Let me make this clear: GDP is not an accurate measure of prosperity. Nor is it an adequate measure of wealth. As Robert U. Ayres argues in “The Economic Growth Engine”, it is a measure of economic activity. It only accounts for capital that is generated as a result of the depletion of “natural capital” (i.e the environment). It does not account for societal wellbeing; nor does it account for the losses of wealth (i.e pollution) resulting from the depletion of “natural capital” resulting from economic activity.
So with all of these limitations, why on earth are policymakers, politicians, and economists still using it as a metric for social and economic progress?
Not accounting for the costs of pollution is a choice, but the fact is that these costs remain present. The reason why we don’t see the costs of economic growth is because economists dismiss them as “externalities”. This is how the current Labour Government can justify that a “win-win for economic growth and natural recovery,” (DEFRA: Environmental Improvement Plan, 2025) can happen, even though growing the economy is inherently coupled to the depletion of the natural environment. You don’t get an economic product from nothing, you have to get the resources from somewhere, and that only comes from either the extraction from the natural environment or from solar energy.
Aside from the essential renewable energy transition which can use solar energy to fuel the pursuit of economic growth, there will always exist economic needs and thus industries that require the extraction of natural resources. The EV transition is an example of this, with electric batteries requiring the extraction of critical Earth minerals. The increasing demand for EVs due to the green transition will inevitably lead to greater depletion of the natural environment.
It can be correctly argued that a move to a circular economy will reduce the pressure for industry to extract resources from the natural environment. The circular economy is a vital component of an environmentally just world: by extending the life-cycle of products we can massively reduce the environmental impact of the economy. However, even if as Ayres argues that 100% recycling is theoretically possible in a closed system, it is not a practical aim.
As an item is recycled, the useful energy we can extract from it degrades over time. The more times we recycle a product, the more energy we have to put in to extract the useful energy out of it. We would have to put increasingly larger amounts of energy into a product to recycle it, and this aim is not realistic.
How many solar panels, wind farms, dams would we need to build to obtain this energy to recycle these products repeatedly, on top of the increasing electricity demand that we require for the green transition? Imagine the extent to which we would have to deplete the natural environment to extract the necessary raw materials required to build that.
Our priority as a party should be phasing out fossil fuels as quickly as possible. Sounds simple, but vested interests say otherwise.
What we desperately require is greater courage amongst our political leaders to stand up to those vested interests and follow the recommendations of researchers like Tim Lenton towards a rapid transition to a net-zero economy.
Secondly, we must look at our redesigning our economy. The ideological pursuit of economic growth is inherently reliant on the exploitation of the most vulnerable people in global society. Those people who make all the consumable items we enjoy in the west for “cheap” are exploited with poor labour conditions, long working hours, and poor pay. Farmers in the UK are exploited by big supermarket firms who dictate the price of which goods are sold to them. Everything we enjoy at “cheap” prices is because we choose to “externalise” the real costs of making these goods, but the costs of that debt must end up somewhere.
Under growth, it ends up in the hands of the most vulnerable.
Is that really freedom?
Thirdly, the environmental impact of our economic activities must be reduced. To do this, we must reduce our consumption to sustainable levels. That is the only way we can truly ensure that we don’t deplete the natural environment at dangerous rates. Learning to live with less stuff goes against everything we have ever known. A shift to a society of “balance” rather than “more” requires a massive cultural shift. I would highly recommend “The Care Economy” by Tim Jackson which goes into detail about this. A “slow” economy may sound like madness, but in actual fact, I believe it is the sanest solution we have.
Growth is not a law of nature. Growth is not guaranteed. Relying on endless growth is a massive political gamble. A gamble which future generations will remember for decades to come.
And now, we are at a crossroads where we get to choose the legacy we wish to leave for current and future generations.
We can either radically redesign our economies on our own terms, ensuring a world free from conflict, poverty, and the consequences of a shrinking biosphere.
Or continue with our ideological desire for growth, praying for technological advancements to save us, whilst we dangerously accelerate towards environmental and social collapse.
I fear our party leadership has chosen the latter.
* Rodrigo is a Liberal Democrat party member and a Young Liberal.
