📉⤵ A Quick Q&A on the economics of 'degrowth' ... with economist Brian Albrecht
'Rather than rationing machinery or plastic as extravagant indulgences, climate justice demands radical technology cost deflation through innovation.'
Quote of the Issue
“As long as the roots are not severed, all is well. And all will be well in the garden. … In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.” - Chance the gardener, Being There
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Q&A
📉⤵ A Quick Q&A on the economics of 'degrowth' ... with economist Brian Albrecht
According to the proponents of “degrowth,” pushing for continued economic growth — much less acceleration — is a civilizational suicide mission. Of course, it’s one thing to argue that GDP growth is an insufficient metric to judge societal welfare, and quite another to point to GDP growth as a clear indicator of societal harm.
And it’s still another thing — an extraordinarily odd thing, in my opinion — to argue for stagnation and shrinkage … a) after a half-century of disappointing economic growth in the West, b) after a generation of rapid growth across Asia bringing a billion people out of deep poverty, c) a moment when a burst of new technologies shows how accelerated growth through technological innovation and environmental sustainability can move forward together.
To explore further the issue of degrowth, I asked economist Brian Albrecht a few questions about his Substack response to a piece, “Degrowth can work — here’s how science can help,” advocating for the idea of degrowth that was published in Nature last year, but was recently rediscovered by social media.
Brian is the chief economist of the International Center for Law & Economics, where his research interests include price theory, political economy, and competition and innovation. He also has his own substack, Economic Forces.
1/ What is degrowth really about, because their policy aims seem pretty widespread? What does a job guarantee have to do with the environment?
On the surface, degrowth uses legitimate environmental concerns to motivate a sweeping policy agenda. But when you examine the details of what degrowthers advocate, much of it is only tangentially—if at all—related to natural resource conservation or carbon emissions reduction.
For example, degrowth supporters call for a government green jobs guarantee to employ anyone willing to work on environmental projects. Why not simply tax energy-heavy industries (coal, oil) and subsidize on energy-saving industries (wind or solar generation)? Both policies make green industries more attractive and encourage investment in them. But a job guarantee also requires a bureaucrat to tell people which exact jobs to do instead of leaving that up to entrepreneurs. Maybe a job guarantee is a good idea (I don’t think so, but maybe), but that discussion is separate from how to save the environment. A green jobs guarantee seems like a preexisting policy preference dressed up with ecological justification rather than a supportable environmental necessity.
The same holds for other degrowth aims like reducing income inequality, shortening working hours, and restricting advertising and executive pay. However worthwhile those goals may be, they have little connection to sustainable resource allocation. Degrowth starts from reasonable concerns about ecological limits to growth but smuggles in a grab-bag of longstanding policy wishes.
2/ If we shouldn't just look at overall economic output to measure a country's success, what should we use instead?
GDP unquestionably has major limitations as a sole metric encapsulating a society's overall welfare. No single number captures what is happening in a complex economy. Economists have long recognized that economic output says little about the distribution of gains, leisure time enjoyed, social cohesion, health and longevity, political rights or other facets shaping the quality of life. People certainly should track and consider a fuller set of indicators around living standards, equity, and environmental sustainability rather than myopically chasing GDP growth at all costs. No one would argue otherwise. No politician is seeking to maximize GDP growth (even if I wish they tried more on the margin).
But these different goals require trade-offs rather than centralized imposition of degrowth preferences. Replacing an emphasis on GDP does not intrinsically require halting economic growth overall or imposing cuts along specific degrowther lines. Do you want more leisure and less income? That is up to each individual through their own balancing of marginal costs versus marginal benefits. Making such contextual judgment calls cannot rely on blanket degrowth decrees. People make these trade-offs every day, but degrowthers do not like the balance many people choose.
3/ Do you think there's any truth to the idea that if people work fewer hours or days, we would use resources more efficiently and wisely?
In the very short term, mandating fewer work hours could perhaps yield some resource savings from reduced output, as well as things like less commuting. At any level of technological advancement, reducing output would require fewer resources.
But this initial conservation impact would soon give way to higher net resource usage as the intervention stifled innovation essential for sustainable growth. Absent price signals and market discipline, little incentive exists for systematic wise reallocation of the newfound non-work time toward ecologically minded priorities. Leisure time tinkering in theory offers potential to uncover innovative breakthroughs. Yet big picture, restricting economic dynamism suppresses the essential productivity enhancements enabling perpetual "more from less" efficiencies essential for long-term sustainability.
