Economic growth - an axiom?

[Christel]

I've wondered and was reminded by Michael Viney's column today:

Securing a steady state is the basis of eco-economics - The Irish Times - Sat, Mar 28, 2009

Is economic growth an axion in economic theory? If so, why?
If not, why does economic growth seem to be a dogma, and does economics have alternatives? Which ones?

Can someone tell more about the idea of "steady-state economy"?

And: Circles at least seem to be accepted, deflation-inflation, recession - boom.
Why then is a recession such a shock? Why do governments, actors not prepare for it during boom time, when recession will inevitably happen at some stage? Would it not be wise to expect recession to happen, like we expect winter every year, happening in nature?

[20000miles]

I've wondered and was reminded by Michael Viney's column today:

Securing a steady state is the basis of eco-economics - The Irish Times - Sat, Mar 28, 2009

Is economic growth an axion in economic theory? If so, why?
If not, why does economic growth seem to be a dogma, and does economics have alternatives? Which ones?

Here is the basic problem of economics: Resources are scarce, while our desires are virtually boundless. What mechanisms should be used in distributing these resources?

The answers can be a voluntary economy where people trade goods and services. Or you can elect someone to allocate resources to everyone. Or anything inbetween.

As to economic growth, it is percieved by many as an end in itself. I disagree with this. It is merely a means to an end. The end being satisfaction of your values.

Can someone tell more about the idea of "steady-state economy"?

Well the article makes it pretty clear:

WHAT WOULD A steady-state economy be like? New Scientist offered a future scenario under Daly’s mentoring: “We have two guiding principles: we don’t use natural resources faster than they can be replenished by the planet, and we don’t deposit wastes faster than they can be absorbed. In our [ideal] society, scientists set the rules. They [should] work out what levels of consumption and emission are sustainable . . . Then it’s up to the economists to work out how to achieve those limits and how to encourage innovation so we extract as much as possible from every scrap of natural resource we use.”

In other words: scientists and economists will be the new philosopher-Kings, and they with the government will dictate what to produce and in what quantity. It's a power-grab.

And: Circles at least seem to be accepted, deflation-inflation, recession - boom.
Why then is a recession such a shock? Why do governments, actors not prepare for it during boom time, when recession will inevitably happen at some stage? Would it not be wise to expect recession to happen, like we expect winter every year, happening in nature?

During a boom phase, central bank money expansion leads to a misallocation of capital and labour. Once the monetary expansion ends, it is revealed that a terrible misallocation has taken place. These investments must be liquidated, and people must start saving to get real investment going again.

This recession didn't surprise me, as I'm an Austrian Schooler and a beleiver in the Austrian Business Cycle Theory. Some economists still beleive recessions come down to "animal spirits" or "irrational exuberance".

The reason everyone is so surprised at recessions is because they appear after periods of great prosperity and "growth". Prices are stable, unemployment is low. It's like a goldilocks economy. The Austrians saw this recession coming, just like Mises saw the 1929 Crash coming.

Oh yeah, and the boom is the problem. The recession is the response to the boom.

[cactusflower]

Try Douthwaite.

http://books.google.ie/books?id=9ZxJ...um=1&ct=result

[goosebump]

Is economic growth an axion in economic theory? If so, why?

No, its an axiom of political theory, but as long long as there is a link between democracy and technical functions like economic management, its a de facto axiom of economic theory.

[Oppenheimer]

In other words: scientists and economists will be the new philosopher-Kings, and they with the government will dictate what to produce and in what quantity. It's a power-grab.

Why the need for this, i.e., can't scientists and economists BE the Govt?

[20000miles]

Why the need for this, i.e., can't scientists and economists BE the Govt?

I guess so. We need a new name for it though. Chemistocracy, Econocracy...?

[sandar]

econ9omic groqwth simply means expanding the rtotal resource sin a country. This is nescessary if the population is increasing for whatever reason, in order that tliving standards can at least be maintained at the previous level for everyone including the new population.
Marx understood and believed in economic growth, although for different reasons and to a different end that capitalists.

[Christel]

Thank you all so far.

