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Old 02-22-2012, 10:14 PM   #1 (permalink)
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Default The Fallacy of Traditional Economics

So, I'd like to discuss a simple theory about the problem with traditional economics in the 21st century, and see what you guys think.

1. Human capital comes from natural resources: The conversion of natural resources into human capital has been the most obvious historical reason for expanding empires and increases in wealth. The exploitation of virgin resources has always resulted in booms of economies.

2. Human capital cannot be made from itself: Money and resources are traded, but the reality is that despite the amount of wealth accumulated by the upper class of society, their actions do not actually create anything. Human capital created from natural resources has a finite number, and merely flows into different hands in different volumes.

3. Natural resource are finite in the scope of human society: Almost all natural resources are renewable - but in the scope of a human lifetime only a relatively small percentage are. Once they have been fully extracted, they may not exist again for thousands to millions of years, and the process of high yield extraction on organic resources often lowers future yield significantly.

The big red flag I am bringing up is that our traditional economic outlook expects growth (3% GDP increase per year for example) to happen yearly forever. As our natural resource base quickly peaks and declines however, new wealth cannot be created, resulting in stagnation and potential declines in global economies.

The scary part about countries like China are that they are consuming world resources at an enormous rate to create massive infrastructure and wealth, despite the fact the fact that soon we will not even have the resources required to meet today's demands. The result is a massive lockdown of human capital - specifically cities which need resources trucked in at astronomical rates. If there are no supply lines, the city dies and is abandoned.

By continuing to act like economies can grow forever unimpeded, we are driving our cars further and further up a cliff, and as we climb the damage we will feel when we fly off increases.

Our consumption is bad enough, but we have already exported the same consumer ideology to other developing countries with far larger populations. How anyone actually thinks this is actually going to work out in 30+ years is beyond me.

Then again this isn't about sustainability, it's about enjoying the present and leaving the future with nothing. As someone who will not be foreseeably dead in that future, I am not very happy.
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Old 02-23-2012, 07:58 AM   #2 (permalink)
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Is it a fallacy or simply a downside?

Basically you're saying that increases in wealth come from taking resources and injecting labour to produce added value, and the formula requires resources which are finite. Not new idea. Or am I missing a nuance?
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Old 02-23-2012, 10:26 AM   #3 (permalink)
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It's not a new idea at all, it's just the fact that no one seems to recognize it because it's inconvenient to the mass-consumerism agenda. The fallacy part is really just pointing at the theory that economies can grow forever.

My gripe is that 0 effort is being put into modeling a sustainable economic model. It's almost taboo to even bring it up, especially in political circles. In America people seem to think that if they vote in the right president they will be able to live like their parent's generation, which in my opinion is a ghost of the past that will never be seen again.
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Old 02-23-2012, 11:10 AM   #4 (permalink)
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The reason its never mentioned is because of supply and demand. Why does the cost of gas go up every time theres an oil spill?

Sustainability isnt profitable, and the government is about making money.
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