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Modern economists haven’t learnt from their own history

How economists came to ignore the natural world

Editor

The following extract from an article by Christopher Jones – The Delusion and Danger of Infinite Economic Growth [1] – appeared in a recent RWER blog [2]:

“…. One of the reasons nations fail to address climate change is their belief that we can have infinite economic growth independent of ecosystem sustainability. Extreme weather events, melting arctic ice, and species extinction expose the lie that growth can for- ever be prioritized over the planetary boundaries.

“It wasn’t always this way. The fairytale of infinite growth – which many people today accept as unquestioned fact – is relatively recent. Economists have only begun to model never-ending growth over the last 75 years. Before that, they had ignored the topic for a century. And before that, they had believed in limits. If more people saw the idea of infinite growth as a departure from the history of economics rather than a timeless law of nature, perhaps they’d be readier to reimagine the links between the environment and the economy.

“In 1950, the economics profession had surprisingly little to say about growth. In that year, the AEA (American Economic Association) asked Moses Abramovitz to write a state-of-the-field essay on economic growth. He quickly discover- ed a problem: There was no field to review.

“The founding fathers of economics shared a belief that growth was finite, and that the reason for limits lay in the natural world.

“ John Maynard Keynes had offered a theory of stagnation, demonstrating the need for government spending to stimulate an economy mired in recession, and Austrian political economist Joseph Schumpeter had studied creative destruction, highlighting the importance of entrepreneurs and innovation. And Wesley Mitchell, founder of the National Bureau of Economic Research, had looked at business cycles. And others had analyzed monetary forces. But no one had put it all together in a theory of growth. Modern work was “fragmentary” and had “remained on the periphery of economics,” Abramovitz explained to AEA members. Development economist

W. Arthur Lewis agreed, noting in 1955 that “no comprehensive treatment of [economic growth] has been published for about a century.”

“It was an interesting turn for a field originally quite interested in growth, but convinced it was bounded. The founding fathers of economics — luminaries including Adam Smith, David Ricardo, and John Stuart Mill — shared a belief” that growth was finite, and that the reason for limits lay in the natural world.

Sources:

  1. https://newrepublic.com/authors/christopher-f-jones   The Delusion and Danger of Infinite Economic Growth
  2. https://rwer.wordpress.com/2019/10/02/how-economists-came-to-ignore-the-natural-world/

Comments from John deChadenedes

The fantasy of unlimited economic growth might arise quite naturally in the minds of American thinkers, whose country was founded on the conquest, expropriation, and unfettered exploitation of what they considered “virgin territory”. For a while there, it must have seemed as if infinite growth was really possible. Attaining the status of a world power, the US moved into other parts of the hemisphere and the globe where local resistance to exploitation was insufficient to prevent the continuation of this type of growth.

Along the way, of course, the negative environmental and social effects of rapacious capitalist development were fully externalized, so activities that have proven in the end to be non-economic (fossil fuel extraction, for example) appeared amazingly profitable. No wonder then, that nobody was theoriz- ing about limits to growth until fairly recently. Nothing in the real world – nothing economists were likely to be aware of, anyway – suggested that we might run into hard limits soon.

When you factor in the deliberate and systematic corruption of economics as a theoretical endeavour (see, e.g.

Mason Gaffney’s “The Corruption of Economics”, and the suppression of any discussion of social democracy as a valid way of organizing production and distribution) then it’s really no surprise that we are where we are now.

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