Does post-growth economics belong in the Liberal Democrats? Questioning the principle of eternal economic growth is such a heresy to the orthodox economic order, that by most it is rejected outright. We live in a world so addicted to growth that envisioning a world that exists outside this paradigm is seen as almost impossible.
We are currently experiencing a social-ecological polycrisis: rising inequality, climate change, it is all driven by the economy transgressing several planetary boundaries. Green growthers respond to this by rightly identifying that green investment and a path to net zero is essential to tackling the climate crisis. They also correctly cite examples of countries such as the UK managing to relatively decouple GDP growth from carbon emissions, which is great.
However, GDP growth must not just be relatively decoupled but absolutely decoupled from environmental impact. Green growthers argue that green growth will provide the necessary technological innovations required for absolute decoupling to occur.
However, when you apply the laws of thermodynamics to analyse the relationship between our natural environment and the economy, a different picture emerges. We can consider earth to be a closed system for materials and an open system for energy because Earth receives solar energy. The second law of thermodynamics sets the physical limits for economic processes from physical work and production to the energy needed to use information (Landauer’s Principle).
Every economic process consumes free energy to perform work. Physical production also consumes materials, and the second law dictates that free energy is dissipated into the environment during production (such as heat and noise); and during economic production materials are also dissipated. The process of dissipation of energy and materials into the environment is termed entropy. Entropy from fossil fuels drives climate change. Entropy also drives economic pollution whilst consuming physical resources of which are now becoming growth constrained.
This knowledge has major implications in explaining why growth rates have been decreasing as decades have passed by, as the quality of resources degrades over time. Ayres himself points out the need for a more service-based economy as a response to his exergy analysis. However, even with this change, GDP growth is inherently linked to mass consumerism which causes overconsumption. We must go beyond this and adopt a post-growth economy.
Due to the urgency of the social-ecological crisis, a combination of both bottom-up and top-down policy initiatives is necessary to transition to a post-growth economy. Striking the balance between both approaches is how we can ensure a liberal approach.
As liberals, we must recognise that pollution has costs in terms of health and environmental harm which tramples on the freedoms of future generations. Thus, we must strengthen the wording in our constitution to fully commit to having a circular economy within planetary boundaries and recognise material constraints to growth. To ensure freedom from poverty in a growth constrained world, we must increase taxes on excess wealth to fund our public services.
To ensure the people’s freedom to choose whatever career path they wish to take, we must recognise the dangers that AI pose by threatening mass unemployment which could massively increase inequality. Exploitative capitalism only values efficiency gains, and once a robot becomes more efficient than a human being, the human will become unemployed. An equal-returns social contract with job guarantees is urgently required to stop this from happening.
Where we can diverge from Green Party policy is by recognising the potential of SMEs, which make up 99.9% of the business population. SMEs can provide a crucial leverage point as defined by Donella Meadows and can be used to build and bring communities along with us. This can only be achieved by SMEs reforming to follow doughnut economic principles of being regenerative and distributive by design. This means that SMEs, much like CICs, must reinforce the community they reside in rather than extract from it, and they must not just sustain but actively regenerate the natural environment they live in.
Businesses cannot be expected to make these changes alone. With businesses existing in our growth-based paradigm, we need our local authorities to actively encourage businesses to change. This can be done by creating incentives for regenerative and distributive business models, training businesses about doughnut economics and limits to growth, and most importantly explaining to them why this change is necessary.
In addition, businesses that inherently extract value from local communities and/or are destructive to the local environment should no longer enjoy freedom from democratic intervention. Businesses that follow this destructive model should face higher rates of taxation to properly reflect the social and environmental costs which their businesses have on their local community. Business models built solely on greed, destruction and the sole pursuit of growth at the cost of environment and society must be made as uncompetitive as possible. They destroy the liberal vision of freedom of individuals outside of the social-ecological polycrisis.
