Our wants and desires keep growing, evidently without end, and therefore so do our economies. But our use of the earth’s resources does not. With the help of innovation and new technologies, economic growth in America and other rich countries — growth in all of the wants and needs that we spend money on — has become decoupled from resource consumption. This is a recent development and a profound one.
I have not yet read the book from which this essay is excerpted. Of course, those of you who have read Specialization and Trade already are clued in. Both McAfee and I were influenced by Jesse Ausubel.
By the way, could this decoupling be responsible for low interest rates? Think of a Hotelling model of resource storage but with the interest rate as endogenous and the path of resource prices exogenous. As long as economic growth required more use of resources, you expect a positive return from storing resources. You get a positive interest rate out of that. But when growth is decoupled, you do not expect a positive return from storing resources. If you want to create a store of value with a positive rate of return, you need to find some productive investment.
For more on McAfee and his latest book, see Alex Tabarrok on McAfee’s long-term bets.
Several points on the rich world resource use along with technology:
1) Don’t you joke we outsource our carbon to China? There is fair amount of energy that is outsourced to China and India.
2) Population growth in developed nations are stagnant and aging even some, like Japan, are falling. I believe it is aging and then falling demographics that is the primary drop in resources used. (Yes technology and consumer choice like smaller cars played a big role.)
And what decade did resources skyrocket and interest rate increase? 1970s in which the Boomers were reaching adulthood and using more resources while joining workforce.
Which nation has had very low interest rates the longest? Japan. And think about life cycle of savings here as well. Japan literally disproved most Keynesian Macro 101 because the one variable Keynes did not see dropping was the population. Look at Japan job totals where the jobs hit 65M in 1998 and did not reach that again until 2015. (Labor participation is going here to.)
Less investment greater fixed pension costs. Not much to be interest-ing.
I think the trend towards low interest rates is caused by a steady increase in global savings.
I’m torn when it comes to “The Second Machine Age” and now “More With Less”. I want every progressive/socialist to at least read McAfee’s blog post and/or book because of its positive message with respect to technology and free markets, but as someone who starts with technology and free markets as fundamentally good for society, I think McAfee’s model generally misses the mark and is less than useful for making predictions for two reasons: 1. resources are not being decoupled, rather, the diffusion of the technologies/products has reached its natural capacity in the population (K in the population biology models, or the rightmost part of a Guassian or Logistics curve), and 2. the “Gone Gizmos” is a separate phenomena involving Silicon/Moore’s-Law, the Web/Mobile/Cloud revolution, and the economics of near-zero marginal cost copies of digital products/services.
I’m a fan of Vaclav Smil and his engineering inspired analysis of the impact/history of materials and energy in civilization. I’m not sure if he has tackled the economic/social impact of silicon and digital products but I don’t think McAfee’s analysis is Smil-like in these areas.
I don’t think you can make this argument only anecdotally, and that’s what McAfee has done.
Probably the best argument for US captialism and resource usage is the 1979 Oil Crisis and American car choices. Looking at US consumption of Oil hit a high point in 1978 when the second oil crisis hit in 1979. And after some dumb Carter stuff, Reagan was elected President in 1980 and left the market more free.
And US oil consumption would not equal the 1978 until 1993, fifteen years later. So the US used less oil the entire Reagan Revolution years so it was not a slower economy that this reality. The true solution here was not government program or some kind of magic technology. It was Japan learned to build dependable small cars that Americans started buying a lot more of. And think the Honda Civic and Toyota Corolla are still being made!
(Yes I believe some other things happened as power companies moved to more coal and natural gas usage back then to.)
Jesse Ausubel is a bit more analytical. https://phe.rockefeller.edu/docs/Nature_Rebounds.pdf