ADVERTISEMENT
See Inside September 2005

Economics in a Full World

The global economy is now so large that society can no longer safely pretend it operates within a limitless ecosystem. Developing an economy that can be sustained within the finite biosphere requires new ways of thinking

Growth is widely thought to be the panacea for all the major economic ills of the modern world. Poverty? Just grow the economy (that is, increase the production of goods and services and spur consumer spending) and watch wealth trickle down. Don't try to redistribute wealth from rich to poor, because that slows growth. Unemployment? Increase demand for goods and services by lowering interest rates on loans and stimulating investment, which leads to more jobs as well as growth. Overpopulation? Just push economic growth and rely on the resulting demographic transition to reduce birth rates, as it did in the industrial nations during the 20th century. Environmental degradation? Trust in the environmental Kuznets curve, an empirical relation purporting to show that with ongoing growth in gross domestic product (GDP), pollution at first increases but then reaches a maximum and declines.

Relying on growth in this way might be fine if the global economy existed in a void, but it does not. Rather the economy is a subsystem of the finite biosphere that supports it. When the economy's expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth. We will then have what I call uneconomic growth, producing "bads" faster than goods--making us poorer, not richer. Once we pass the optimal scale, growth becomes stupid in the short run and impossible to maintain in the long run. Evidence suggests that the U.S. may already have entered the uneconomic growth phase.

This is only a preview. Get the rest of this article now!

Select an option below:

Customer Sign In

*You must have purchased this issue or have a qualifying subscription to access this content


It has been identified that the institution you are trying to access this article from has institutional site license access to Scientific American on nature.com.
Click here to access this article in its entirety through site license access.

Rights & Permissions
Share this Article:

Comments

You must sign in or register as a ScientificAmerican.com member to submit a comment.
Scientific American Holiday Sale

Limited Time Only!

Get 50% off Digital Gifts

Hurry sale ends 12/31 >

X

Email this Article

X