So, does post-growth belong in the Liberal Democrats? Yes. It certainly does. And there is a liberal means of getting there. A post-growth economy requires a holistically informed approach to our economic and social policy, and this ensures a lasting freedom for individuals from the social-ecological polycrisis.
* Rodrigo is a Liberal Democrat party member and a Young Liberal.
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33 Comments
Thank you for a most interesting and relevant article!
In our entropic universe, how can growth be continuous?
Might “growth” be a deceitful, contemporary version of Lewis Carroll’s “Jam tomorrow”?
Tremendously interesting stuff.
“A post-growth economy requires a holistically informed approach to our economic and social policy”
You have to account for natural capital, social capital, intellectual capital on the nations balance sheet, as well as economic capital. And then you need an economy that put maintaining and improving all of those types of capital at its heart.
If you haven’t read it, may I recommend this: https://dieterhelm.co.uk/books/the-sustainable-economy/
Which means (I think) the environmental (and possibly societal) costs of every transaction have to be paid for AND the economy has to pay the costs rectifying
“The second law of thermodynamics sets the physical limits for economic processes from physical work and production to the energy needed……”
It doesn’t. Look it up. It’s about entropy and heat flows. In any case the use of energy doesn’t have to increase the concentration of Greenhouse gases in the atmosphere. Hence the concept of “Net Zero”.
The argument against growth does have some merit but the emphasis needs to be on economic arguments rather than some dodgy pseudo science. The mainstream argument that if we bake a bigger cake then everyone will have a bigger piece clearly hasn’t worked out as promised.
The GDP per person in the UK is around £40k p.a.
Isn’t this enough if it’s shared out a bit more equitably?
To add to Peter’s correction:
– ‘Every economic process consumes free energy to perform work‘ – Not really true. You appear to be equating ‘economic process’ with doing work, but some economic processes are intended to dissipate energy rather than doing work: Heating a home for example.
– ‘Entropy from fossil fuels drives climate change‘ – Not true. CO2 (and methane) in the atmosphere are what drive climate change, not entropy.
‘ Entropy also drives economic pollution whilst consuming physical resources ‘ – again, it is not entropy that consumes resources; Human activities consume resources.
@Rodrigo: This is not the first article you’ve written that contains scientific errors. I’m not sure where you’re getting your information from, but can I politely suggest it might be worth your while learning a bit of actual science before writing about it. Something like Peter Atkins – The Laws of Thermodynamics: A Very Short Introduction, would explain how the laws of thermodynamics actually work.
In a fashion led economy where demand leads supply, it is quite simple to produce perpetual ‘real’ growth.
1. Demand for an item rises. The price goes up. Because production levels are low, it has only a slight effect on inflation.
2. Production rises to meet demand. Because prices are high, this counts significantly towards growth.
3. Demand falls. The price goes down. Because production is high, this has a more significant downward effect on inflation than the upward effect of phase 1.
4. Production falls. Because prices are low, this has less effect on growth than phase 2.
Rinse and repeat.
I have long been interested in the work of the Center (sic) for the advancement of a Steady State Economy, which is US based but had a Centre in Leeds run by a dynamic Canadian. Maybe he still does.
See for further and better particulars:
Enough is Enough Ideas for a Sustainable Economy in a World of Finite Resources
O’Neill, D.W., R. Dietz, and N. Jones (editors). 2010. The report of the Steady State Economy Conference, Leeds, UK. Center for the Advancement of the Steady State Economy (Arlington, Virginia, USA) and Economic Justice for All (Leeds, UK).
Peter Marin is right: if our National Income were sheared more equitably we could all have more than enough to live a very comfortable and stimulating life. It is a nonsensee to claim that we can only have decent public services is our economy grows. Share equitably and enjoy what we have. We have arrived!
