We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

“Yes, we might all think that sending a virtual red rose over Facebook is silly but those sending them (and presumably to some extent those receiving them) do value them. And that value is what we measure when we talk about GDP and it is the creation of that value that allows people to make profits. There is absolutely nothing at all in the capitalist system, the free market one (these are two different things please note), the pursuit of profits or even continued economic growth that requires either the use of more limited physical resources or even the use of any non-renewable resource.”

Tim Worstall, nicely skewering the idea that economic growth is the same as ever rising consumption of finite resources. Not the same thing at all.

7 comments to Samizdata quote of the day

  • Yes, it’s a good article correcting a ripe error, but let’s not get too enamoured of formal indicators of economic growth like GDP. Too many of the things they measure aren’t goods anyone consumes voluntarily.

    Setting aside ‘broken-window’ contributions to GDP caused by nasty things happening, and having to be set right, there is also the issue that things people do in the informal economy aren’t measured. Rightly – any attempt to include them would be sheerest flim-flam. Dangerously – because every time, say, a government forbids people to do something for themselves and get it done ‘professionally’, that is formal ‘economic growth’. Even though it wasn’t voluntary, and has its utility further degraded by the fact that Somebody just stuck their hand in and took a big tax cut out of the transaction.

    If the proverbial two mothers hired each other to look after their children while they were out at work, this pathological formalization of childcare would show up as ‘growth’. If my unmonetized rights to talk toot on the net were appropriated by the State or Toot International plc, forcing me to pay a licence fee for the privilege in future, this would be measured as ‘growth’. Not so? Not, in various shapes, common?

    It’s easily possible that the higher-order effects of perverse exchange end up depressing formal, as well as actual, economic growth very promptly. But that is such a large and untestable conclusion to assume, that I hesitate to do so.

    I’m all in agreement with Tim about the unlimited and beneficial nature of actual economic growth. As to the degree to which it tracks the ostensible growth of the official economy… a bit more agnostic about that!

  • PaulH

    Worstall is right, but doesn’t really address the Guardian’s point, which is that you can’t continue to grow *in the way that we currently grow* indefinitely. That’s evidenced by Worstall’s examples; he points out that the price of tantalum has fallen dramatically because we learned to be more efficient with it, but doesn’t mention that world consumption of tantalum is still rising by 5-8%, which can’t go on indefinitely. Sure, we could replace it with something else, but that too would run out in due course, and so on until we run out of replacements.

    Now the Guardian’s flaw is to assume that just because we grow in this way now, that doesn’t mean we always will. It might do better in its argument if it accepted that we won’t, because we can’t, and advocated for improvements to the pricing of finite resources that will motivate the sort of change that they currently seem content to whine about.

  • Well, the problem is that most people just don’t know this. Most people naturally believe that prices are deterministic in some way, and that value is predicated on something else, rather than the truth that value is subjective.

    Even on “our side”, there’s likes of Mark Wadsworth clinging to his religious Ricardian belief that value is the product of the productive value of land plots (measured in bushels of corn), while I’ve even seen Tim Worstall himself speaking apparently approvingly of Ricardo’s Iron Law Of Wages.

    Marxism of course is itself based on the discredited Labour Theory Of Value (Ricardian again), but most people if asked their opinon of the statement “the price of a good is the sum of its labour costs” would probably agree. Well, those who could understand what you were talking about, anyway.

    I think the problem is, even if we ignore that people are encouraged to think this way, is that these “determinist” ideas regarding value seem rather common-sensical, if you haven’t thought hard about the subject. Even professional economists didn’t figure out a proper theory of value for a long time. Adam Smith never knew where value comes from, after all. Neither did Ricardo come to that, which is why he came out with all this cranky nonsense about labour and corn, which crackpots like Marx and George based their theories on. The fashionable belief that value comes from “resources” is just more of the same.

    So we can’t really blame people for believing these wrong things, though we might like to blame ourselves for losing the argument so catastrophically.

  • Laird

    Good article, and great post Ian B.

  • Very kind of you Laird 🙂

  • Dishman

    which is that you can’t continue to grow *in the way that we currently grow* indefinitely.

    Curious word, ‘grow’.

    This brings to mind (for me, anyway) the following question:

    How has humanity’s total land usage changed since the ice retreated?

    As best I can tell, it hasn’t changed by more than a couple percent in over 12,000 years.

    The way we use land has changed, the but total amount in use has not.

    And, you’re right. Nobody really has any need for more than a few gigabytes of MP3s. Making bigger iPods is just wasteful. /sarcasm