The Invention of Infinite Growth

The star of Christopher Jones’s The Invention of Infinite Growth is economist Robert Solow, whose widely used model holds out the prospect that there may be no end to economic growth. Jones admits up front that “When I began this book, I expected to write a blistering critique of the economics profession” (p. 4), because—driven by thinking like Solow’s—economists have convinced most people of their optimistic “infinite growth” conclusion—a conclusion that he sees as both dangerous and deluded. Despite learning to appreciate the wit, intelligence and progressive political values of Solow, Jones still casts him and the economists who have followed him as the unintentional cause of trouble. Economists cannot really undo the damage arising from their models, but they should at least attempt to do so because their way of seeing the world is one of the principal roadblocks to dealing with the serious environmental problems humanity faces, as Jones sees it.

While I do not agree with Jones’s environmental pessimism, nor with his belief that models proposing the possibility of unending economic growth are dangerous delusions, I can recommend his book as a sweeping, engaging and capable history of economists’ ideas about economic growth seen through the lens of environmental concerns. Jones earned a PhD from the University of Pennsylvania’s History and Sociology of Science Department and is an associate professor of history at Arizona State University. Despite not being formally trained in economics, his knowledge of the field is impressively broad. He insightfully surveys a striking array of thinkers, including Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill, William Stanley Jevons, Richard Ely, Thorstein Veblen, Harold Hotelling, John Maynard Keynes, Simon Kuznets, Paul Samuelson, Moses Abramovitz, W. Arthur Lewis, Joan Robinson, Edward Denison, the leading economists at Resources for the Future, Nicholas Georgescu-Roegen, Ezra Mishan, Kenneth Boulding, Herman Daly, Julian Simon, Paul Romer, and, of course, William Nordhaus. Sorry for the long list, but the breadth is much greater than this roster suggests. While I have omitted many, there are only a few I would have included in a book like this, but who Jones leaves out—among these are Friedrich Hayek and Erich Zimmermann.

However, the book’s most serious omissions aren’t any particular economists, they are Solow’s model itself, the billions of non-economists in the world, and important statistics on economic growth and the environment.

A chapter titled “The Kingdom of Solovia” describes Robert Solow’s key contributions—especially his two breakthrough papers “A Contribution to the Theory of Economic Growth” (Quarterly Journal of Economics 70, no. 1 [1956]: 65–94) and “Technical Change and the Aggregate Production Function” (Review of Economics and Statistics 39, no. 3 [1957]: 312–20). In the 1957 (p. 314) paper, Solow explained a simplifying assumption by stating that “for present purposes, ‘capital’ includes land, mineral deposits, etc.” Jones argues that this was one of the crucial steps in economists’ systematic effort to ignore the environment and natural resources. Natural resources weren’t viewed as a separate category by Solow. They were lumped into capital and the two were essentially viewed as perfect substitutes. The depletion of natural resources could be completely offset by increasing physical capital. A gross oversimplification, indeed. Jones perceptively adds that “the exclusion of the natural world was not forced upon him by the Cobb-Douglas production function” (p. 107) Solow chose to use.

Solow’s model is the co-star of The Invention of Infinite Growth, but it never appears on stage. It is always talked about but never seen. The uninformed reader will wonder what it’s all about and suspect that the model is extremely complicated and just too rarefied for anyone without a PhD from Solow’s MIT to understand. Nothing could be further from the truth. Jones should have added a single equation to his text, along with a simple graph of the model. This would make the narrowness of the model much clearer, strengthening his point about the decision to leave nature out of the picture. The basics of the model are so simple that I use it in my Introduction to Economics course and in a course on American economic history that I teach to high school teachers. Here’s the missing equation: GDP = ALαKβ. Gross domestic product (output) is a simple multiplicative function of two inputs—labor (L) and capital (K)—each raised to a power. The A variable in the equation is called total factor productivity (TFP). It is a unitless measure of how efficiently an economy turns these inputs into outputs. That’s it. Solow’s key point was that the A in the equation can and does rise over time, potentially yielding infinite growth. Though he doesn’t put it this way, Jones’s counterargument is essentially that Solow and other economists should have used a richer variation of the Cobb-Douglas production function in their empirical work—perhaps something like GDP = ALαKβRγ.  This version adds natural resources (R) as a third input and suggests that GDP will stop rising when decreases in natural resources offset increases in the other inputs and TFP. (When I teach this model, I put everything into per capita terms, which is the kind of growth people really care about.)