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31 Comments
“The reason why we don’t see the costs of economic growth is because economists dismiss them as “externalities”.”
I agree. We need an economics that makes these “externalities” onto the balance sheet and into the cash flow. That means we need to account for the degradation of natural capital, and ideally make the consumer pay for the costs of recreating it.
In addition , we should want to bring social capital and intellectual capital on to the balance sheet as well.
If we can do these things we might just be able to leverage the power of the market and human ingenuity to help deliver these goals.
“Growth is not a law of nature”.
That growth can continue indefinitely is certainly not a law of nature. However I suspect a desire for it and attempts to achieve it are part of the human condition. And I am also sure that selling making people poorer as desirable is not the way to electoral success, especially as the liberal democratic method has delivered extraordinary gains in wealth and freedom over the last 2-300 years.
It’s also true that those gains in wealth and freedom have been achieved on the back of plentiful cheap but extremely dirty energy, supplies of which are diminishing and the (environmental) costs of which are huge. Yet suddenly through technology we may be able to exploit practically limitless supplies of cheap clean energy from the sun and other sources.
As an item is recycled, the useful energy we can extract from it degrades over time. The more times we recycle a product, the more energy we have to put in to extract the useful energy out of it.
I’m afraid I don’t understand this bit. Surely it is the physical material that degrades over time?
GDP is not supposed to be a measure of prosperity or a measure of wealth – it measures the total monetary value of all final goods and services produced within a country over a period of time. A higher total of final goods and services suggests that more of the country’s population’s needs and wants have been met than if the GDP total was lower though this is only an indication – how the GDP is shared among the population is an important consideration. However, if GDP grows by less than the rate of growth of the country’s population, GDP per head will be falling.
I support growing GDP if we can as that is how a country increases it ability to meet human needs, now and in the future.
“As an item is recycled, the useful energy we can extract from it degrades over time. The more times we recycle a product, the more energy we have to put in to extract the useful energy out of it.”
This is nonsense.
A glass milk bottle can be used many times and each time the energy/expense of washing it is approximately the same.
Even if glass bottles are melted down and made into new bottles the energy required is going to be approximately the same each time, but this will be higher than if the bottle was simply washed and reuse.
Washing and reusing bottles makes good environmental sense. It saves the energy required to make plastic bottles in most cases.
If Lib Dems are looking for a popular vote winning policy they might want to look at making all drink bottles recyclable by putting deposit on them and requiring the drinks manufacturers to reuse them.
It will significantly reduce the litter problem.
Or are the Lib Dems ‘frit’ to offend the likes of Coca Cola etc?
I have some sympathies for the argument advanced here. But we need to do a lot more work to explain why we need to make the transition from a growth economy to a sustainable economy, how we manage that transition, and how it affects our society and political system – not to mention our international context. Democracy is easy to sustain when growth is above 3%, but difficult when growth drops below 1%, because redistribution becomes far more painful when there isn’t an apparent surplus to distribute. There’s a lot of research and a lot more public persuasion required before we can win sufficient support for this transition.
Those who target increasing GDP are using it as a proxy for standard of living. Those who think we should reduce it are using it as a proxy for environmental impact. It’s not a great proxy for either at the best of times but if you set targets for a proxy, it will normally diverge from whatever you think it’s a proxy for. Let’s just measure the likely impact of policies on standard of living and environmental impact directly and ignore what they do to GDP.
It’s ridiculous to assert that GDP growth equates to resource extraction. It’s a measure of the amount of money changing hands be it from goods or services, and for goods it doesn’t only count those made from newly extracted materials.
Furthermore if you’re concerned are environmental then worrying purley about resource extraction is idiotic. It depends entirely on the resources concerned and how and where they were extracted. If we can get to the point that heavy industry no longer relies on fossil fuels then the only issues with mining for example would be if any chemically dangerous waste, was insensitivity dealt with or if it involved digging up an especially important or scarce type of habit, which isn’t likely for most mines in the world. (Eg digging up a very tiny part of a vast area of uniform arid scrubland in the middle of Australia is likely to be of very little environmental consequence.)
