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I have done this before, but here's another thread on some basics about economics, economists and economic growth. I have seen another surge of tweets recently claiming that "conventional economics" promotes "economic growth at any cost". This is completely wrong /
First, concerning the "at any cost" point. The only episode in history that I am aware off that this happened was in the Soviet Union during the first quinquennal plans. And this episode also shows why mainstream economists are not enthusiastic about " growth at any cost" /
The point is that, if you're an undeveloped country, the only way to grow sustainably is through a massive increase in your production capacity, and this requires investment. And, when you use your resources to produce capital goods, you don't produce consumer goods-
In other words, breakneck growth is only possible through a massive reduction in consumption. Which is exactly what happened in the Sowjet Union during its industrial expansion, where consumption was forcibly reduced to levels that no democratic country would deem acceptable/
That doesn't imply per se that what the Soviet Union did was wrong (it was, but for other reasons) - you could argue that reducing the consumption of current generations for the benefit of future ones is a price worth paying /
(After all, this is also what happened, but less radically, in the countries that became known as the Eastern Asian Tigers. Which shows that you don't need communism for a massive state promoted mobilisation of resources) /
Anyway, I don't know any economist who would promote "growth at any cost" in a developed country. Now, you may argue that I have Interpreted "at any cost" literally, while it really means "at the cost of other objectives such as the environment". More on this later
One could reasonably ask: "well, maybe growth was worth pursuing when everybody was poor but can't we just decide we now have enough as a society and aim for a zero growth economy?". Leaving aside the question whether this is indeed a correct objective to pursue /
there's a more fundamental issue: we don't know how to do that. Now, you may ask "what good are economists if they don't know how to achieve a given level of economic growth? Isn't that their core business?" /
But that is a fundamental misunderstanding about the kind of knowledge we have and can reasonably be expected to have (leaving aside that most of us actually work in the field of microeconomics). There are definitely a lot of useful things we do know.
For instance, people have criticised economics a lot for failing to prevent the 2008 financial crisis. What they forgot to do, is to look at the length and depth of economic depressions between the early 19th century and the Great Depression. If we haven't had anything /
close to those experiences, this is largely thanks to better macroeconomic management. We also know pretty well what kind of policies will condemn a country to permanent stagnation or lead to complete collapse. We know pretty well how to stop high inflation. /
We also have a lot of evidence on the impact of specific policy changes - but this evidence is often equivocal. But nothing of all this suggests we can come up with the policy mix that will lead to exactly zero growth. /
What of the things we also know, is that macroeconomic tendencies can become self reinforcing. So even if we come up with a policy mix that supposedly leads to zero growth, it could well lead us into a recession that risks ending in a depression - ask the Greeks how cool that is.
Let me now come back to what I said about growth in the Soviet Union. Remember, this was largely based on a massive mobilisation of resources. And, in the medium run, it was actually pretty successful (which is probably why even very smart and we'll intentioned people were /
willing to ignore the mass murders and occasional policy induced famines). But what eventually happened with the Sovjet economy actually illustrates another important point: in a world with diminishing returns to physical assets/
massive investment gets you only so far. In the long run, economic growth is driven by an increasingly efficient use of the existing resource base. Technological progress, thus. And the nature itself of technological progress is that we don't know what is going to happen in /
the future. Of course, some policies are conductive to innovation, and some are not. One of the fundamental reasons for the collapse of centrally planned economies, is that they didn't provide the right incentives for innovation in the field of consumer goods. /
But it is clear that, if the main driver of economic growth in the long run is something that is intrinsically hard to measure, zero growth as a policy objective is a Chimera.
(By the way, you could ask whether GDP measures the 'right' things. That's a legitimate question, but not one I will address today)
