Historical Dynamics of Growth Critique

Since the beginning of modern economic theory’s history, which set off in the second half of the 18th century, economic growth was one of the most central themes, creating controversies over and over again. The emergence of modern economics, identified oftentimes with the publication of An Inquiry Into the Nature and Causes of the Wealth of Nations by Adam Smith, coincided with the onset of an exceptional process in human history: until the late 18th and early 19th century, economic growth had been a temporary intermezzo at best, not a general pattern of socio-economic development of human societies. Then, around the time when Smith wrote his book, a new pattern gained momentum, economic growth becoming a matter of course. However, the perception of growth and its limits has evolved over time Continue reading

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Peak Everything, Backstop Technology and Economic Growth

And interesting, though also frightening characteristic of today’s world is that it seems to be peaking all the time. Peak Oil, Peak Metals, Peak Soil, Peak Uranium, Peak Rare Earths. Peak Everything, to put it bluntly. Some of these slogans may be exaggerated, at least if taken literally. On the other hand, given high and rising demand for oil, coal, uranium, rare earths, metals, agricultural land and other essential resources – demand that is going to be increasing for decades to come, as China, India and especially Africa will become both richer and more populous -, there is a strong case for taking seriously concerns regarding the diminishing resource base, even if there is still much left. Continue reading

Climate Change, Backstop Technology and Thanksgiving

There is a whole class of economic models of climate change that reach the conclusion that we can (and, indeed, should) wait with climate protection measures, and reduce greenhouse gas emissions slowly in presence. In the future (after some 20-30 years), when “optimal, efficient technologies” have been developed and we will be able to invest in climate protection at less cost – then we should engage heavily in mitigation of climate change (this approach is sometimes called the “climate policy ramp”). The most influential models of this class – William Nordhaus’s DICE and Richard Tol’s FUND – reach their conclusion as a consequence of two factors mainly: their discounting practice (which I wrote on recently), and the assumption that there exists a so-called backstop technology (a concept going back to… William Nordhaus). Meanwhile, there are reasons to fear that there make come a Thanksgiving for this technology optimism. Continue reading