The priest, the engineer and the economist

I was exchanging economist jokes over the holiday and heard this one that seemed apropos both to our resource predicament and the seeming abundance of the holiday season:

A priest, an engineer and an economist were stranded together on a desert island. Given their location, fish seemed to be a logical source of food. So, they discussed how to get some. The priest said that the three of them should pray. The engineer said he thought a better approach would be to fashion a net from materials on the island. The priest and the engineer then turned to the economist for his input. With his hand on his chin, the economist thought for a moment and then looked up and said, "Assume a fish."

That joke neatly summarizes the problem with the vast majority of economic thinking today. Much of that thinking rests on something called the Cobb-Douglas function which has three terms:

Total production = Labor input X Capital input

What is so obviously missing, of course, are physical resources. Hence, "assume a fish" illustrates the slight of hand which most economists perform when referring to the physical world.

In fact, most economic growth projections simply forecast a certain expected (higher) level of demand for goods and services and then assume that the physical resources to meet that demand will appear. Which reminds me of a quote I shared over Christmas dinner that comes to us from economist John Kenneth Galbraith:

The only function of economic forecasting is to make astrology look respectable.

And, I am reminded of yet another quotation attributed to economist Herbert Stein:

If something cannot go on forever, it will stop.

So, the real question is when. When will economic growth come to a halt because limits have arrived? It may be difficult to know that this is happening because the main method we use to measure growth—gross domestic product—is imprecise and includes all sorts of questionable elements such as growth in the extraction and burning of fossil fuels and the resulting growth in greenhouse gas emissions, growth in the production and release of toxic chemicals, growth in convenience foods laced with many of those chemicals and devoid of good nutrition, and the enormous amounts of money spent on health care (really illness care) in most wealthy nations rather than the promotion of wellness. GDP is simply a tally of total economic activity. It makes no distinction between activities which degrade our well-being and those that promote it.

Economic growth as growth in the use of resources and in the waste products which result cannot go on forever. Limits to Growth produced a very rough picture of the future of economic growth and resource use that pointed to problems emerging right about now.

And, there has been persistent concern about low economic growth worldwide in the last decade. Will similar concerns remain and even deepen as we move out of the pandemic-induced economic slump we have faced?

Writer Gail Tverberg recently provided a list of reasons that economic growth may elude the world as a whole in the coming years. Many of those reasons echo the ones found in Limits to Growth.

In recent conversations with a colleague at the Center for the Advancement of the Steady State Economy I was reminded of Herman Daly, the dean of the steady-state economists, who writes in his seminal essay Economics in a Full World that:

Even trying to define sustainability in terms of constant GDP is problematic because GDP conflates qualitative improvement (development) with quantitative increase (growth). The sustainable economy must at some point stop growing, but it need not stop developing. There is no reason to limit the qualitative improvement in design of products, which can increase GDP without increasing the amount of resources used. The main idea behind sustainability is to shift the path of progress from growth, which is not sustainable, toward development, which presumably is.

There are certainly many intangibles which we can also continuously develop such as the arts, our spiritual lives, and our personal relationships. It is that kind of development which comes to view more prominently during holidays that emphasize the oneness of all human beings.

As difficult as 2020 has been, it could be for some, if not for all, a springboard to vast positive personal and social transformation. Such a process would be aided by less focus on "more" and greater focus on "better."

Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Naked Capitalism, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at kurtcobb2001@yahoo.com.