Major contradiction in Economics

I am an economics major at Penn State University finishing up senior year. After almost 4 years of study, one thing has always bothered me about the field:

On one hand, we base economic health on GROWTH. That is, if we merely maintain the status quo that is considered very bad and we will likely fall behind in the world. According to economics, all improvements in quality of life is due to uninhibited growth.

However, if you read the opening paragraph to most rudimentary economics textbooks, you will see that economics is "the study of allocating scarce resources". If resources are scarce and obviously finite, then how do we at the same time require exponential growth to be the underlying machinery of our society?

I just don't understand how you can rectify these two opposing trains of thought. The bottom line is, it is inevitable that we will hit a brick wall and growth is not sustainable. In a normative (idealistic) sense, the aim of economics should be to find a way to sustain balance on this planet without sowing our own demise through our growth based economy.

What do you guys think?

I see no reason for concern. Once we have outgrown this planet, we will colonize others.

Once we conquer the universe and there's nothing left, check back with me.

Modern economics simply restate what the Klingons have always known: An empire is either growing, or it is dying.

Qapla'! 'arlogh Qoylu'pu'?

I think that there can be a growing economy without using more and more natural resources. I'm not an economist, nor have I studied economics at school but its maybe about improving efficiency, and the growth of the "third sector". I understand that the first two are agriculture and industry, and the third one is "service industries" (entertainment, communication, etc...)

Your entirely correct in your assumtion, but the situation is far worse than you realise.

All money is created into our system with an additional cost of interest, even if every dollar that has ever been created was given back to the banks tommorrow we would still be massively in debt.

As the interest debt builds up exponentially we will owe far more than the value that the earth can provide, if we havn't reached this piont already.
All this was realised by scholars as long ago as 600BC in Solon's review of Athens, several Hundred Years Later Aristotle (384-322 Bc) Formulated The Classical View Against Usury. Aristotle understood that money is sterile; it doesn�t beget more money the way cows beget more cows. He knew that "Money exists not by nature but by law".

"The most hated sort (of wealth getting) and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest. And this term interest (tokos), which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth, this is the most unnatural." (1258b, POLITICS)

So it's not that this problem is unknown or that it's logical consequence has just revealed itself to us, the truly alarming thing is that WE HAVE KNOWN ALL ALONG, and we have just blithely advanced toward the impass which we are rapidly reaching.

The answer to date has been just to wipe the debt away with bankrupcy, but what happens when the US reaches a stage where it cannot pay it's debt, according to the the US Bureau of the National Debt the US owed

$7,429,933,004,818.29 as at 11/4/2004

Prior Fiscal
Years

09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/28/2001 $5,807,463,412,200.06
09/29/2000 $5,674,178,209,886.86
09/30/1999 $5,656,270,901,615.43
09/30/1998 $5,526,193,008,897.62
09/30/1997 $5,413,146,011,397.34
09/30/1996 $5,224,810,939,135.73
09/29/1995 $4,973,982,900,709.39
09/30/1994 $4,692,749,910,013.32
09/30/1993 $4,411,488,883,139.38
09/30/1992 $4,064,620,655,521.66
09/30/1991 $3,665,303,351,697.03
09/28/1990 $3,233,313,451,777.25
09/29/1989 $2,857,430,960,187.32
09/30/1988 $2,602,337,712,041.16
09/30/1987 $2,350,276,890,953.00

so it has trebled in the last seven years....

The US National Debt Clock determined the Outstanding Public Debt as of 08 Nov 2004 at 06:01:44 AM GMT is:

$7,435,848,371,606.29

The estimated population of the United States is 294,741,085
so each citizen's share of this debt is $25,228.41.

The National Debt has continued to increase an average of
$1.61 billion per day since September 30, 2003

Ugly, isn't it....

Originally posted by ajc301
I just don't understand how you can rectify these two opposing trains of thought.

They can't be. I only took micro and macro as electives to my science degree. But you are right, the stock market works the same way based on ever increasing profits and productivity gains toward more profits. Limits imposed by nature or the environment are always left out of the equation. Kind of like leaving out the friction to simplify a physics problem.

First thing my econ professor told his new class of science students was that economics is not a science. It is based on faith. And as a rule, analysis serves to explain events in the past and recognise when the conditions of those events are present again. It cannot predict the future nor the human behaviour behind it especially since it is based on faith.

Then he went on the rest of the year explaining all the usual theories on supply and demand, inflation, Kensyan economics etc.

Flange Gasket is right. We have known all along.

The bottom line is, it is inevitable that we will hit a brick wall and growth is not sustainable.

I think we are getting very close to that wall. If you like economics check out my thread on oil (see signature). I'd appreciate an economist's point of view.

Edit: brain fart


[edit on 11/8/2004 by Gools]

Exactly, This is why capitalism can not go on forever, Companies demand growth year after year after year, rather than simply making enough to survive and be comfortable

Companies aren't going to give a damn above the enviroment, or anything else if it harms there "bottom line" or prevents them from growing,therefore this will go on until there are either no resources left and we're all screwed, or we start to make things based on need(which would use a damn lot less resources), rather than making 100000's of things(which aren't needed) for profit.