If everyone became more frugal, would GDP per capita permanently drop as a result in the long term?
(Someone on reddit's AskEconomics forum posted this question. People started saying no, and 'it depends', and quoting all sorts of bits of theory to suggest that GDP would actually go up.)
This was my answer:
(Someone on reddit's AskEconomics forum posted this question. People started saying no, and 'it depends', and quoting all sorts of bits of theory to suggest that GDP would actually go up.)
This was my answer:
Yes.
Consider the effect of a new world-wide religion, which guarantees salvation to anyone who restricts their consumption to the level of a well-off 16th century peasant farmer.
There's a list of all the things you're allowed to have and do, and for all those things, there's a defined maximum rate of acquisition. No getting round the rules, barter and 'just picking stuff up' all count.
You don't actually have to get rid of the things you already own, but get hold of more stuff of any kind faster than the ideal rate and you're going to hell.
The religion catches on enormously quickly, because it's being proselytized by a fleet of hypno-drones controlled by an AI built by the Green Party.
And no more than one child per adult. You have to throw any extra ones down a well or something.
Nobody ever breaks these rules again ever.
Obviously, all hell is going to break loose, but when things eventually settle down, the amount of stuff produced is going to be equal to the amount of stuff consumed.
If that were not true, then spare stuff would just keep piling up everywhere. Anybody who has a job making stuff that is already lying around in vast piles is going to lose interest.
So GDP per capita has fallen to something like the mediaeval level, maybe a hundredth of what is is now.
There will be a slight extra term relating to ongoing hypno-drone maintenence, obviously. But I claim it will be negligible.
(Obviously this got deleted. It seems pretty straightforward to me. If macroeconomic theory can't describe this scenario, then it's broken.)
Consider the effect of a new world-wide religion, which guarantees salvation to anyone who restricts their consumption to the level of a well-off 16th century peasant farmer.
There's a list of all the things you're allowed to have and do, and for all those things, there's a defined maximum rate of acquisition. No getting round the rules, barter and 'just picking stuff up' all count.
You don't actually have to get rid of the things you already own, but get hold of more stuff of any kind faster than the ideal rate and you're going to hell.
The religion catches on enormously quickly, because it's being proselytized by a fleet of hypno-drones controlled by an AI built by the Green Party.
And no more than one child per adult. You have to throw any extra ones down a well or something.
Nobody ever breaks these rules again ever.
Obviously, all hell is going to break loose, but when things eventually settle down, the amount of stuff produced is going to be equal to the amount of stuff consumed.
If that were not true, then spare stuff would just keep piling up everywhere. Anybody who has a job making stuff that is already lying around in vast piles is going to lose interest.
So GDP per capita has fallen to something like the mediaeval level, maybe a hundredth of what is is now.
There will be a slight extra term relating to ongoing hypno-drone maintenence, obviously. But I claim it will be negligible.
(Obviously this got deleted. It seems pretty straightforward to me. If macroeconomic theory can't describe this scenario, then it's broken.)
You're interpreting "everyone" as I would, because you're an ex-mathematician. But several people seem to have interpreted it as "everyone in my own country, not the whole world", and answered that way.
ReplyDeleteIt is of course *possible* for GDP to go up: everyone's savings from that frugality could be invested by a benevolent-or-otherwise dictator (this in a sense happened in China) into making some really long term thing (or even just investing in the ability to make things). Or the spare things could be blown up by naval gunfire. Or we could waste them in a massive pointless war (this in a sense happened to America). None of those are particularly realistic, but then again neither is the premise of the question.