At the risk of coming across as a bit nerdish, I should explain that entropy can be viewed as a increased state of disorder. Everything does have a tendency to increased disorder. So, for example, if you sort out a deck of cards into order, then shuffle them slightly the disorder will increase. If you shuffle them again the disorder will increase more. As the disorder increases so does the entropy.
As we burn fossil fuels disorder increases which is where the argument comes from in the first place. The energy of the sun comes from an ever increasing entropy too. Ultimately the sun will burnt out and the universe will expire when entropy reaches a maximum, and we don’t really know how it started off as a minimum in the first place.
But, quite how this relates to the question of whether or not we aim for economic growth isn’t particularly obvious to me.
Nice article. And actually postgrowth to the steady state economy is the sane approach for liberals and conservatives. All can support the movement by signing the CASSE position at http://www.steadystate.org and joining the 17,000+ signatories calling for the steady state economy.
Postgrowth means permanent recession.
“Vote Liberal Democrat, vote recession” doesn’t strike me as a winning policy.
Please do not try to use thermodynamics to reason about the limits to growth of human activities, for example based on the energy required to flip one bit. Our actual technology is many orders of magnitude worse than that.
The idea that more “human value” can be extracted from one unit of energy is good. However it is cheaper and less fiddly to persuade people to go with the “cheap energy is good” method. Venezuelan oil.
Two of the best sources to read about this topic are Donella Meadows[1], and work on cliodynamics (e.g. [2] and [3]) which deal with the dynamics of power, wealth, and human history. We are headed fast for Diminishing Returns, and repeating the Victorian era will not work.
I also will commend the words of Dieter Helm.
[1] https://www.clubofrome.org/publication/the-limits-to-growth/
[2] https://peterturchin.com/wp-content/uploads/2023/06/Turchin_SDEAS_2005a.pdf
[3] https://escholarship.org/uc/item/93b5m968
I would firstly like to thank those who have engaged with and/or supported my article, it is incredibly warming to find that my work resonates with people! I would particularly like to thank the endorsement from Brian Czech at CASSE, I never realised I would reach such an international audience! Further to their petition, it would be amazing if the APPG on Limits to Growth was reinstated, because as far as I am aware it is inactive, and that needs to change!
However, there are a few sections in this article which I have realised are poorly worded and would benefit from further explanation. Thanks to @SimonRobinson and @PeterMartin for pointing this out. I will address this in a further comment below. I would like to clarify that this knowledge is purely done based on interest and research which I pursue in my free time, and by no means am I an expert. I am currently an undergraduate student, but finding potential solutions to the social-ecological polycrisis is of great interest to myself. Thanks again!
“Entropy from fossil fuels drives climate change.” You are correct to say climate change is driven by GHG emissions, and I was not refuting this. On Earth we receive short-wavelength solar radiation. Some of this is absorbed into Earth’s system and some longer wavelength infrared (IR) radiation is radiated into the atmosphere. When fossil fuels are burned GHGs are produced. GHGs are significantly more effective at absorbing IR radiation. This changes the flow of energy that would usually go into space by decreasing the amount of IR radiation radiated back into space. Thanks to the altered chemical and radiative balance of earth’s atmosphere due to the introduction of more GHGs in the atmosphere, global warming is accelerating driving climate change. Consequently, entropy production in Earth’s system is increased. I hope that makes sense
2.) You are correct, there are some economic processes which do not perform strict physical work in terms of mechanical work, such as those which dissipate heat. However, all economic processes consume energy and materials generating waste/pollution thus increasing entropy. I would point you towards exergy-based analyses, such as by Robert U. Ayres. He illustrates how biophysical constraints to growth exist because economic processes destroy exergy, causing resources to degrade in quality over time.
Ayres’ article below: https://www.sciencedirect.com/science/article/abs/pii/S0921800997001018
3.) You are correct, that phrase was poorly worded. Human activities consume resources, and these resources are transformed by economic processes which inevitably produce waste and/or pollution; and as per the 2nd Law of Thermodynamics, entropy increases.
