I recently read a post on Freakonomics.com titled “Can Economic Growth Continue Forever? Of Course!”.
The premise is simple: imagination is theoretically infinite, so the amount of things humans can create, thus, for which others are willing to pay a monetary sum are also infinite… but:
What is physical acts as a natural limit. While the resources we possess can be changed in an infinite amount of ways into an infinite number of things, there is only so much material to work with at any given moment. This leads directly to another point:
Productivity also isn’t infinite. The amount of energy which can be expended to create new things is limited by economics, technology, and physics. This process is becoming increasingly efficient in some ways but also increasingly inefficient in others. While technology, such as Information Technology, computing, robotics, etc., has greatly improved the ability to create large economies of scale, increasing global unemployment and underemployment suggests systemic inefficiencies. It can only be considered inefficient when people are not able (because of externalities created by economics) to contribute their efforts, either physically or intellectually.
Another thing to consider is the concept of utility, which is limited through obsolescence. What has utility (and, therefore, value) today will often not have it tomorrow. The markets for typewriters, radios, vinyl records, cassette players, cathode ray tubes, and many other technologies has dropped precipitously or disappeared entirely over time. As things are being created, things are also being destroyed, a process economist Joseph Schumpeter is (falsely) credited with coining as “creative destruction.”
This all begs the question: what exactly is “economic growth”? When you think of growth in terms of production, it mostly involves using energy to change items with little practical utility into items of much greater practical utility. Granted, history builds upon itself, with every previous innovation spurring the creation of the next one. From a historical standpoint, you could definitely consider the chain of creation and innovation “growth.”
But from an economic standpoint, how accurate is that? All inventions and innovation don’t co-exist actually as they do historically. Indeed, the state of innovation in any given instant, while not static, definitely doesn’t encompass the entirety of even a country’s history of innovation. It’s more like a snapshot. How different is the world technologically now than even a decade ago? Hell, ten years ago, the iPhone was still about two years from being introduced. How much technology has become completely or nearly obsolete in that time? Is a thing said to be growing when it is also dying vigorously at the same time?
I don’t mean to be existential but, at least in our current economic system, what we consider growth is mostly illusory. The past, at least technologically, is dying just as quickly as the future is being created.
When I conceptualized the innovation presented in The Currency Paradox, I took this factor into account. Currency is inextricably tied to economic and technological growth. The value of our history never diminishes even if the practical utility of it does. A currency that can reflect the time and effort of society is almost like a living history, a form of immortality. It ties the past and the present together in a way that is tangible. Each unit represents a contribution to society, regardless of how mundane. It allows the quantification of history in a way that can have significance for every living person on the planet.
With fiat currency, we price things of value with things that are inherently worthless. In order to have true value, our money should matter. “Growth” is a measurement of the present relative to the past. If we want to reflect an economy that can grow indefinitely, maybe our currency should reflect that reality.