Hi @TristanWard, thank you for your detailed engagement with my article! Regarding your second point, I disagree that growth is a part of the human condition. Even if it so deeply ingrained into our modern societies that growth is a precondition to prosperity, it is not a requirement for a successfully flourishing society. I would highly recommend Tim Jackson’s book “The Care Economy” to you, as it goes into detail about this.
I am not against growth, nor am I against sensible economic development to meet the needs of the poorest and most vulnerable. But the economic development we choose to pursue must be well thought out and effectively targeted to be most effective in supporting the most vulnerable. Not just done in order to meet targets of “growth”. We must manage our resources much more carefully so that we don’t continue to degrade the environment at unprecedented levels, to avert the worst consequences of a shrinking biosphere.
@TristanWard: Under growth, our economic institutions inherently rely on pursuing expansion. But what happens when we begin to reach practical limits to this expansion in developed economies? At what cost does this expansion come in terms of unavoidable environmental degradation?
An increasingly shrinking biosphere means greater poverty, conflict, and injustice – which is deeply illiberal. None of these claims are alarmist – we know what a shrinking biosphere means for global security. Take the National Security Assessment recently published by the Government in Jan 2026.
The stability, wellbeing and order of our societies are relying on the possibility that technology and markets will be able to provide the tools required to mitigate the worst impacts of a shrinking biosphere.
That is the gamble we are taking when assuming economic growth.
What I am arguing that is that in these truly extraordinary circumstances and with the urgency of the social-ecological crisis, urgent action is required. Rather than gambling under growth, instead we could proactively design a new sustainable economy on our own terms. This way, I believe we can truly secure a liberal future for individuals to live on a planet free from the worst consequences of a shrinking biosphere.
@TristanWard and @PeterMartin:
“As an item is recycled, the useful energy we can extract from it degrades over time. The more times we recycle a product, the more energy we have to put in to extract the useful energy out of it.”
Basically what I was getting at here was Ayres’ work in “The Economic Growth Engine.” @TristanWard, yes the physical material degrades over time, and the amount of useful energy we extract from it degrades each time we recycle it. We also have to put in more energy to extract useful energy from it each time we recycle it. Hence why we have downcycling sometimes. I hope that makes sense.
As far as I can see, @PeterMartin you example refers to the reuse of a product rather than the recycling of a product. As I understand it, the recycling of a product occurs when a partially degraded product is irreversibly altered, and we extract useful energy from it. I can’t see that occurring with the example you give of a glass bottle being cleaned for reuse.
@WilliamWallace – I am so glad that my ideas are resonating with you, thank you for taking the time to publish your comment!
As for your comment, I couldn’t agree more. I am a realist at heart, and questions like these I am constantly grappling with all the time. We desperately require more research and public inspiration to make these ideas become reality. The fact that this is also an international problem makes it much tricker. I sometimes feel like I have chosen a sisyphean battle!
I have no doubts that this may take a long time. But part of me writing articles like these on Lib Dem voice is to get the conversation going, and to persuade people of my case. I have no doubt that the work required to make these ideas become reality begins today, in conversations like these. I just hope that the people in power realise this sooner rather than later, so they can begin the work of inspiring people towards a path away from growth towards a truly sustainable, equitable and just global economy.
Hi @PeterDavies, thank you for your engagement with the article! I agree with you – GDP growth is flawed in many ways, and it very much misguides policy. The reason I critique it so vehemently is because our political leaders still use it as a measure of increases in standards of living, wellbeing, etc. when this is clearly not the case.
@DavidLeGrice
I don’t think it’s ridiculous to assert that GDP growth equates to resource extraction. Fundamentally, our economies rely on the natural environment. Without a natural environment, we cannot have a society, nor an economy. So all our economic processes impact not just the natural environment, but our societies too. They are not external to each other, they exist within subcomponents of each other.
I resent the idea of worrying about resource extraction being idiotic. In relation to GDP growth what I am discussing is the scale of resource extraction under the conditions and assumptions of growth. What I am doing here is a systemic analysis of how and why I believe pursuing GDP growth in an increasingly shrinking global biosphere is fundamentally flawed.
