing now, and having done so with a much smaller economy than we have now.

- Nickbert

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...

Nickbert and Chris,

you are correct, I agree.

 

Regards

EmperorNero

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Re: Growth or Prosperity? Crash Course says Prosperity, I ...

As CM defined the terms, a conventional way for sure, growth and prosperity are mutually exclusive choices on a finite planet.  The convention is to see humans strictly as more complicated organisms.  Are there alternatives?  I think there is a particularly important one.

If we include in the paradigm shift we advocate a long-lived, but buried view of whole people, the exclusivity goes away (the beauty of paradigm shifts).  Whole people are beings that are more than the sum of their parts:  body, mind, heart and spirit.  Good societies are comprised of them in complementarity.  We can thank Galileo for starting what became wholesale reduction of people to things.  The ages of colonization and industrialization were all about that process.  The material progress was impressive, distracting, mesmerizing and suicidal -- a dead end.

When we put people back together, need sets change by shifting somewhat from established positions in the material realm to again available and accessible ones in other realms (new frontiers).  With that, growth is freed from correlation with material resources alone, may correlate with exploration and discovery, and may continue indefinitely.

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