I thought it worth making a couple of points. While inequality is too high, it is still lower in the UK than it was 100 years ago, and economic growth has reduced it.
Secondly, unless I’m missing something, if you desire a ‘steady state economy’ AND reduced inequality, then surely you are asking everyone with above average wealth to be worse off in order to level the playing field. You will never win that argument because there will always be a majority who either already have above average wealth or believe that they will in the future.
While I share your concerns about the environment, I don’t agree with the premise of some of your arguments (to the extent that I can follow them). For instance, where is your evidence that “growth rates have been decreasing as decades have passed”? Mature economies like the UK might have lower growth now than some developing countries, but global economic growth for the world as a whole hasn’t decreased in recent decades.
But even if you’re right, the idea that you can win all those voters over by lecturing them on entropy and the laws of thermodynamics strikes me as ambitious…..
@Nick Baird. The biggest falls in inequality since the Edwardian peak have been two world wars and a couple of financial crashes. There is an obvious correlation between prosperity and increased inequality but the causality is the other way round. Prosperity causes inequality not the other way round.
Nick Baird claims we shall never win the argument (that those with too much should have less so that those with not enough can have more.) Certainly we shan’t win the argument unless somebody, preferably with influence makes it. Yet all the UK’s political parties, inducing us, tamely accept the fiction that we can’t afford decent public services and welfare provision at the present level of income, but only out of the magic of growth. There’s a wealth of literature on the “limits to growth.” How close to the limits to habitability does the planet have to become before we take notice? Read
The Economics of Arrival: Ideas for a Grown-Up Economy
Book by Jeremy Williams and Katherine Trebeck
We have solve the problem of providing enough for everyone’s need. So let’s enjoy it, not destroy our habitat through greed.
@Rodrigo: Thanks for responding. It’s great that you’re actively engaging with the comments. I think though you may be missing the wider point – perhaps I wasn’t sufficiently clear. You’ve withdrawn the specific errors I pointed out, but you still seem to be treating entropy as if it were a general constraint on economic growth. It isn’t. Entropy increases as a result of all physical processes (including breathing and life itself!). It was increasing long before humans existed and long before there was any meaningful economy. By itself, this gives no general reason to avoid growth.
There are specific problems (for example greenhouse gas emissions), and addressing those requires reducing particular forms of economic activity (such as burning fossil fuels), not abandoning economic growth in general.
I also think you’re misreading Robert Ayres’ work. He argues that biophysical constraints exist unless exergy inputs are replenished. But they are being constantly replenished, most importantly by solar energy. Even the abstract of the paper you cite states that “the flux of available low-entropy energy (exergy) from the sun is extremely large and certainly adequate to sustain economic activity in the solar system indefinitely.”
@ Rodrigo,
To echo Simon’s comments. Thanks for responding. I do find it somewhat annoying that some authors refuse to engage with what are often very sensible comments in reply to their OPs.
I still don’t agree with your bringing entropy into the greenhouse gas explanation. In fact the term “greenhouse” also isn’t the best analogy. The build up of GH gases acts in a similar way to normal clouds. The GH gas “cloud” is transparent to incoming radiation but due to the frequency/wavelength shift it is less transparent to outgoing radiation causing an increase in temperature.
We see a similar effect with normal clouds. Clear nights tend to produce colder temperatures than cloudy nights. On the other hand, during the daytime, the clouds do reflect some of the incoming energy so cloudy days tend to be cooler than sunny clear days. The invisible GH gas ‘cloud’ doesn’t do any reflecting, though, so there is no similar counterbalancing effect.
I’d keep the term ‘entropy’ out of it. If you know anyone in your Uni Physics dept you could discuss the point with them. Even so, hardly anyone the general community will properly understand the term so, arguably, there is no point using it unless you’re going to be deeply engaged in constructing accurate thermodynamic models of how the atmosphere actually behaves. There is still some uncertainty about how much warming will be created.
