Herman Daly — Three Limits to Growth

From the diagram we can distinguish three concepts of limits to growth. 

1. The “futility limit” occurs when marginal utility of production falls to zero.… 

2. The “ecological catastrophe limit” is represented by a sharp increase to the vertical of the marginal cost curve.… 

3. The “economic limit” is defined by marginal cost equal to marginal benefit and the consequent maximization of net benefit.… 

From the graph it is evident that increasing production and consumption is rightly called economic growth only up to the economic limit. Beyond that point it becomes uneconomic growth because it increases costs by more than benefits, making us poorer, not richer. Unfortunately it seems that we perversely continue to call it economic growth! Indeed, you will not find the term “uneconomic growth” in any textbook in macroeconomics. Any increase in real GDP is called “economic growth” even if it increases costs faster than benefits.

Casse
Three Limits to Growth
Herman Daly | Emeritus Professor, University of Maryland, School of Public Policy