Economic Growth

1 May 2008

I have been thinking a lot lately about economic growth. It seems like the news media, and practically everyone else, assumes that if the economy is growing, it's a good thing, and if it isn't, something terrible is occurring. This assumption has been bothering me for a while, and I recently read a book that put my vague uneasiness into words: Deep Economy: The Wealth of Communities and the Durable Future by Bill McKibben. In this book, McKibben makes the following points:

  • When you measure the economy, only things that cost money count. So, for instance, increases in things like hospital stays, divorces, and burning coal in out-dated power plants count towards economic growth, whereas things like volunteer work, walking rather than driving, and spending time reading a library book with your child don't.
  • Economic growth in recent decades has not actually increased most Americans' real earnings or standard of living.
  • We are already facing food and energy crises, which will get worse if we keep "growing" the way we have been, and we can't afford the global warming that would result. (See my previous articles on The Energy Future and Biofuels for more information.)
  • Economic growth that raises individuals' income up to the point where their basic needs are reliably met (roughly $10,000 per person per year) certainly makes them happier, but after most people have reached that point, economic growth does not increase people's happiness.

So the problem is clear: economic growth is not improving the world or our happiness, and it isn't sustainable. Unfortunately, the solutions are not easy. Here are McKibben's key ideas:

  • In the area of measuring the economy: When we measure the the value of economic activities, put a value on the natural resources they use up, as well as the pollution they produce, and count that against their economic benefit. Also, rather than only measuring things that cost money, attach an economic value to happiness and to beneficial activities like teaching, volunteer work, and child raising.
  • In the area of sustainability: Work on making our economy more localized instead of more globalized, letting each local community come together to figure out how to make itself better. McKibben is convinced that if we all try to make more of our economic activities local, we will both solve our larger economic problems and make ourselves happier, as we get more of a sense of being involved in a community. His ideas include using building materials that come from nearby; eating food that is grown on nearby, small organic farms; adding small wind turbines and solar panels to our cities; and building sidewalks, bike lanes, and bus rapid transit. It's hard to argue that any of those would be a bad idea.