Uneconomic growth

Uneconomic growth, in welfare economics, human development theory and some forms of ecological economics, is economic growth which reflects or creates a decline in human well-being. The concept is variously attributed to Herman Daly (formerly the senior economist in the environmental department of the World Bank) and Marilyn Waring, though other theorists are also often credited:

For instance, in Daly's 1999 Feasta Lecture, "Uneconomic Growth in Theory and in Fact", he cites John Ruskin, then William Nordhaus and James Tobin as having identified the issue. His own colleagues John Cobb and Clifford Cobb developed, with Daly, a formal analysis that emphasized "the cost of GNP growth - in other words, the social and environmental sacrifices made necessary by that growing encroachment on the eco-system."

Scientific American uses the definition "Uneconomic growth occurs when increases in production come at an expense in resources and well-being that is worth more than the items made", which comes from Daly.

Good vs. bad growth

Uneconomic growth often reflects poorly-developed or poorly-planned growth, rather than growth that is bad in and of itself. For example, if one assumes that Atlantic hurricanes and Pacific typhoons have intensified in recent years due to human-caused global warming, then a rapid surge in automobile ownership in China, Brazil, and India could be seen as uneconomic growth. This is based on the assumption that significantly increasing the number of internal combustion engines worldwide would increase global warming, and that the economic damage from global warming would more than offset any economic growth brought about from the increase in automobiles; however, if the new automobiles were hydrogen-fueled, instead of petroleum-fueled, the effect on global warming might be very minor and not uneconomic at all.

Difficult to detect

However, this demonstrates two central problems with theories of uneconomic growth. First, they are necessarily global in scope while nations are not, and second, typically they rely on long-term longitudinal studies that can be performed only looking backwards across relatively long spans of time, while many political decisions must be made quickly with limited data.

The limits to growth

The "limits to growth" debate is essentially a form of 18th-century Malthusianism. Much of the debate in recent times was prompted by the 1972 Club of Rome study Limits to Growth, which considers the ecological impact of growth and wealth creation. Many of the activities required for economic growth use non-renewable resources. Many researchers feel these sustained environmental effects can have an effect on the whole ecosystem. They argue that the accumulated effects on the ecosystem put a theoretical limit on growth. Some draw on archaeology to cite examples of cultures they say have disappeared because they grew beyond the ability of their ecosystems to support them. The argument is that the limits to growth will eventually make growth in resource consumption impossible.

Others are more optimistic and believe that, although localized environmental effects may occur, large-scale ecological effects are minor. The optimists suggest that if these global-scale ecological effects exist, human ingenuity will find ways of adapting to them.

The rate or type of economic growth may have important consequences for the environment (the climate and natural capital of ecologies). Concerns about possible negative effects of growth on the environment and society led some to advocate lower levels of growth, from which comes the idea of uneconomic growth, and Green parties which argue that economies are part of a global society and a global ecology and cannot outstrip their natural growth without damaging them.

Canadian scientist David Suzuki argued in the 1990s that ecologies can only sustain typically about 1.5–3% new growth per year, and thus any requirement for greater returns from agriculture or forestry will necessarily cannibalize the natural capital of soil or forest. Some think this argument can be applied even to more developed economies. Mainstream economists would argue that economies are driven by new technology—for instance, we have faster computers today than a year ago, but not necessarily physically more computers. We may have been able to break free from physical limitations by relying on more knowledge rather than more physical production.