Kevin Drum, who is not a no-growth economist, analyzes what a no-growth economy would look like.
This is….a wee bit rosy. If we all worked two days a week, I suspect the real result would be more time spent playing video games and drinking beer, not a renaissance in the arts and sciences. And more time to look after sick relatives? I’m not sure everyone would consider this a boon.
…and then he aptly notes:
…In other words, not only wouldn’t we get a renaissance in the arts and sciences, we probably couldn’t afford video games or beer either.
This is all very correct. No-growth economics is almost exclusively the intellectual realm of the left. I mean the type of lefties that have no problem with sawdust toilets, grass huts, and foraging. For those of you scratching your head as to how one goes about achieving “no-growth economics” in a world where people have a propensity to discover, adapt, and amplify different methods and tools for achieving ends more efficiently…well, I’m right there with you.
The biggest problem that faces the entire world is a scarcity of wealth, and economic growth is the natural result of cooperation and competition that people engage in to maximize their wealth. What is happening here is that proponents of “no-growth economics” have completely misidentified their intended target, and have thus made themselves a model which is extremely high on idealism, and extremely low on realism.
So if economic growth isn’t the proximate cause of the injustice that leads people to an incoherent economic model, what is?
Our money system.
It is assumed in economics that money is a value-neutral accounting device.* That the rules of the monetary system itself do not shape the kind of transactions that are made, it just makes them easier; and that the type of money we use has no effect on the relationships between the users. I make nearly the exact opposite claim, and that we take this fact for granted in a way that artificially prevents us from meeting needs with unused resources.
Humans have an incredible ability to find ways to waste eachothers’ time put eachother to work. I doubt that anywhere in the world there is a shortage of imagination. So what is the problem? A shortage of money. And why is that? Because of the rules governing how the prevailing monetary systems of the world work.
People who advocate for “no-growth economics” should realize the incoherence of their views, and instead advocate the use of complementary currencies — currencies which operate under different rules — that circulate alongside legal tender.
*I am using the term value-neutral in a different way than economists when they talk about the neutrality or super-neutrality of money.
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Tuesday ~ July 27th, 2010 at 9:52 pm
JP
So is there a way to develop competing currencies without an act of congress. To me a dollar is simply require legal tender that businesses have to accept. But there seems to be no law that limits our ability to create a tender that can compete.
Tuesday ~ July 27th, 2010 at 11:06 pm
jazzbumpa
You seem to have left us with implied questions, rather than an answer.
What would this alternate currency be?
Where would it come from?
Why would anyone accept it?
If it really caught on, what would that imply for regular currency?
I think a step toward solving the money problem would be for the Fed to stop paying interest on reserves, and possibly even tax or penalize excess reserves above some level.
They started paying interest on reserves in Sept. 08, and the M1 multiplier immediately dropped from about 1.6 to 0.8.
JzB
Wednesday ~ July 28th, 2010 at 2:03 pm
Leigh Caldwell
jazzbumpa – I agree with you that interest on reserves is bad, but you’re in danger of inventing a causal relationship that is not true at all.
A less misleading description of events is:
– they doubled the monetary base without the demand for cash doubling
– the multiplier dropped from 1.6 to 0.8
– (at some point, they started paying interest on reserves)
No doubt the interest on reserves has made a small contribution to the fall in the multiplier. But the real reason is simply that expectations of growth were (and remain) low, therefore there is little demand for investment, therefore little demand for borrowing, therefore a low multiplier.
You can cut the multiplier just as easily by doubling the denominator as by halving the numerator.
Wednesday ~ July 28th, 2010 at 1:29 am
Brett
“No-Growth Economics” strikes me as bizarre as well, since even with a stable population and no net growth in usage of non-renewable resources, you could still get GDP growth (if only from increasing productivity and efficiency).
I can only see “no-growth” economics emerging in a civilization that is
A) At the effective limits of its technology, and
B) Unwilling or unable to advance further.
That’s in addition to no net population growth or external growth from adding resources to the mix.
Wednesday ~ July 28th, 2010 at 9:26 am
Rebecca Burlingame
Now is a good time to say why the wide use of barter is generally temporary. Both barter, and the alternative currencies that arise during times of financial trouble, tend to measure economic value in the same exterior ways that money itself measures, which is why people quickly revert back to fiat money, wherever possible.
One reason why so many fixate on no-growth economies is psychological. Those who actually have growth in income cannot effectively use it to “grow” economies overall. You are right in that people are being prevented from meeting needs with unused resources, and in fact those unused resources are growing by the day.
However, whenever we try to put those resources to use in a framework of valuation that looks traditional, all the rules and regulations surrounding the use of money, stop us in our tracks. The problem is that the potential for use of mind and body is actually infinite, as compared to the finite economic universe it is trying to operate in. This is why the measurement of human potential needs to be internal, that is, in time measurements equal to others. This does not mean we are equal, for we are not. It means that we need to tap into the skills that all of us have, at relatively matching levels, to regain wealth. Such an interior valuation of wealth would be a stablilizing factor, to the exterior valuation of money, which is only incidental to representing human ability. Real growth potential currently rests in human ability, even though it would need to be measured differently than what is possible with money.
Wednesday ~ July 28th, 2010 at 12:36 pm
Hyena
I’m curious: do you know of anything like this? How do alternative currencies work? How are they measured? How do you obtain value from them?
Thursday ~ July 29th, 2010 at 8:04 am
Niklas Blanchard
@jazzbumpa:
I’m guessing I generally agree with you regarding optimal monetary policy, but that isn’t the issue that is fueling people who are fans of “alternative economics” like these.
The money problem that I think the proponents of “no-growth economics” are mis-identifying is that our money system is geared to foster extreme forms of economic competition, and is nearly as incompatible as you can possibly get with their inclination of “fair living”. Since money is largely taken for granted in society, they blame this extreme behavior on “capitalism” and then denounce the whole enterprise.
I (and others) have made the claim that it is our money system which causes this kind of behavior, and that since the money that we use is nothing but an agreement within a society, that we can create monies with different rules, that foster different relationships. I don’t know the exact answers to all of your questions, but there are alternative currency systems working around the world today, started by local communities, and circulating alongside national currencies. Japan is a particularly interesting example, where there is a department within the Ministry of Finance which develops alternative currencies and tests them. Japan also has a large amount of alternative currencies operating (starting from 1995), including Fureai Kippu, and Yamoto LoVE…just to illustrate that this isn’t some crazy scheme.
I think that people that “believe in” no-growth economics are doing themselves an extreme disservice by failing to properly identify the problems that they have with the current system…which then leads them to abysmal conclusions…like no-growth economics.