I love Stella Marrs’ postcards. All of 'em. Even the ones with the Provocative Statements really make me think. Usually, they make me think, “Cite?”
Case in point, the card that’s currently on the front page of her site. It reads
My General Question: Is this true? I find it kind of hard to believe that no economists have ever hypothesized a steady state economy.
If Marrs is wrong, and the implications of such an economic situation have been considered, has there been any consensus about what those implications would be?
I realize this could quickly head into Great Debates territory. That’s not my goal; my question is really limited to the truth or falsity of her statement, and generally accepted answers to the question. If someone wants to start a GD thread, I’ll be interested in reading it, but I don’t have a pro or con position myself.
If the economy doesn’t grow, the number of jobs available remains constant, but since the population continues to rise, it stands to reason that the rate of unemployment will continue rising as well. Surely, this cannot be a good thing, since more and more resources would need to be diverted to supporting this growing population of unemployed individuals.
But the population does not have to grow either. Parts of Europe have neutral or even negative growth rates even today and the rate of growth in the U.S. is very slow. I am interested in this question because I have wondered the exact same things myself. Why does the company have to grow? Why does the economy have to grow forever? Can’t they just find a nice comfortable spot and stay there.
With no growth, it seems to me we’d be equally close to both inflation and deflation. Ok, slight inflation in a no-growth economy wouldn’t hurt much of anything. However, consumers appear psychologically incapable or unwilling of continuing to “consume” during deflation. It seems to me any economy in such a situation would be constantly balanced on a razor’s edge.
In any case, the only way I can think of for productivity to “not grow” forever would be for technology to STOP moving forward. I don’t think mankind is anywhere close to inventing all value-adding inventions.
As long as we have innovations like electricity, polyester, the automobile and the computer coming out, we’re going to keep having growth over the long term.
Well, take a look at Japan- for the past 10 years or so they have had both little growth and little population increase. They don’t seem too bad off, but with a no-growth economy, eventually the country in question will be marginalized in the world economy, as countries with growth pass them up.
These are all interesting answers. Thanks. Does this mean that the implications have been considered, from an economic perspective?
Is considering the implications of a no-growth steady state economy a meaningful economics thought experiment, or is this something like considering the implications of living in a thirteen-dimensional world? (That is, potentially interesting but by its nature hypothetical.)
Now a physics expert will tell me that we do live in a 13D world, and my ignorance will be revealed to the world…
It’s really a silly question from a pratical standpoint. Achieving perpetual 0.00% growth in an economy will never happen, not even in the most restrictive of command economies. It’s like asking what would the ocean be like if there were no waves in it?
I could imagine someone creating a computer simulation in which zero growth was one of the conidtions, but I don’t know what that would accomplish. It would need to be done (and for all I know, it might have been done) to see if anything of interest arises.
We’re balanced on razor’s edge, it’s true, but our scenario is temporary. The scenario the OP described sounds more like being PERPETUALLY on the razor’s edge.
I think of the economy like a drunken sailor.
If he stands on a high ledge, there’s a chance he’ll fall towards the gaping chasm next to him, and a chance he’ll fall the other way.
If he stood 8 feet from the gaping chasm, and only occasionally went to the ledge, his odds of falling into the gaping chasm go way down.
Mild inflation doesn’t hurt much of anything. Deflation is the mind-killer, in this situation.
Regarding the OP: Yes, the field of economics has formally considered this. One cite I found, though I’m sure there are more:
The Economics of the Steady State
Herman E. Daly The American Economic Review, Vol. 64, No. 2, Papers and Proceedings of the Eighty-sixth Annual Meeting of the American Economic Association. (May, 1974), pp. 15-21.
If you have access to jstor, here’s the link, though I imagine only academic institutions will have subscriptions.