Hi again, @SimonRobinson. I can see where you are coming from. You are right to say that entropy has always been increasing. It has been increasing since the beginning of the universe itself approx 13Bn years ago! On earth we are blessed to receive a constant source of solar energy which has enabled life to occur on earth, thus causing increased entropy. You are right to say that solar exergy is constantly replenished due to the light we receive from the sun.
What I mean when I discuss entropy is that it represents a quantity of energy that is unable to do useful work, unlike exergy. I use this as a consequence of the 2nd law of thermodynamics, which stands due to Earth being reasonably described as a materially closed system for matter. Despite some exchange in the form of asteroids hitting earth and some nitrogen escaping, these are considered negligible, thus the 2nd law can be applied. Following this, our economies rely on both biotic and non-biotic resources from earth’s systems to fulfil human wants and needs. Crucially, Earth systems such as the biosphere and geosphere are finite. Our economies rely on these Earth systems to function.
Ayres’ analysis demonstrates that economic processes destroy exergy. This means that as our economies grow and more economic processes are applied to resources, more and more exergy is destroyed. This results in the generation of more energy unable to do useful work. In developed economies in the global north, we are approaching a stage where we are getting diminishing returns. This supports the theory that there are constraints to certain forms of economic growth, and demonstrates that in a world of diminishing returns, we must move beyond growth as a means of sustaining our economies and societies.
@SimonRobinson continued: However, if we look at the broader picture using GDP growth as a metric is inherently coupled to mass consumerism, causing overconsumption of earth’s resources. Although the service sector has expanded over time, the paradigm of economic growth still relies on the consumption of manufactured goods, to feed our societies’ addiction to growth. Take Labubus as an example in 2025, or Fidget Spinners and Loom Bands back when I was in primary school. These gave us a short burst of happiness or joy, and then were/will be largely forgotten. When faced with the prospect of diminishing returns, we must be more careful when consuming Earth’s resources. We must consume them in a fairer, more equitable and measured way that ensures lasting prosperity, not for short bursts of enjoyment before they are put to waste under GDP growth.
Hi @PeterMartin, on reflection I will take the entropy bit out of the greenhouse gas explanation. You are correct about “greenhouse” not being the best analogy, but I’d imagine it’s more about trying make it more accessible to non-scientists to gain a general understanding on how global warming occurs. I am not a physicist, and I am not fully qualified to discuss entropy with regards to Earth’s atmosphere. My goal is not to use entropy to understand the climate system, rather to demonstrate as explained above how exergy destruction during economic processes is leading to diminishing returns which constrains growth. I understand entropy as applied by ecological and biophysical economists.
@Rodrigo: The Second Law of Thermodynamics does not work the way you are using it. The global, continual increase of entropy that people appeal to applies to isolated systems. Earth is not an isolated system because it receives a continuous flow of low-entropy energy from the sun and exports higher-entropy energy to space. That energy flow is precisely what allows sustained order, life, and economic activity despite entropy production, and what can in principle support continued growth far into the future. Being approximately “closed to matter” is irrelevant.
Exergy is destroyed locally in economic processes, but it is also continually replenished globally, primarily via solar input. Exergy destruction therefore tells us about unavoidable costs and efficiencies. It does not imply any thermodynamic prohibition on growth. And to be clear, there is no thermodynamic prohibition on growth.
You also mention diminishing returns. I’m not sure which specific returns you mean, but diminishing returns are a common feature of many activities and of economics in general, and once again do not imply that growth must end.
In a world of net zero, why would we want no growth? What is so liberal about telling people that they can’t go to theatre more often? Or read more books? Or meet their friends? I don’t know about entropy, but this article makes no sense economically.
@ Tim,
Good to hear from you. But it isn’t that the article makes no sense economically, as others clearly agree with it and believe it to be sensible. What you perhaps mean to say is that you don’t agree with it, which is a perfectly fair position to hold.
