Modern Monetary Theory (MMT) can be applied to growing economies. Equally, as Jason Hickel rightly observes, MMT is also an appropriate macroeconomic framework for proponents of degrowth. The theory makes clear that a currency-issuing government always has the capacity to maintain full employment through implementation of a job guarantee, irrespective of the overall level of aggregate demand or rate of economic growth. As currency issuer, the government faces no financial barrier, nor has any need of profit. Whereas employment in an economy left to the whims of for-profit firms slumps whenever demand slumps – not least because private firms as currency users are financially constrained and subject to the profit criterion – currency-issuing governments have the capacity to maintain full employment at all times....
heteconomist
MMT Applies to Both Growth and DegrowthPeter Cooper
Jason Hickel
DEGROWTH AND MMT: A THOUGHT EXPERIMENTJason Hickel | Visiting Senior Fellow at the International Inequalities Institute at the London School of Economics; Professor at the Institute for Environmental Science and Technology at the Autonomous University of Barcelona; Associate Editor of the journal World Development, and serves on the Statistical Advisory Panel for the UN Human Development Report, the advisory board of the Green New Deal for Europe, and the Harvard-Lancet Commission on Reparations and Redistributive Justice.
I've been fairly hostile to advocates of 'degrowth' the few times I have encountered them. Maybe a bit unfairly- but man, these people need to hire a public relations firm to give them some advice about how to present and explain their goals. I mean ultimately I think the goal is an economy that is ecologically sustainable. And that seems like a worthy goal that I support without getting into questions of shrinking economic activity or even worse, human populations that already exist. And unfortunately some of their proponents start citing things like the Laws of Thermodynamics as if their mistaken applications make their arguments stronger.
ReplyDeleteWell Jason Hickel's article seems very reasonable.
Degrowth will be achieved the hard way. It will be unreasonably messy.
ReplyDelete@Jerry Brown
ReplyDeleteIn your views, why the Laws of Thermodynamics are a poor argument for the degrowth?
Magpie, they are a poor argument because the Earth is not a closed system. As in more energy from the Sun hits the Earth every single day than we use up in fossil fuels. Sure, maybe over a billion years it might be reasonable to say that entropy ensures that we run out of energy, but there is nothing stopping us from using that energy in the next few million years. And that is just solar energy and it is more than possible we will eventually learn to harness fusion energy that we can create from matter here on earth.
ReplyDeleteAnd there are things like gravity that aren't going away anytime soon that we cannot 'use up'. There are many potential energy sources in the world itself as well as from outside the world that will not go away no matter how much we use- just so long as we figure out how to use it. So the arguments trying to use the second law of thermodynamics as a basis are very weak.
ReplyDelete@Jerry Brown,
ReplyDeleteMagpie, they are a poor argument because the Earth is not a closed system. As in more energy from the Sun hits the Earth every single day than we use up in fossil fuels.
I see what you mean. And I agree that that would be a poor argument.
What I am not sure is that that is what degrowthers argue. To my knowledge, what they do argue is that (1) it takes energy to produce energy, and (2) energy degrades into heat and becomes unusable.
Fossil fuels, for instance, concentrate the solar energy that living organisms once accumulated and gathered; once fossil fuels are burnt, part of that energy is used to produce work, part dissipates as heat. That increases entropy, but it is not entropy they worry about (at least not in my reading): it's the byproducts of combustion.
Much closer to what you say is the fact that not all sources of energy contain as much energy, so it is possible that the use of some energy sources may end up requiring more energy as an input than they offer as output. But there are other reasons why those alternative energy sources could be less satisfactory.
I myself read Hickel's article a while ago, and I might be mistaken, but I can't remember him using the word entropy once. And he is a degrowther.
Well, I have only been exposed to a few of them and the arguments I heard may not be representative. I did say Jason Hickel's article seemed very reasonable and I meant that as a compliment compared to some other degrowth advocates.
ReplyDeleteAs to taking energy to produce energy, that's not really true in a meaningful way. You can just look at the sun or any of the active volcanos on Earth and realize that at least no human input is required in the production of that energy. Or even something like a water wheel that uses the force of gravity on water to power the wheel.
If the argument is we need to limit the byproducts of combustion because they are ruining our world- that is a good argument. It is an argument for finding alternative energy sources. It does not necessarily translate into a 'degrowth' in GDP argument.
Building renewable infrastructure requires massive amounts of fossil fuel.
ReplyDeleteProjects like China's Belt & Road initiative will also require massive amounts of fossil fuel.
One way or the other, CO2 emissions will continue since the vast majority of people want to improve their standard of living.
Everyone has been conditioned to believe in a prosperous future. Civilization will go for broke in pursuit of that narrative.