Might this article entitled “If GDP is a broken measure, why do politicians still worship it” be of interest/use?
https://www.taxresearch.org.uk/Blog/2026/02/03/if-gdp-is-a-broken-measure-why-do-politicians-still-worship-it/
An interesting piece.
I think you are perhaps too focused on goods a proxy for GDP (or vice versa). Then we end up with a dogma that growth must stop – a fairly traditional position of some Greens. To me this does not reflect that GDP is more and more heavily based in the mind not the factory.
I suggest rather that the core battle now is for efficiency of energy (and emissions) use, and that it is a “fast as practicable” move rather than a “Change It! Now !” attitude – over rapid change is always less efficient. It remains that UK C02 equivalent emissions continue to track down at 2-3% per annum, or a little slower in consumption terms, as they have since perhaps 2008.
I also note that the majority of the UK population (60% – Yougov in November 2025), still support “Net Zero by 2050”.
Ed Davey gets considerable credit, as he was the one who started our long-term energy reduction strategy in houses, back in about 2012 when he was a Minister in the coalition. The current moves by Ed Milliband seem significant to me, and will mark a further major step towards Net Zero.
To my eye, there are two strands of opposition. One argument has shifted from “how dare you try and change my behaviour” to “No more pollution ! Yippee – we can do whatever we want if we build 740563 square miles of solar farm”. The other is simple-minded denialism a la Trump.
I think Rodrigo is being unkind to Daisy Cooper. She specifically talked about “sustainable growth” even if the press ignored “sustainable”.
Of course there is an argument to be had about whether you can actually have sustainable or green growth that doesn’t harm the environment.People promote growth because they are frit to push for redistribution. What we need to be aiming for is a decent standard of living for all and that necessarily means taxing wealth and income to achieve meaningful redistribution, something even our party has abandoned in the face of the Thatcher revolution. From 1945 to 1979 we had a highly progressive income tax system that taxed people according to their ability to pay. (And probably from 1939-1979) We then allowed ourselves to be seduced by wrong headed arguments about high taxation and disincentives as propounded by Friedman and Laffer and introduced by the Thatcher and Major governments.
Time for a new (or possibly old?) approach.
I’m very sympathetic to the aim of protecting the environment, but this article makes very questionable claims.
Economists referring to pollution an externality is not dismissing pollution. Externalities is the correct term for costs imposed on third parties, and economics does take account those costs.
As @Peter Martin notes, the stuff about useful energy degrading as an item is recycled is plain wrong: That is not at all what science says.
When you say you don’t get an economic product from nothing, you appear to be forgetting that services are economic products. If I give someone tuition or a deep tissue massage or home care, that’s an economic product that contributes to both GDP and quality of life, but consumes no resources (other than incidentals like some electricity). Besides, solar energy is very close to getting something for nothing since you’re capturing energy that would otherwise be uselessly dissipated.
Economic growth is not inherently reliant on the exploitation of the most vulnerable. Certainly that exploitation has happened in the past and still does happen too much, but that’s generally the result of power imbalances and unequal business relationships: It’s perfectly possible to have economic growth without that kind of exploitation.
Likewise there’s no inevitability that extracting raw materials degrades the environment. That depends on the extraction processes and how you clean up the area after extraction.
Yes, GDP is an imperfect measure. Yes we need to decarbonise the economy, because man made climate change is a real threat to all of us.
However to go from there to say, effectively, that we should not care about economic growth is leap away from reality.
National GDP growth may not matter much for those of us who are are already well off. (I am an affluent pensioner.) However most people in Britain would be delighted if they could have £15,000 per year of extra income, to pluck a number out of thin air.
When you say economic growth is irrelevant, you are telling them to focus on other things.
Many of Britain’s problems would become much less significant if we could return to 2% per year increase in GDP per person.
@SteveTrevethan – Absolutely! Thank you for taking the time to share it, and engage with my article! I will certainly take a read.
Hi @MattWardman, thanks for commenting and engaging with my article. I am glad you found it interesting!
You are right to point out that GDP doesn’t just come from the factory, and that it can also come from the mind in the form of services. My concern rather lies with the fact that we systematically rely on growth in order for our governments, societies and economies to function. My concern is that growth structurally relies on our economic system developing increasing amounts of material throughput, which aggravates the risks of environmental harm due to the depletion of the natural environment.