Now, inflation seems to be associated with "growth", which seems something positive. Deflation seems to be associated with recession, negative.

Why does inflation seem to have to happen, if "things go well"?

I looked for web definitions of "inflation", and this list I find rather funny:

"S: (n) inflation, rising prices (a general and progressive increase in prices) "in inflation everything gets more valuable except money"
S: (n) inflation ((cosmology) a brief exponential expansion of the universe (faster than the speed of light) postulated to have occurred shortly after the big bang)
S: (n) ostentation, ostentatiousness, pomposity, pompousness, pretentiousness, puffiness, splashiness, inflation (lack of elegance as a consequence of being pompous and puffed up with vanity)
S: (n) inflation (the act of filling something with air)
WordNet home page"

Is it thinkable for economists that all prizes would be fixed, so that no inflation could occur in an economy?

[Christel]

Here is the basic problem of economics: Resources are scarce, while our desires are virtually boundless. What mechanisms should be used in distributing these resources?

The answers can be a voluntary economy where people trade goods and services. Or you can elect someone to allocate resources to everyone. Or anything inbetween.

As to economic growth, it is percieved by many as an end in itself. I disagree with this. It is merely a means to an end. The end being satisfaction of your values.




Well the article makes it pretty clear:

WHAT WOULD A steady-state economy be like? New Scientist offered a future scenario under Daly’s mentoring: “We have two guiding principles: we don’t use natural resources faster than they can be replenished by the planet, and we don’t deposit wastes faster than they can be absorbed. In our [ideal] society, scientists set the rules. They [should] work out what levels of consumption and emission are sustainable . . . Then it’s up to the economists to work out how to achieve those limits and how to encourage innovation so we extract as much as possible from every scrap of natural resource we use.”

In other words: scientists and economists will be the new philosopher-Kings, and they with the government will dictate what to produce and in what quantity. It's a power-grab.



During a boom phase, central bank money expansion leads to a misallocation of capital and labour. Once the monetary expansion ends, it is revealed that a terrible misallocation has taken place. These investments must be liquidated, and people must start saving to get real investment going again.

This recession didn't surprise me, as I'm an Austrian Schooler and a beleiver in the Austrian Business Cycle Theory. Some economists still beleive recessions come down to "animal spirits" or "irrational exuberance".

The reason everyone is so surprised at recessions is because they appear after periods of great prosperity and "growth". Prices are stable, unemployment is low. It's like a goldilocks economy. The Austrians saw this recession coming, just like Mises saw the 1929 Crash coming.

Oh yeah, and the boom is the problem. The recession is the response to the boom.

"In other words: scientists and economists will be the new philosopher-Kings, and they with the government will dictate what to produce and in what quantity. It's a power-grab."

I felt uneasy when I read that myself. As I always do if some parts of society are meant to play a special role.

[20000miles]

Thank you all so far.

Now, inflation seems to be associated with "growth", which seems something positive. Deflation seems to be associated with recession, negative.

Why does inflation seem to have to happen, if "things go well"?

I looked for web definitions of "inflation", and this list I find rather funny:

"S: (n) inflation, rising prices (a general and progressive increase in prices) "in inflation everything gets more valuable except money"

Is it thinkable for economists that all prizes would be fixed, so that no inflation could occur in an economy?

"Inflation" used to mean "an expansion of the money supply". But somewhere along the line its meaning changed to "a general increase in prices".

Back when, for example, the world was on a gold standard, the money supply grew at a slower rate than the production of goods and services. The result was increased prosperity and falling prices. Contrary to what people will tell you, companies can still make a profit during a period when prices are falling, and falling prices and economic growth can happen together.

There is a famous Milton Friedman quote: "Inflation is always and everywhere a monetary phenomenon". So if everyone woke up with €10,000 under their pillows, when they would go to the shops they will have realised that prices had risen suddenly.

This emphasises the fact that MONEY =/= WEALTH.

Nowadays, central banks tinker with the money supply to ensure this doesn't happen, and a "stable price level" is maintained.

So deflation and inflation are not in themselves good or bad.