Growth

1. Growth's Origins: A Recent and Reversible Miracle

‘Before the eighteenth century mankind entertained no false hopes.’

Long Stagnation. For the vast majority of human history, economic life was stagnant, with living standards barely improving for hundreds of thousands of years. Whether a Stone Age hunter-gatherer or an 18th-century laborer, most people lived in poverty, struggling for basic survival. This period of stasis, known as the Long Stagnation, highlights the exceptional nature of modern economic growth.

Recent Shift. Modern economic growth began only about two centuries ago, marking a dramatic reversal in human economic fortunes. This sudden and sustained ascent is unlike anything that came before, as previous periods of growth were limited and short-lived. Understanding the origins of this shift is crucial for ensuring its continuation.

Uncertain Future. The pursuit of economic growth has become a defining activity of modern life, yet its future is uncertain. Recognizing the fragility and recency of this phenomenon is essential for appreciating the challenges and opportunities that lie ahead. The book emphasizes that the current state of prosperity should not be taken for granted.

2. GDP: A Flawed but Influential Metric

‘Under communism … only the future is certain; the past is always changing.’

Accidental Priority. The prioritization of economic growth, measured by GDP, is a relatively recent development, gaining prominence almost by accident. GDP gained pre-eminence because it correlated with almost every measure of human flourishing. Useful measures of the size of an economy only emerged in the 1930s, and the idea of pursuing growth would have been unimaginable to most classical economists.

Wartime Origins. The creation of GDP was spurred by the need to manage resources during wartime, particularly World War II. Keynes needed to know the size of the economic pie to determine how much could be allocated to the war effort. This led to the development of national accounting methods that eventually became GDP.

Limited Scope. Despite its influence, GDP has limitations, including its inability to capture non-market activities, environmental impacts, and social well-being. The book argues that GDP's rise to prominence was not the result of a deliberate decision but rather a confluence of historical circumstances and its perceived usefulness in achieving other goals.

3. The Allure and Peril of Technological Progress

‘What earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?’

Two-Sided Coin. Technological progress is both the engine of economic growth and a source of significant societal challenges. While it has driven unprecedented prosperity, it has also contributed to environmental destruction, inequality, job displacement, and political disruption. Understanding this duality is crucial for navigating the growth dilemma.

The Escape. The escape from the Malthusian trap was driven by sustained technological progress, which counteracted diminishing returns. Economists like Solow and Romer emphasized the role of innovation and ideas in driving long-term growth. However, the specific direction of technological progress matters.

Unintended Consequences. The book highlights that the technologies we develop and adopt have profound social and economic consequences, not all of which are positive. It is essential to consider the broader impacts of technological choices, not just their immediate economic benefits.

4. The Malthusian Trap: Diminishing Returns

‘Before the eighteenth century mankind entertained no false hopes.’

Stagnant Existence. For most of human history, economic progress was virtually non-existent due to the Malthusian trap. Any improvements in living standards were temporary, as population growth would eventually consume the new prosperity, pulling society back down to subsistence levels. This cycle of stagnation defined human existence for millennia.

Population Dynamics. Malthus identified a mismatch between the explosive rate at which populations grow and the slower rate at which food supplies increase. This imbalance led to a constant struggle for resources, preventing sustained improvements in living standards. War, famine, and disease, while horrific, could temporarily improve living standards by reducing population pressure.

Diminishing Returns. The core of the Malthusian story is the concept of diminishing returns, where each additional input (e.g., labor or land) yields progressively smaller increases in output. This curse of diminishing returns kept societies trapped in a cycle of poverty and stagnation.

5. Escaping Malthus: Ideas and Innovation

‘What earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?’

Technological Progress. The key to escaping the Malthusian trap was sustained technological progress, which allowed societies to overcome diminishing returns. Innovations like the spinning jenny, power loom, and steam engine revolutionized production and living standards. This progress was not merely about using more resources but using them more productively.

The Role of Ideas. Paul Romer emphasized the non-rivalrous nature of ideas, meaning they can be used and reused without limit. This property allows for increasing returns and sustained economic growth. The discovery and application of new ideas are what drive technological progress and overcome the limitations of physical resources.

Industrial Enlightenment. The Industrial Revolution was not just a period of technological invention but also a cultural shift towards valuing reason, experimentation, and the application of knowledge to improve human life. This "Industrial Enlightenment" fostered a culture of innovation and economic progress.

6. The Growth Dilemma: Promise vs. Price

‘The end justifies the means. But what if there never is an end? All we have is means.’

