Economists Are Blind to the Limits of Growth

Economists ignore a crucial constraint on human prosperity: energy.
Economic growth requires energy.

For all their calculating nature, economists are surprisingly optimistic about humanity's ability to have as much prosperity as it wants. Express concern about the negative impact of excessive growth on our planet's ecosystems, and many will simply chuckle and say you don't understand what growth means.

Nobel laureate Paul Krugman, for example, chides natural scientists for thinking of growth as a "crude, physical thing, a matter simply of producing more stuff." They fail to appreciate, he suggests, that growth is about innovation and deciding which technologies and resources to use.

Allow me to explain why I am one of those scientists who are preoccupied with the physical. Economists are correct in saying that growth doesn't necessarily require more pollution, more carbon pumped into the atmosphere or more deforestation, even though we're getting all of the above today. Humans can learn, and we might figure out how to grow differently in the future, separating the benefits from the environmental costs.

There's just one crucial exception: energy.

Growth inevitably entails doing more stuff of one kind or another, whether it's manufacturing things or transporting people or feeding electricity to Facebook server farms or providing legal services. All this activity requires energy. We are getting more efficient in using it: The available data suggest that the U.S. uses about half as much per dollar of economic output as it did 30 years ago. Still, the total amount of energy we consume increases every year.

Data from more than 200 nations from 1980 to 2003 fit a consistent pattern: On average, energy use increases about 70 percent every time economic output doubles. This is consistent with other things we know from biology. Bigger organisms as a rule use energy more efficiently than small ones do, yet they use more energy overall. The same goes for cities. Efficiencies of scale are never powerful enough to make bigger things use less energy.

I have yet to see an economist present a coherent argument as to how humans will somehow break free from such physical constraints. Standard economics doesn't even discuss how energy is tied into growth, which it sees as the outcome of interactions between capital and labor.

Why does using ever more energy matter? For one, it feeds directly into all the bad things we're trying to stop doing -- polluting, destroying forests, wiping out habitats, covering the planet with an ever-denser network of roads. Our energy use -- either by design or by accident -- always ends up changing the environment in one way or another.

Then there's the issue of climate change. Even if by some miracle we act to fix carbon-dioxide levels soon, that won't actually be a lasting solution. If energy consumption follows the historical trend, by 2150 or so the waste heat alone will warm the Earth as much as carbon dioxide is doing now. We'll have yet another global warming problem.

I'm not sure how economics broke free from the laws of physics and biology. Maybe we'll eventually leave the planet and live among the stars, escaping the limits of our Earth. Those dreams aside, the physical limits to growth apply as much to us as they would to a colony of bacteria expanding into a jar of sugar water.

The irony is that economists love to talk about trade-offs and constraints. There are no free lunches, they like to say. Yet when it looks as if the unbridled optimism of economic growth itself is running into a wall, they prefer to look the other way.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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