Economic Theory

[silicon toad2000]

Another thread prompted me to throw some of my thoughts open for comment.

For a while now I have been thinking about modern economic theory and the excess it seems to reward.
For most countries economic growth is seen as a good thing. That is if the GDP of a country expands beyond inflation. To me adjusted real growth (increase in GDP less inflation) should never exceed population growth. What this means is that a country has had to use more resources in order to sustain the needs and wants of its population.
I would see an important aim of an economy would be negative real growth adjusted for population growth. This would mean that that country has been able to satisfy the needs and wants of its populace with less resources, therefore more efficiently.
Microeconomics shows this and internal company policies reward the ability to do more with less. If the expenses increase by a lower percentage than sales, the stakeholders are rewarded. Surely at some stage this should flow into macroeconomic theory.
Surely if the worldwide per capita real growth is positive, it simply means we are using the planets resources faster then we did the previous year.

Would love to know your thoughts.

[Brutha]

Not every part of growth needs more Ressources.
If you find a way to do something with less ressources and can therefore reduce the price that results in deflation or growth because when you substract a negative amount of inflation you get a positive amount of growth.
A good example would be computers. You can buy a computer today that can do the same thing as five computers ten years ago.

If you do more that's growth on a macro scale.
If you want to reduce the amount of ressource usuage you have to make ressources more costly.
That means taxing ressource usuage through policy's like carbon credits and killing subventions of ressource producing industries like farming and fishing.
That has also the added benefit that the state gets money to finance whatever you want to finance be it tax cuts, education or research.
In Germany we put the money that we gain through carbon credits into funding for altanative energies.

But there are people who profit from cheap ressources who lobby against those policies. One of the arguments is that because of the time value of money ressources are now more valuable than in the future.

[silicon toad2000]

If we can produce something with less resources and reduce the cost, all things being equal, it will reduce the cpi and reduce gdp. Once GDP is adjusted for inflation there will be no effect on gdp and no growth.
Your example of the computer is a prime example, if a computer can do the work that 5 computers used to do, allowing for population growth, we should be buying 5 times fewer computers. Making for an overall reduction in GDP.

Every technological advancement and increase in efficiency should be resulting in a reduction of gdp.

[Brutha]

Making for an overall reduction in GDP.

But only if we don't adjust for inflation.
In pratice we are always interested in inflation adjusted GDP.

If we produce two of those computer that do the the job of five old computer that's in endeffect GDP growth even when we use lesser resources.

In our days a lot of product that are created are also intellectual or services that don't need resources.

If you produce more regadless of whether you use more or less resouces that is real GDP growth.

[silicon toad2000]

labour is a resource, although arguably not as other factors of production.

[Brutha]

You usually don't call it a resource in that context but I get your point, there is only a finite amount of manhours that a society with a given population produces.

But if you are smart and find a way to be more effective with your work, to write for example a computer program in less hours because you have a better programming language you can write more computer programs and gain as a result an GDP increase.