Irresistible Promise. Economic growth is associated with many of our greatest triumphs and achievements, including freeing billions from poverty, extending lifespans, and funding scientific discoveries. The promise of growth pulls us towards pursuing ever more of it.

Unacceptable Price. The pursuit of prosperity has come at an enormous cost, including environmental destruction, social inequality, and the disruptive effects of technology. This price pushes us away from the chase with a powerful force.

Moral Renewal. Confronting the growth dilemma requires a moral revitalization, a renewed sense of collective purpose in society. This involves prioritizing not simply a more prosperous economy but also a fairer society and a healthier planet.

7. GDP Minimalism: Technical Diligence and Moral Modesty

‘If we have the wrong metrics, we will strive for the wrong things. In the quest to increase GDP we may end up in a society where citizens are worse off.’

Flawed Measure. GDP, while influential, is a flawed metric that fails to capture many aspects of social well-being. It includes activities that may be harmful (e.g., pollution) and excludes valuable non-market activities (e.g., housework).

Technical vs. Moral Limits. The limitations of GDP are both technical (inaccurate measurement) and moral (failure to reflect social values). Attempts to fix GDP by incorporating moral considerations are misguided.

Dashboard Approach. A better approach is GDP Minimalism, which involves focusing on technical accuracy while recognizing the measure's inherent limitations. This requires using a dashboard of indicators to track various aspects of social well-being, rather than relying on a single number.

8. Directed Technological Change: Shaping Growth

‘What earlier century had even a presentiment that such productive forces slumbered in the lap of social labour?’

Incentives Matter. Technological progress is not a random process but is shaped by the economic incentives that people face. By altering these incentives, we can direct technological change towards more desirable outcomes.

The Pandemic Example. The COVID-19 pandemic demonstrated the power of incentives to drive technological innovation. The sudden increase in the cost of in-person work led to rapid adoption of remote work technologies and the development of vaccines.

Beyond the Market. The market mechanism alone is insufficient to guide technological progress in a socially beneficial direction. Government intervention, through taxes, subsidies, and regulations, is necessary to align private incentives with public goals.

9. The Imperative of Confronting Tradeoffs

‘There are no solutions. There are only tradeoffs.’

Avoiding Tradeoffs. The first strategy in responding to the growth dilemma is to seek out Pareto improvements, where both growth and other valuable ends can be achieved simultaneously. However, these opportunities are limited.

Weakening Tradeoffs. The second strategy is to weaken tradeoffs by redirecting technological progress. This involves using policy tools to change economic incentives and steer innovation towards more sustainable and equitable outcomes.

Accepting Tradeoffs. Inevitably, some tradeoffs cannot be avoided or weakened. In these cases, we must explicitly confront the choices between growth and other values, such as environmental protection or social equity.

10. Long-Termism: Balancing Present Needs with Future Generations

‘The Dark Ages may return, the Stone Age may return on the gleaming wings of Science, and what might now shower immeasurable material blessings upon mankind, may even bring about its total destruction. Beware, I say; time may be short.’

Intergenerational Equity. A key consideration in addressing the growth dilemma is how much we should care about the future. This involves balancing the needs of present generations with the well-being of those yet to be born.

Long-Termism. Long-termism, the idea that positively influencing the long-term future is a key moral priority, has gained prominence. However, it is essential to avoid extreme versions of long-termism that neglect the needs of people alive today.

Imaginative Humility. We must approach the future with imaginative humility, recognizing the limits of our ability to predict and control events far into the future. This requires a balanced approach that considers both present and future needs.

11. The Power of Collective Deliberation

‘The vast and wonderful knowledge of this universe is locked in the bosoms of its individual souls. To tap this mighty reservoir of experience, knowledge, beauty, love and deed we must appeal not to the few, not to some souls, but to all … The real argument for democracy is, then, that in the people we have the source of all that endless life and unbounded wisdom which the rules of men must have.’

Beyond Technocracy. Addressing the growth dilemma requires moving beyond technocratic solutions and engaging citizens in collective deliberation. This involves creating new institutions and processes that allow people to participate in shaping the future.

Mini-Publics. Mini-publics, such as citizen assemblies and juries, offer a promising way to involve ordinary people in political decision-making. These institutions can help to bridge the gap between expert knowledge and public values.

Deliberative Democracy. A shift towards a more deliberative democracy, where citizens are actively involved in shaping policy, is essential for addressing the complex moral questions raised by the growth dilemma. This requires a commitment to open dialogue, mutual respect, and a willingness to compromise.

Last updated: April 12, 2025