Now, I’m not an economist but there is an interesting debate to be had about the limits of a sustainable economy and what that means to the world’s poorest economies. If there is a limit on the size of a sustainable global economy, and I leave it to experts to debate that, if we are not to condemn the world’s poorest to remain poor, might that not mean a redistribution of wealth from “rich north” to “poor south” (I generalise here, obviously, I hope)?
Optimists will doubtless suggest that there is no reason why the global economy cannot continue to grow, and I wouldn’t gainsay them. But very little is inevitable in the world we live in, and offering a debate on questions such as this are what we at Liberal Democrat Voice are keen on.
@SimonRobinson, I agree with you on when it comes to the hard physics. Again, I am not an expert in physics. It was never my intention to argue that thermodynamics absolutely prohibits economic growth from occurring or that the 2nd Law would imply that growth would just “end”.
My intention was to use and promote the work of ecological economic and biophysical economic literature (Ayres, Daly, Georgescu-Roegen), in arguing for a post-growth economy. Ecological economics is an transdisciplinary field that use systems thinking to understand interconnected relationship between our economies and the natural environment, viewing the economy as a sub-system of the environment, whereas biophysical economists deal mostly with energy flows between the economy and the environment.
Although we have made progress when it comes to climate change and inequality in some areas, it still remains far too slow. Our current social-ecological polycrisis is so complex, pressing, and urgent that we require a fundamentally different approach. The application of systems thinking by ecological economists, and biophysical economists filling in information gaps in current economics provides us with fresh new tools that we can use to tackle this crisis. These disciplines are not trying to completely upend current economics, rather they are trying to developing it further.
The uncomfortable reality is that the findings of ecological and biophysical economists directly challenge some long-held assumptions made by economists. Crucially, these assumptions inform our not only our policy-making, but also culturally inform our societies in general.
As uncomfortable as it may be, we must begin to challenge these assumptions openly, and inspire others to do so. Our growth-addicted social and economic paradigm has meant the response to the social-ecological crisis has been too slow and ineffective. We can either choose to use the new tools being developed by these disciplines to tackle this crisis, or continue to watch the price of a shrinking biosphere.
Hi @TimLeunig, thank you for taking the time to engage and read this article! I am nowhere near as economically literate as you are, but I can see where you are coming from. I say this because I used to think the same as yourself, and I thought that green growth was the only way of tackling the crises we face whilst crucially allowing people to live prosperous and thriving lives.
Since Greta Thunberg’s sparked the climate movement late 2018-19, she inspired me to understand more about climate change. I have undertaken research on climate change since in my free time, and I have gradually developed my understanding of it all to develop a much wider and complex picture; but by no means am I an expert!
The turning point for me was when my research made me come across “Prosperity without growth” by Tim Jackson, which completely changed how I saw ways of fixing the interconnected crises of systemic injustice and environmental degradation.
If you are interested, I would highly recommend his works to you, especially “Post-Growth: Life After Capitalism” as well as “Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist” by Kate Raworth. She does a lot of interesting work in this field as well. If you do decide to engage with these texts, I hope you find them interesting!
@Mark: I think – yes, the bits of the article that are concerned with economics are in themselves debatable. The problem is, the whole article is based on the premise that the laws of physics will somehow constrain our future growth in the coming decades – and that premise is factually wrong. To my mind it crosses the boundary where it’s plain misinformation rather than being a matter for debate. (I realise that to a non-physicist it would seem I’m making a very bold assertion. To partially justify it: I do have a phd in physics). I notice that every time I’ve pointed out specific errors in the physics, Rodrigo has accepted the errors, but then still defended conclusions that actually depend on the errors.
What you could more plausibly argue is that we don’t yet have the technical knowledge or economic/societal systems in place to allow significant immediate growth without causing unacceptable environmental harm: That would have been a much stronger foundation for the points Rodrigo is trying to make. Personally I would still tend to disagree with it but would acknowledge that is a legitimate place to debate – rather than trying to invoke laws of physics that do not in fact impose the claimed limits.