The second missing set of characters, as I noted above, is the billions of non-economists in the world. Jones argues that economists like Solow convinced the world that economic growth can be unending and is—on the whole—a desirable thing. I suspect that the causation goes the other way around. Economists were once fairly pessimistic about the prospects for growth, especially during and after the Great Depression. The march of events disabused them of their pessimism. The economy grew. A lot. So, economists needed to explain why. It didn’t take acute perception to realize that lack of aggregate demand wasn’t an important bottleneck to long-run growth, nor to realize that the technological improvements (captured in the Cobb-Douglas production function’s TFP term) were a primary driver to growth. Anyone with a bit of historical perspective could see it and—just as important—people wanted economic growth. The desire for growth was not merely a bipartisan consensus in the United States. It wasn’t sold to people by persuasive economists. It has been a nearly universal human desire. I suspect that almost all of the 117 billion or so humans who have ever lived have desired a higher standard of living. Jones suggests that economists let the idea of unending growth out of Pandora’s Box and quotes environmentalist Edward Abbey, who said that “growth for growth’s sake is the ideology of a cancer cell” (p. 258). But the people I know and know about don’t desire greater output for its own sake. They mainly want it because it makes life more comfortable, enjoyable, and interesting. It also brings more status and power. While the latter two may be zero-sum concerns, most of the reasons to desire growth are for humanity’s sake—not growth’s sake.

The third missing set of characters is numbers. In a book about growth, it is surprising to see no graphs or tables showing the remarkable economic growth of this country and the world as a whole. Jones concedes that economists’ invention of models yielding infinite growth may have been excusable in the post-World War II boom period but says that their time has passed. However, it’s not clear that the “golden age” of economic growth is over. Per capita growth for the world as a whole has remained very strong. By my calculations (using data from Our World in Data) global real GDP per capita rose by 30 percent in the 1950s and 35 percent in the 1960s. This compares to 27 percent in the first decade of the twenty-first century and 23 percent in the 2010s. That’s a pretty robust growth rate, barely a step behind the glorious post–World War II period. More importantly, the amount of absolute growth has soared. Global real GDP (in 2021 dollars) rose by $18.7 trillion between 1950 and 1970 and by an astounding $76.8 trillion between 2001 and 2021. Since modern economic growth began in the eighteenth century, those who have argued that it cannot last much longer have looked pretty silly (stupid?) in retrospect.

Also missing are numbers on environmental quality—such as air and water pollution. Pollution levels often rise as countries begin to develop, but then they fall once GDP per capita passes a certain point. Developed countries like the United States passed this peak decades ago. And many developing countries passed the peak more recently, including China and Brazil. In addition, the entire pollution vs. real GDP per capita curve—the Environmental Kuznets Curve—has shifted downward over time, so that pollution levels at any level of development are lower now than in the past. An early demonstration of this is in Susmita Dasgupta et al. (“Confronting the Environmental Kuznets Curve,” Journal of Economic Perspectives 16, no. 1 [2002]: 147–68), which concludes that “the driving forces appear to be economic liberalization, clean technology diffusion, and new approaches to pollution regulation in developing countries.”

Likewise absent are numbers on natural resource stocks. One of Jones’s points is that decreases in natural resources will erase growth from technological improvements and increases in the capital stock. However, key natural resources are becoming more abundant in economically meaningful ways. For example (see Thomas Covert, Michael Greenstone and Christopher R. Knittel, “Will We Ever Stop Using Fossil Fuels?” Journal of Economic Perspectives 30, no. 1 [2016]: 117–37), proven reserves of oil and natural gas have risen in recent decades—despite the fact that annual production is also rising. In addition, David Jacks (“From Boom to Bust: A Typology of Real Commodity Prices in the Long Run,” Cliometrica 13, no. 2 [2019]: 202–220) finds that most commodities’ inflation-adjusted prices have fallen since 1900. These trends are an important reason that economists continue to use the Solow Growth Model. Perhaps a model with natural resource bottlenecks would be more realistic, but we aren’t running into many of these bottlenecks, so the simpler model works pretty well.

Finally, let’s consider the likelihood of infinite growth. Infinity is a pretty big number! But economists aren’t arguing that GDP will ever equal ∞. They are arguing that growth can go on forever. Jones quotes Romer’s conclusion that “per capita output can grow without bound” because “knowledge will grow without bound” (p. 213). I introduce Romer’s model to students and add a quote from that famous philosopher Buzz Lightyear: “to infinity and beyond!” As I see it, the principal counterargument to unending growth is not that economically important resources are running out or that the planet is doomed but that it takes a lot of brains to come up with the ideas that drive economic growth. If total fertility rates continue to fall, global populations could shrink dramatically in coming generations. (See, for example, my review of Dean Spears and Michael Geruso, After the Spike: Population, Progress and the Case for People.) That trend could stop growth in its tracks. Surprisingly, Christopher Jones says nothing about this crucial issue.