Since the Industrial Revolution, market economies delivered dramatically falling resource inputs per unit of output over decades. But this occurred through tinkerers finding innovations rather than bureaucratic constriction of growth itself. We have already seen decades of falling resource inputs per GDP output from market-driven "dematerializing" innovation that "decoupled" growth from physical constraints—delivering more cars, computers, and crops while conserving forests, fuels, and farmland in the process. Bureaucratic restrictions that hamper further economic expansion now risk reversing the dynamic efficiency gains that enable "ever more from ever less" through ongoing productivity increases.
4/ Should countries that are already well-off and those that are still developing handle their economic goals differently, especially when it comes to measuring success?
This is the most sensible contribution from degrowthers. On the surface, rich countries intentionally slowing resource usage to leave space for still-developing economies sounds sensible. Near term, this would marginally lower commodity prices from reduced US/European demand, helping poorer countries import more fossil fuels, minerals or timber at better prices. But this view remains excessively static.
We must ask what happens to long run incentives and innovation from demand constraints in wealthier countries. Imagine we implemented stringent resource consumption limits in the US a decade or more ago. Would breakthrough technologies like hydraulic fracturing still have emerged? What substitutes and efficiencies fail to materialize going forward if policy suppresses market signals communicating scarcity?
Lasting global equitable prosperity requires dramatically cheaper, cleaner energy and materials accessible to every part of the world. Rather than rationing machinery or plastic as extravagant indulgences, climate justice demands radical technology cost deflation through innovation. That only happens by rewarding entrepreneurs and innovators when they find ways to do more with less.
5/ What would Friedrich Hayek make of the degrowth article in Nature?
It’s always dangerous to speculate but too fun to resist. Hayek’s core insight, across many domains from economics to philosophy, was raising a huge caution sign against the fatal conceit of centrally planned solutions. His life's work emphasized how decentralized market economies tap into contextual knowledge no centralized bureaucracy can replicate.
The most important question is not what we should do, but who should decide. Should degrowthers decide what is an acceptable level of leisure, or should each individual?
However well-meaning, the grand vision merely revives an old idea of endowing credentialed intellectuals' wisdom over the contextual knowledge of each individual. Hayek already warned against the arrogant pride that superior minds might grasp and weigh all relevant constraints from the center. Degrowth offers not humbler wisdom but another insistence that planners displace unreliable individuals on society's supposed behalf.
Micro Read
Economics
▶ Does Working from Home Boost Productivity Growth? - John Fernald, Ethan Goode, Huiyu Li, and Brigid Meisenbacher, SF Fed | Analyzing the relationship between GDP per hour growth and the ability to telework across industries shows that industries that are more adaptable to remote work did not experience a bigger decline or boost in productivity growth since 2020 than less adaptable industries. Thus, teleworking most likely has neither substantially held back nor boosted productivity growth.
▶ The Macroeconomic Consequences of Import Tariffs and Trade Policy Uncertainty - IMF
Policy
▶ A Vision for Tech Policy is Missing from GOP Economic Plans - Mark Jamison, AEI | A strategic and comprehensive tech policy could be a linchpin of a Republican agenda for economic renewal. By championing innovation, streamlining regulations, and collaborating with Congress to limit future administrations’ ability to re-expand the regulatory state, a Republican president can pave the way for a thriving economy.
▶ Empowering Our Future Workforce Requires Transforming High Schools - Michael Bloomberg, Bloomberg Opinion |
AI
▶ Apple boosts plans to bring generative AI to iPhones - FT
▶ Two-faced AI language models learn to hide deception - Nature
Health
▶ Gene therapy eyedrops restored a boy’s sight. Similar treatments could help millions - AP
Clean Energy
▶ Nuclear power generation to reach record high next year, IEA forecasts - FT | Global nuclear power generation is set to reach an all-time high next year, according to the latest forecasts from the International Energy Agency, marking a resurgence for the technology and boost for efforts to cut carbon dioxide emissions. Output from nuclear power plants is expected to rise by about 3 per cent both this year and next to 2,915TWh, overtaking the previous peak of 2,809TWh in 2021, and by a further 1.5 per cent in 2026, the IEA said. Growth will be driven by new reactors in China and India as well as the return of plants in France that were shut down last year for maintenance.
AI to drastically cut time to develop new battery materials, say executives - FT
Biden Drops Nuclear Regulator Nominee After Senate Backlash - HuffPo
Space/Transportation
▶ San Francisco sues California over ‘unsafe,’ ‘disruptive’ self-driving cars - WaPo
Up Wing/Down Wing
2023 Annual Letter - Dan Wang
Oxfam’s Love Affair With ‘Inequality’ - Johan Norberg and Gonzalo Schwarz, WSJ Opinion
3% growth in nuclear is similar to total energy demand growth and anemic compared to renewable growth ~10x higher, and will barely maintain nuclear's market share.