In a market economy, businesses vie for greater expansion because they are under the competitive pressure to do so as it is the only means of survival. Businesses also have the pressure to achieve profits to successfully credit back the money loaned by investors. Such a modus operandi aggravates the probability of greater environmental harm. In practical terms, the assumptions made with economic growth result in the compounding depletion of the natural environment at unsustainable levels.
Employment depends on growth. Our government’s spending plans depend on growth. Our global economy is built around credit, and expected returns. But what happens when we begin to reach practical limits to those returns being achieved? What happens when we deplete the environment to such massive levels that we cannot continue to grow at the same rate we are now?
What I’m saying is that it doesn’t have to be like this. We can still have markets, employment and the freedom to choose the products we want to consume, but outside the assumptions made when we choose to follow economic growth. I fundamentally believe that the assumptions made under economic growth misguide our policies, and the quicker we realise this, the better.
Hi @MickTaylor, thank you for your continued engagement with my articles! My intention was not to be unkind to Daisy, I was just venting my frustrations because I believe that we are fundamentally misguided with our policy aims when relying on economic growth. I hope you understand.
I have no doubt that there are many noble politicians and economists who go about their daily lives wanting to make positive change to solve the crises we currently face. I am under no doubts that Daisy Cooper genuinely believed this to be the case when announcing the “Department for Growth.”
But I still believe that we are going down the wrong path, and that this will inadvertently worsent some of the social and environmental issues we are facing. I completely agree with your point that redistribution is a much more challenging sell than growth is.
With us facing practical limitations to the extent to which we grow our economies, and growth aggravating risks of increasingly worsening environmental consequences, we require a radical change in direction.
Hi @SimonWilson, thank you for your continued engagement with my articles!
Conceptually, you are correct. What I am discussing here is how economic growth in practice is causing increasing rates of environmental depletion, due to growth increasing demand for material throughput beyond environmentally sustainable levels. Consequently, this increasing degradation worsens the social-ecological crisis.
“As @Peter Martin notes, the stuff about useful energy degrading as an item is recycled is plain wrong: That is not at all what science says.” – Sure, but there are practical limits to the circular economy. You can’t recycle something 100% of the time. It does not eliminate environmental pressures, rather it only reduces it.
Sure, it may be possible to have growth without the exploitation of the most vulnerable. But there are deeply ingrained cultural assumptions that are made under a growth-based economic paradigm that makes it incredibly challenging for this to be practically successful.
Take the idea of “homo homini lupus est”, that looks upon mankind as wolves, with self-interest being central to modern capitalism. Or the idea of “homo economics” – us being the rational economic man which we know to be false due to the works of Daniel Kahneman in his book “Thinking Fast and Slow.”
Tim Jackson has some TedTalks on YouTube that do a much better job about talking than this than I would! I fully agree with his vision, and I personally found him very inspirational in this speech.
Hi @MohammedAmin, thank you for your comment!
“However to go from there to say, effectively, that we should not care about economic growth is leap away from reality.” – I strongly disagree.
What I am looking at here is the costs of GDP growth on both society, and the environment. Accelerating and compounding GDP growth will always cause more environmental degradation, because all of our economic activities rely on the environment to function. Whether we like it or not, this is the reality we face.
We are at a point now where we are degrading the natural environment at such extraordinarily high rates that it is unable to credit in monetary terms at the same rates as before when it comes to economic growth. Hence generally slowing growth rates in developed economies.
So yes, you are right to say that “However most people in Britain would be delighted if they could have £15,000 per year of extra income, to pluck a number out of thin air.” But at what cost?
Despite conventional economic theory, economics *is zero-sum*. There is a cost to everything we do and consume when we interact with the natural environment. What we are beginning to see with climate change, ecosystem loss, and all the other environmental problems we face is the costs of unsustainable environmental depletion materialising more clearly.
This is no alarmist claim, with the Potsdam Institute for Climate Research (PIK) calculating that climate change will shave 17% off the global economy’s GDP by the middle of the century. I am incredibly confident that if we continue down the path of economic growth, that cost will only increase.
