The “Limits to Growth” Obsession

When a typical conventional economist wants to show somebody (e.g., her students) that all the talk about the “alleged impossibility of infinite economic growth” is rubbish, it is very probable that she take the 1972 Club of Rome’s report “Limits to Growth” as her starting point. This modeling work about the limits population and resource scarcity pose to economic growth, done by a group of young PhD’s, made extrapolations of historical trends of population growth and natural resource extraction to conclude that “sustainable” economic growth is not possible and that it is likely to seize during the 21st century due to these constraints. So, the economist’s arguments goes, as you can see, population growth has slowed, we do not seem to run out of natural resources – and, if you look at the widespread Cobb-Douglas production function, you will see that this wouldn’t matter either. Ergo, infinite economic growth is possible, and Meadows et al. (the authors of “Limits to Growth”) are naive doomsayers. However, this line of argumentation is a) “too easy”, and b) wrong. Continue reading