Beam Me Up, Scotty

A friend recently alerted me to a C-SPAN video called From Poverty To Prosperity.

Arnold King and Nick Shulz argue that economists tend to fail to consider things like creativity and technological advancement when coming up with policies to improve the economy.  They spoke at an event hosted by the Cato Institute in Washington, DC.

Arnold Kling served as an economist at Freddie Mac and is now an adjunct scholar at The Cato Institute. What got my friend's attention was this question & answer at the 57:54 mark.

Question — I wanted to speculate that just to accomodate population growth, the U.S. economy will have to grow 3% per year, which means after 24 years, the GDP will double from $14 trillion to $28 trillion, which is probably bigger than the combined economies of the world today. So it seems that in a very short time we will go from scarcity to depletion, probably use up all the resources of the world in a very short time. So should [we be] talking about growth, or should [we be] talking about  fundamental changes to the economy [where] it needs to be stabilized and needs to be prevented from total failure?

Arnold Kling — So, will we have depletion of resources? Let me give you what I think might be a Paul Romer-type answer. Paul Romer said, "gee, in physics we learn about the law of conservation of matter, we don't learn that matter gets depleted. Ah, so, what economic activity consists of, to the extent that it's physical activity at all—of course a lot of it is becoming, again, intangible activity, communications and so on—but to the extent that its physical activity, it's taking some molecules and transforming them into other molecules. Ah, so in that sense, there is no depletion. We're coming up with new recipes for transforming molecules. So I think if you were to read the interview with Paul Romer in our book, you'd get a perspective that says that we don't really face an issue of depletion of resources, that that's not really how the economy works. And I think that some of the facts that we mention in the book include the fact that, for instance the "weight" per dollar of GDP is falling, so the physical components of GDP are falling relative to the mental components.

Now that the ancient dream of Alchemical Transmutation—turning Lead into Gold—is a reality, we need not ever worry again about resource depletion. Matter (actually mass in a closed system) is conserved, and because there is no chance that we are going to run out of matter, there is also no need to worry about resource depletion. We can simply take some molecules and transform them into other molecules. And apparently—I didn't know this—we are "coming up with new recipes for transforming molecules" all the time. That's a relief—one less thing to worry about!

Comments

[John Hemington]

Wow, Dave, you have no idea just how relieved I am! What a burden this has lifted from my shoulders, just knowing how foolish we have all been in senselessly worrying about such a triviality as resource delpetion. Arnold King must be a genius to have so easily unlocked the key to eternal human happiness. But, I am still just a bit confused. Perhaps you can fill me in on this, just what is the "weight" of a dollar of GDP and how does one go about calculating this? I'm guessing that it must have something to do with King's molecular conversion formula and I am exceedingly anxious to find out how I can take advantage of it in the here and now. Just wondering.