And under the gross inequalities that we have under economic growth (World Inequality Report, 2026), these costs will clearly fall on the hands of the most vulnerable. So is pursuing an ideology of growth at all costs really liberalism?
@SimonRobinson – The reason why we keep talking past each other is because we are talking in different macroeconomic languages. This may also be why you see that I have “questionable claims.” From what I gather, whereas I come from an ecological economics standpoint, you come from a neoclassical economic view. Both of these macroeconomic lenses analyse and diagnose the problems we face in different ways.
I must accept I have not done a good job at times of presenting my argument to you. I have made physics mistakes in the past, and I also made one in this article with regards to my recycling statement.
My macroeconomic language (ecological economics) takes a fundamentally interdisciplinary approach, different to that of neoclassical economics. Hence why I am able to flip from physics to economics in my articles. I will try and summarise my argument as best as I can.
I am not directly analysing energy flows as done in classical thermodynamics. Instead I am using industrial ecology, which was pioneered by individuals such as Robert U. Ayres, to analyse material throughput.
Earth is an open energy system. It is approximately closed in terms of matter (MyNASAData, n.d.). In terms of human timescales, we are working with a fixed amount of abiotic resources.
Solar energy cannot replenish abiotic resources, but it does assist in extracting them. Our economies rely on abiotic resources to function. Abiotic resources are material inputs into the economy rather than energy inputs.
Economic processes increase the entropy of these abiotic resources. Economic processes destroy exergy, and they are not 100% efficient. This means some form of waste is introduced into the environment. This can be termed as “pollution”, even if it is benign and presents no immediate environmental harm. This can be seen in the case of heat loss with the concept of “anergy” when looking at heat engines in classical thermodynamics.
The crucial point is this: even with abundant solar energy, we cannot practically transform these abiotic resources back to their original high-exergy form quickly enough within human timescales under an economic growth paradigm.
Economic growth relies on markets being successful. Markets rely on businesses being successful. A successful business in a growth paradigm requires amassing increasing profits, to increase the amount of investors who want to be successfully recredited. In principle, a successful market relies on a theoretical “equilibrium” and “perfect competition”, none of which are practical realities; but tending towards this is a completely practical aim.
Thus under growth, there exist structural components which inherently compound the economies’ demand on the natural environment. In industries of abiotic material extraction, this leads to the natural environment to be depleted at faster and faster rates, which is worsening the social-ecological crisis.
Under the structural components of growth, to transform these abiotic resources back to their original high-exergy state would require the use of a LOT of energy. This would require a lot of infrastructure to enable the technological developments necessary for this to occur, depleting the natural environment further, not to mention being incredibly costly. All for the sole ideological and steadfast pursuit of economic growth.
The solutions you propose to these issues such as moving to a service economy, technological advancements and the circular economy only serve to limit environmental harm.
*They are efficiency gains, not a panacea.*
Crucially, they do not decouple all economic activity from environmental harm. Even if they could, this process is not happening at the rate anywhere near fast enough.
The social-ecological crisis is real, and the poorest people in our world are already beginning to suffer from the impacts of this. We can’t continue to hope for efficiency gains to save us whilst we are aware of their ongoing suffering. That is us actively denying them their freedom to live a life free from suffering.
What we face are practical, structural limitations to which we can grow our economies. We are already living in a “post-growth” economy. Look at our growth rates right now as evidence. Sure rejoining the EU and Daisy’s plan may help in the short-term, but what about in the long-term? And that isn’t even thinking about the costs of pursuing this new growth agenda.
So that’s why we need a change. That’s why we need to resign our economies. So that we can live freely in a world outside these constraints. I hope to push my case for this to occur. Most crucially, on a personal note, taking inspiration from our party leader, I will not forget to have fun whilst doing it!
Finally, I forgot to add that I reject neo-malthusian arguments, (mostly present in the Green Party) because they grossly oversimplify the problem. I am not trying to do what Georgescu-Roegen did when he proposed a “4th Law of Thermodynamics”. Rather, I am trying to carefully diagnose what is quite a complex, interconnected and structural problem in our societies’, governments’ and civilisations’ heavy reliance on economic growth.
