Saturday, March 18, 2006

Economic Growth Revisited

So, last time I claimed that economic growth is not required to maintain and improve our infrastructure, create new goods and services, and provide for a growing population. How can that be? Where's the money for new bridges, roads, and schools supposed to come from? Never mind that we won't have businesses to provide all of the goods and services people want.

OK, so that view is partly correct. As a society we do require a growing ability to provide goods and services. Even a teeny, tiny rate of population growth makes this so. We would eventually outgrow the economy's ability to provide luxuries, then the basics. Then we would look like Bangladesh or Nigeria. Not good.

Now many of you may have spotted one or two problems with the preceding rationale for economic growth. If not, well, there are two general problems. The need for businesses to provide goods, services, jobs, and infrastructure is not a real need. Secondly, there is an alternative to increasing the sheer dollar value of goods and services produced. That increase in value is what we normally refer to as economic growth.

About that first problem: There are alternative ways of providing goods and services. You are already familiar with the two best alternatives - government and nonprofits. The third alternative is to create voluntary associations that divide up infrastructure management. You may have seen "Adopt-a-Highway" signs outside your community. That's what I have in mind, except for public safety, road maintenance, education, and who knows what else.

About that second problem: Economic growth calculations are indifferent to two important considerations. Any economic activity contributes to growth. For-profit schools are treated like toxic waste cleanups. Economic growth calculations ignore the negative consequences of much economic activity. The spending that you do to make up for the effects of pollution are counted as economic activity. Never mind that in a purely rational economic system you would not have to pay for the negative impacts of that pollution.

Next time: Ummm, I'm not sure. It will be a surpise for us all.


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