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.