Honey, I shrunk the economy!

Screenshot Tonari no Kashiwagi-san 2.5

Life isn’t so bad after all! Just ask the Japanese, they aren’t dead yet after two decades of economic stagnation. They haven’t even stopped making manga and anime.

For several generations now, economic growth has been seen as not only desirable but the natural state of things. The occasional wild-eyed hippie, radical environmentalist or other fringe voice from far outside the halls of economics will sometimes fantasize out loud about the zero-growth society, but it is not really taken seriously. Well, perhaps it is time to redefine growth: In an age where so many things are growing smaller, why not the economy?

There is a kind of “speed blindness” after all these decades of economic growth. When we learned that Japan had zero growth for over a decade, we imagined people wearing ten year old clothes and driving ten year old shoes, because they had not had any economic growth in that long. But what it really means is that they can’t buy more expensive clothes or more expensive cars than they could ten years ago. That is not a leading cause of death exactly, not in the rich world at least.

It’s been over 2 decades now in Japan, and Europe is approaching its first. Europe is a bit different because it is not really a country, there are some countries in which poverty really is spreading and biting ever deeper, notably in Greece, but also Spain is struggling with half of young would-be workers falling outside the official economy. (Some of them are working in the underground or black economy, which is traditionally large in southern Europe. Still, there is definitely a problem.) In northern Europe, growth has resumed, just not very fast.

The USA is a special case again: The nation as a whole has economic growth, but pretty much all the new money flows to those who are already rich. Depending on how you look at it, ordinary workers have either no growth or they are earning a little less over time. While household income is holding up compared to 40 years ago, there are now more household members working outside the home, so that the individual income is somewhat lower than in the previous generation. (This may explain some of the behavior of those who were young 40 years ago.)


So, 40 years ago, could you buy a tablet that you could bring with you anywhere and
-read a million books for free, anywhere, at your whim, instantly
-buy a million other books (many at a discount), anywhere, at your whim, and read them instantly without increasing your luggage weight or your shelf space at home
-listen to a million songs and melodies, anywhere, at your whim, for free or nearly so
-watch thousands of movies for around $10 a month (or free if your conscience failed you)
-let you talk to people around the country or around the world, for free
-let you read or watch news from anywhere, anytime, at your whim
-let you keep up to date with what your old friends and acquaintances were doing
-let you play games varying from chess to complex role playing games
-and more?

I think not. Even in the late 1990es, which was a pretty cool time all things considered, Supergirl and I had to traipse to the local video store and pick out a movie that happened to not be rented out at the moment, pay a modest rental fee, lug it back home and play it on the VHS machine. Later we had to trudge back to the store and give them the box back.

Today, I can watch a Japanese animation at the same time it airs in Tokyo, but with English subtitles. With American movies there is a substantially longer delay, because Americans think with their flagpoles, evidently. But it still beats having to wait until the local video shop guy decides to update his inventory. And there is no need to struggle up and down the steep hill between home and the shop on an icy road in the middle of winter only to find that they don’t have the movie we wanted to see so we have to make do with another.

So how do economists measure the value of this radically improved convenience? How do they measure the improvement of the saved time and money? They don’t. On the contrary, this is called economic “contraction” or “negative growth”. The basic idea in economics is that the more money people spend, the better. (But at least they adjust for inflation, or things would go horribly wrong very fast.) There is no way in classic economics to adjust for the fact that people spend less money because they need less. This idea is not only hard to measure, it is also utterly alien to the profession and the human mind in general. After all, normally, when we meet our needs easily, we promote a want to become the next need, and a wish to become the next want. The human mind is a highly efficient factory of desires, cravings, wants and wishes. So after a few days of saving money, you don’t really feel richer anymore. But you are. If some circumstance was to disable the new technology, and you tried to revert to the old, you would suddenly need more time and money to fulfill the same needs. That  you would definitely notice.