Hi Rodrigo, thanks for the detailed explanation.
Regarding the multidisciplinary approach Taking multidisciplinary approaches is great, but it doesn’t remove the need to understand the individual disciplines too. If you’re combining physics and economics and you want a correct analysis, then you need to understand BOTH physics and economics separately. Although you don’t say it explicitly, it sounds from your tone like you’re somewhat dismissing classical economics. I think that’s a mistake. Classical economics is sound, well researched, and does actually tell us how to account for environmental destruction as an external cost. The problem is, politicians and Governments often ignore that knowledge. Example: The economically efficient way to deal with CO2 pollution is to charge polluters the cost of that pollution. We mostly don’t do that because politicians get scared that would lose votes (Most voters quite like driving and flying!) That’s a failure of politics, not economics.
You mention poorest people. But economic growth provides a huge success story there: In 1990, nearly 40% of the World’s population lived in extreme poverty. Today, it’s about 8.5%. And most of those 8.5% are in countries ridden by conflict or corruption or dictatorial Governments. Again, that’s a failure of politics, not (neoclassical) economics.
On the physics, you say, Solar energy cannot replenish abiotic resources. But that’s not really the point. What we need for recycling in thermodynamic terms is to reorganise the used, dispersed materials back into concentrated, useful forms. Solar energy can enable that.
Hi again Simon, “On the physics […]”. I agree. But there is a bigger picture that is missing in this.
*The economy is a material throughput system that is embedded within the biosphere.*
To harness solar energy when recycling abiotic resources, you require infrastructure. The key problem is that there are systematic and structural components when relying on economic growth that will only serve to continuously compound demand for this infrastructure.
Under growth, demand for material throughput has ballooned: “Between 1970 and 2024, the amount of materials extracted worldwide jumped from 30 billion metric tons to 106.6 billion metric tons, growing at an average rate of 2.3% annually,” (Schandl, H. et al., 2024)
Even if material productivity improves with a circular economy, the compounding demands for abiotic resources under growth is what causes me concern.
Economic growth is a positive feedback mechanism. Investors demand greater returns to fuel growth. Increasing returns means generating greater capital (economic outputs). You cannot increase material economic outputs without increasing the number of economic processes. These economic processes require increasing the amount of resource extractive processes (economic inputs) which deplete the natural environment.
If you see that everything is fundamentally energy, you will see where I am coming from.
Economies will never be immaterial. Services require infrastructure. Infrastructure requires upkeep. Services are reliant on a material support system in order to function. So even a very very service based economy will have a material footprint.
In a growth economy, the most efficient businesses are the most successful ones. Efficiency gains allow businesses to lower cost, enabling these businesses to produce cheaper products. This allows for their product to be more accessible to everybody, and more people will buy the product. This causes demand for material throughput to increase (Jevons Paradox). Even if this is not a law, this has been empirically observed in the past.
Neoclassical economics, and its greener evolution in environmental economics assume that we can accurately price Earth System’s processes. I greatly doubt the effectiveness of this approach. To do this, markets must accurately replicate Earth System’s processes, which they cannot. Earth’s Systems are far too interconnected, complex and are also self-regulating systems. Economic growth being a positive feedback mechanism is incompatible with these self-regulating Earth System processes, which are vital for our environmental wellbeing.
Even if it is not the aim of environmental economists to replicate the earth system’s processes within markets, pricing externalities comes with an uncertainty. I would argue that this uncertainty is higher when trying to price externalities compared to following an ecological economic approach.
The key issue is economics needs to change. Rethinking Economics does a lot of good work in this field: https://rethinkeconomics.org/about/
Our politics rely on economics to produce sound policy. But currently, the economics they are using has massive gaps of knowledge in it. That is why we are facing the problems we are facing, and why we need to look towards change.
Schandl, H. et al., (2024). Global material flows and resource productivity: The 2024 update. Journal of Industrial Ecology, 28, 2012–2031. https://doi.org/10.1111/jiec.13593
We need a composite metric composed of quality of life, quality of local environment, success in combating climate change and growth in national income that can be used for public services.