Are There Limits to Economic Growth?

Consistent with human experience over the last several centuries, conventional wisdom holds that innovation and technology have all but eliminated the limits to economic growth. But new scholarship – from outside the realm of traditional economics – contends that this is not true.

What happens when a bright and curious engineer, research scientist, and student of energy systems modeling decides to look at how the economy works, shorn of the assumptions that underlie conventional economic theory? We get a startling overview of a self-directing complex system integrating economics and the physical world in Carey King’s recent book: The Economic Superorganism: Beyond the Competing Narratives on Energy, Growth, and Policy (Springer, 2020). King tackles the contradictions and connections between narratives and data to build a framework that explains economic trends and processes that leave mainstream neoclassical economists baffled.

The three pillars of the book are (1) the Earth is finite and the limits to growth hypothesis (from the 1972 book of that name) is valid; (2) energy has a central role in all economic activity far beyond its relatively small financial share of the overall economy; and (3) the economy can be described as an economic superorganism (ESO), the sole purpose of which is growing the amount of “useful work” (defined as the product of the amount of energy available and the efficiency of its use) it can generate as long as it can.

Importantly for advisors, the ESO is ever evolving, but it is not forward looking. Thus, even if observers believe the economy is approaching physical limits, the economic system cannot perceive that, and therefore nor do prices and markets, because they are based on short-term factors, not long-term trends.

Further, the ESO cannot be easily managed, beyond small adjustments in its general forward direction toward greater fitness through control of more useful work and more resources. Fighting climate change will reduce the net energy available to society (and the ESO), which reduces useful work and perceived fitness and will therefore be very hard to make happen. The maintenance of societal structures and high human well-being might be of no concern to the ESO if it requires reduced resource consumption.