This is not the only way in which the new reality collides head-on with economics and the old common sense. For instance, if you buy a paper book, you don’t only pay for the content. You pay for people to cut down trees, other people to drive the wood to the paper mill, factory workers to change the wood into paper (and by the way you also pay people to make chemicals used in the bleaching process), drivers to drive the paper to the printing press, workers at the printing press (and workers making ink), drivers to drive the printed books to the warehouse and possibly to your local bookstore. Oh, and people who make the trucks used to drive all this stuff for hundreds of miles, and the refinery workers and oil drill workers, and the people making machinery for the factories and so on.

All of this hectic activity from mining and drilling and lumbering to manning the cash register in the bookshop, all of this is economic activity and makes the world a better place according to economics. Well, isn’t that true? Aren’t we doing something wrong when we are putting all these nice people out of work?

No, not really, because all this work (some of which destroys pristine nature, extracts resources that can not be put back, poisons the air and changes the climate) is now unnecessary. If we truly believe that it is virtuous to pay people to perform unnecessary work, then we can hire the laid-off workers and divide them into two teams: One that digs holes at some convenient location, and one that fills the holes. It is just as useful, safer, and has minimal impact on nature.

Now you can say that there are reasons to have paper books, and I won’t stop you. Perhaps you regularly spend a lot of time away from electricity, or screens give you a headache, or books just smell good. Nothing wrong with that: We still have vinyl records, even though they were replaced by CDs and the CDs by lossless electronic music formats. And despite way too many cars, riding still remains popular, because, horses! Most people who have a dog does not need it for hunting or herding, and most cats are not there for keeping the rodents down, not anymore. So there will likely be paper books around for quite some while, although some genres are likely to bow out.

But there is a rapid rise in affordable books which do not require lumberjacks, and this is measured by economists as an economic contraction, a downturn, even deflation since the prices go down. Deflation in particular is a terrifying concept that we should worry about and flail and wail, a problem that politicians should spend our money to counteract somehow, even if they don’t understand what it is.

This was just one single example, and you can expect to see much more of it in the future. For instance, solar panels are doubling in number every two years, and the price is dropping by 22% over the same time, on average. Back of the envelope calculation says that roughly in the time frame 2020 – 2025, the exponential growth of solar will sweep fossil fuels out of the tropical, subtropical and temperate zones. Oil, gas and coal will simply not be able to compete: Even with the cost of batteries to keep the power overnight, we will make electricity so cheap that only the rich will burn coal. Gas-powered cars will go the way of the vinyl records, although obviously it will take a decade or two for them to fade away.

Receiving clean power from the sky at a fraction of the cost instead of ripping off the topsoil, fracturing the land, polluting the groundwater and belching smoke into the air … do you know what economists will call this? You should know by now: Economic contraction, downturn, deflation. Somebody do something!

You think this is bad, wait until the food synthesizers appear (my target time is around 2040, but it could easily be a decade earlier). With the planet overflowing with cheap electricity and a little more progress in nanotechnology, the food synthesizer will break down simple organic material like grass or leaves and rearrange the peptids and lipids on a molecular level to produce whatever food we have programmed it to, somewhat like a 3D printer but with organic molecules and far higher complexity. There is nothing wrong with cows, but it will be cheaper and simpler to just put the hay in your food synthesizer the night before and get meat and milk when you need it. (Not that you actually need meat, but a lot of people like it.) The end of 10 000 years of agriculture as we know it. Cows reduced to pets. (Goats are better pets, by the way, they are awesome. Ask me about goats any day.)

Now this may sound like science fiction, and currently it is. Then again, the 3D printer was science fiction ten years ago. But what if it really happened? What if you could make dinner from the leaves you raked yesterday? Economists would describe a Great Depression the like of which has not been seen since the dawn of time. Let us face it, if we all became immortal, the economists would worry about the undertakers. It is called The Dismal Science for a reason.


In conclusion, traditional economics (and the politics that depend on them) are out of date. Certainly we could wish for ever more economic growth, and for the poor among us it certainly would not hurt. But for most of us, what we should really hope for is more of the “shrinkage” in which ever more expensive goods and services disappear in favor of simple or outright invisible solutions, where the things we need just are there when we want them. I for one welcome our new electronic underlings.

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