One of the core arguments used by economists who accept physical limits to growth but argue economic growth can continue forever is that economic growth can be decoupled from physical growth through efficiency gains.

The common rejoinder to this argument is to invoke the Jevons Effect – that efficiency gains are more than offset by increased consumption of the more efficient product. However, this is not a strong argument because while the Jevons Effect is often observed, there is no necessity that it occurs.

There is a much stronger argument that decoupling is mathematically impossible in the longer term. It is valid for the global economy as a whole which exceeded the planet’s biophysical carrying capacity in the 1980s.

The mathematics of decoupling requires that efficiency gains increase exponentially through time at the same rate as economic growth so that there is no resultant increase in the material throughput of the economy.

To illustrate this, consider economic growth of 5% per annum and decoupling (efficiency gains) also proceeding at 5% per annum, such that the overall impact remains constant. It follows that economic growth and efficiency gains will both double approximately every 13 years. Thus, things will be twice as efficient in 13 years, four times as efficient in 26 years, 8 times as efficient in 39 years, 16 times as efficient in 52 years and 256 times as efficient in 104 years, ... etc.

In the real world (as opposed to the imaginary world of economic thought) it becomes harder and harder to achieve efficiency gains through time (law of diminishing returns), not easier and easier as the flawed economic logic of decoupling demands. Myth demolished.

Richard Sanders 19/04/2012

Please feel free to share