@SimonRobinson, you are mischaracterising my argument. I am not using physics to prove or disprove anything. I am simply trying to communicate the findings of biophysical and ecological economists to policymakers, our party, and the wider general public. I appreciate this article is quite technical which inhibits accessibility, and something I can improve on (and something which to be honest academia could improve on in general) but it remains a key argument used by biophysical and ecological economists alike.
I think the characterisation of my article as “misinformation” is not just misunderstanding my argument, but is also an unfair delegitimisation of my argument entirely; which I refuse to accept when there are many peer-reviewed academic publications which support my claim. I do not engage with misinformation and/or disinformation, and when I do, I always seek to rectify it.
Where we seem to disagree is on the analytical framing. You seem to use a purely physical framing, which is absolutely fine, but in my view impractical when looking at discussion with regards to policymaking to deal with the social-ecological polycrisis. Systems thinking in ecological economics is a very broad transdisciplinary field that rejects disciplinary absolutism, and does not deal with physics alone.
The fact is we are living in an economy that is operating outside of planetary boundaries, and is shrinking the biosphere as we speak. I think that policymaking has been far too ineffective and slow, and a net-zero world would still see a shrinking biosphere due to the economy remaining outside planetary boundaries. In light of this, we require an urgent change of direction outside a growth-based economic paradigm, and that is what I am arguing.
@Rodrigo: You say you are not using physics to prove or disprove anything. But your article clearly stated, “when you apply the laws of thermodynamics … a different picture emerges“, and later “ the second law dictates that … “. That is plainly an attempt to use physics to justify your conclusions.
You still seem to be missing the point, so let me try to put it from a different angle: In your article you invoke thermodynamic language and claimed laws of physics to try to give authority to conclusions about economic growth that are ultimately political and economic choices, which require risk assessment and value judgement. That is misrepresenting what the laws of physics tell us.
Arguments about shrinking biodiversity, environmental harm, and what we should do in response, are legitimate and important to debate (and for what it’s worth I totally agree with you that policy making has been too ineffective and slow). But presenting those arguments as consequences of non-negotiable physical laws is factually wrong.
@SimonRobinson: Thank you for your clarification, and “kicking the tyre” as they say. This exchange has helped me to further understand a topic which I misinterpreted beforehand. I am going to make my position clear; you are correct, growth is not thermodynamically forbidden, and I misunderstood Ayres’ work. I was grossly overextending the scope of physics – I was learning on the way! I was aware that the 2nd law only applied to isolated systems, which honestly confused me further and made me tie myself in knots because of it. This hopefully explains the poor wording in the article. To correct the record, I will redraft that paragraph to thus restructure my argument.
“However, when you apply Ayres’ exergy analysis as shown in “Eco-Thermodynamics: Economics and the 2nd Law”, which is not yet considered by conventional economists, a different picture emerges. Ayres’ analysis examines how economic processes destroy exergy and gradually degrade resources over time, demonstrating how exergy is a key enabler of economic growth.
Ayres himself supported green growth, but his scepticism of this only grew over time. In “Turning Point – The end of exponential growth” – Ayres described how he was a technological and economic optimist, taking “the opposing (i.e) optimistic side in a formal debate […] about “Limits to Growth.” He also argued against the “entropy” pessimism of the likes of Herman Daly and Georgescu-Roegen in the past.
His scepticism stems from the fact that historic drivers of growth were beginning to reach limits or run out of steam. He states that he is “increasingly convinced that a continuation of growth until 2100 cannot be taken for granted.” and that “the evidence is far more persuasive” than it used to be.
Bearing in mind this article was written in 2006, it is important to contextualise the arguments he gives in this article to the modern day, to assess whether their relevance has changed or not. He argues 7 reasons for scepticism:
1.) Division of labour (job specialisation) as emphasised by Adam Smith.
