Economics and the limits to growth

Here are some wise words from economist Herman Daly

Thermodynamic Roots of Economics

by Herman Daly

The first and second laws of thermodynamics should also be called the first and second laws of economics. Why? Because without them there would be no scarcity, and without scarcity, no economics. Consider the first law: if we could create useful energy and matter as we needed it, as well as destroy waste matter and energy as it got in our way, we would have superabundant sources and sinks, no depletion, no pollution, more of everything we want without having to find a place for stuff we don’t want. The first law rules out this direct abolition of scarcity. But consider the second law: even without creation and destruction of matter-energy, we might indirectly abolish scarcity if only we could use the same matter-energy over and over again for the same purposes — perfect recycling. But the second law rules that out. And if one thinks that time is the ultimate scarce resource, well, the entropy law is time’s irreversible arrow in the physical world. So it is that scarcity and economics have deep roots in the physical world, as well as deep psychic roots in our wants and desires.

Economists have paid much attention to the psychic roots of value (e.g., diminishing marginal utility), but not so much to the physical roots. Generally they have assumed that the biophysical world is so large relative to its economic subsystem that the physical constraints (the laws of thermodynamics and ecological interdependence) are not binding. But they are always binding to some degree and become very limiting as the scale of the economy becomes large relative to the containing biophysical system. Therefore attention to thermodynamic constraints on the economy, indeed to the entropic nature of the economic process, is now critical — as emphasized by Nicholas Georgescu-Roegen in his magisterial The Entropy Law and the Economic Process (1971).

Why has his profound contribution been so roundly ignored for forty years? Because as limits to economic growth become more binding, the economists who made their reputations by pushing economic growth as panacea become uncomfortable. Indeed, were basic growth limits recognized, very many very prestigious economists would be seen to have been very wrong about some very basic issues for a very long time. Important economists, like most people, resist being proved wrong. They even bolster their threatened prestige with such pretension as “the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel” — which by journalistic contraction becomes, “the Nobel Prize in Economics,” infringing on the prestige of a real science, like physics. Yet it is only by ignoring the most basic laws of physics that growth economics has endured. Honoring the worthy contributions of economists should not require such flummery.

I once asked Georgescu-Roegen why the “MIT-Harvard mafia” (his term) never cited his book. He replied with a Romanian proverb to the effect that, “in the house of the condemned one does not mention the prosecutor.”

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4 responses to “Economics and the limits to growth

  1. i can agree with the write-up

  2. Lets lay it all down in very simple terms, if we agree that it is indeed physically impossible to sustain an ever expanding price system economy in a finite world, then why even try to keep it all growing?

    We might be wise to ask ourselves HOW natures equilibrium is demonstrated? It is demonstrated through the governing dynamics of FREE ENERGY technologies and resources… Look at it this way, Adam Smith once said, ” In nature, individual ambition serves the common good.” In other words Smith was saying that the best result comes when everyone in the group does what’s best for themselves and so as a result of Smiths ideologies we built the entire modern and mythical economic system known as capitalism. then along comes John Nash who said that Adam Smith needed revision because the best result comes when everyone in the group does what’s best for themselves and the group, and as a result of Nash’s ideologies the entire economic world shifted again, resulting in Free Trade etc… Now along comes lil’ ole me, and I say, hey wait a minute, John Nash needs revision because the best result will come when everyone in the group does what’s best for themselves, ALL groups and the entirety of the natural world, through the governing dynamics of FREE ENERGY SYSTEMS…

    And so if it’s NOT MONEY, then what will be the driving incentive in keeping the entire production-distribution system going under the dictatorship of a FREE ENERGY economy? Well, how about the feelings of the abstract concept of LOVE… Yes, the best producers and distributers are those who actually love what they do, and those people who love what they do, will always do what they do regardless of pay, and they are the ones who are always the BEST at what they do. The incentive will be LOVE, under the next most probable operating economy.

  3. Definitely a connection, but one which also impinges on Godel’s incompleteness theorem, which tells us that in any consistent axiomatic formulation of number theory(of suifficient complexity) there exists undecidable propositions.

    Essentially, there is a relation between excessive growth and entropy, but that excesive growth occurs when the system becomes so focused on its internal goals that it ignores its effects on its environment and the feedback that environment produces.

    The relation of this to Godel’s theorem is that any system, even mathemtaical systems, once they become more focused on internal logic than feedack from environment, will produce an infinity of necessary decisions for which there are no solutions within that system.

    In other words, the very act of organizing contributes to its own entropy by focusing on “internal circuitry” rather than feedback from its environment. Environmental movements are on the right track, but may be going in the wrong direction.

  4. Pingback: Economics and the limits to growth - Tom Greco at Chelsea Green

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