2.) International trade (globalisation) allowing economies of scale and international division of labour.
3.) Monetisation of unpaid domestic and agricultural labour due to urbanisation.
4.) Saving and investing.
5.) Borrowing from the future (by the creation of new forms of unsecured of credit) tending to increase present consumption without creating anything new.
6.) Extraction of high quality irreplaceable natural resources and the destruction of the waste assimilation capacity of nature.
7.) Increasing technological efficiency of converting resource (especially fossil fuel) inputs to “useful work” and power.
He states that the first 4 trends have been largely completed in the industrial world, thus one can reasonably assume they provide incredibly limited opportunities for growth and can be largely ignored.
Therefore, we will look to see whether the last 3 still apply to the context of 2026, and following this, why they do not provide growth that meets increasingly undervalued environmental or social needs.
5) Borrowing from the future: yes, and in a more significant way. In the article Ayres discusses how modern economies like the US are increasingly reliant on debt as a means of growth. This heavily applies to the UK economy, because services account for up to 80% of our economic output. The output of services is mostly not material goods, meaning they don’t produce exergy, and this is financed via credit. Financial goods appear to provide value on paper, but importantly real-world output *does not* have to increase for this to happen. This leads to a positive feedback loop where financial bubbles form, and then inevitably pop. What looks like growth is so decoupled from energy and material throughput, which in an economy that is *inherently reliant* on these components to function, is just a sequence of bubbles forming and bursting.
f this form of growth is pursued, it unnecessarily exposes our citizens to perpetual loops of bubbles bursting. The societal costs of pursuing this unreliable form of growth will be dire and we don’t want another repeat of the 2008 financial crisis. Potentially exposing our citizens to the consequences of recession due to the insistence of pursuing economic growth is not liberal.
6)Extraction of high quality irreplaceable natural resources and the destruction of the waste assimilation capacity of nature: yes. Growth relies on finite resources especially in a high-tech world, more high-tech products require increasingly rarer materials with high exergy. Even if renewable energy and a circular economy can be a substitute for some resources, recycling is not 100% efficient. As Ayres describes, even recycling a product to basically the same level requires a lot of exergy, which is unsustainable and unrealistic to rely on. The reality is that we will still rely on resource extraction, and pursuit of resource of resource extraction to fuel economic growth will cause environmental degradation. Due to GDP growth and mass consumption being inherently linked, overconsumption is inevitable and the environmental consequences will be dire. That is not what we promise as liberals when we promise to protect the environment.
7.) Increasing technological efficiency of converting resource (especially fossil fuel) inputs to “useful work” and power. Yes. In a net zero world without fossil fuels, this still applies. Even currently, we are beginning to reach peak oil, and we are at the stage where EROI is inhibiting growth with regards to fossil fuels. Ayres argues that efficiency gains in energy driven by Jevons’ Paradox are slowing over time, and that breakthroughs are slowing down, slowing growth. In the modern day, even if there are gains in “productivity” in the economy by IT and AI, the social costs of this will be dire: mass unemployment on an unheard-of scale could occur, which again is not liberalism. Limiting people’s job prospects and inhibiting their ability to do what they want to do to in life is not liberalism.
Therefore, even though growth may be possible, it comes at a massively high environmental and social cost, which inhibits the freedom of both current and future generations. Post-growth liberalism is the way to go.”
Wow, that looks like this was a constructive discussion. Thanks for being willing to revise your position in public, @Rodrigo. That kind of thing takes integrity and I respect that.
So now we have the more interesting discussion about how to balance the economy, growth, and environmental protection. Personally I would be a lot more optimistic about the prospects for continued growth while at the same time restoring ecological balance. But maybe that’s for another debate.
I like the idea of taxing businesses depending on how sustainable they are. It introduces a social element to the business model. The accompanying bureacracy might hinder its implementation however.