In December, there was a resurgence of “degrowth” advocates in the media, with two article Issuer Nature It is especially attracting attention on X (formerly Twitter).
Although the fallacies underlying the degrowth movement are not new to economics, it is worth revisiting their important relationship to monetary policy in the central banking era.
Proponents of degrowth typically argue that:
Wealthier economies are abandoning the goal of gross domestic product (GDP) growth, cutting back on destructive and unnecessary forms of production to reduce energy and material use, and reducing human needs and welfare. Economic activities should be focused on securing This approach, which has gained attention in recent years, can enable rapid decarbonization and halt ecosystem destruction while improving social outcomes. ”
Now, there is a kernel of truth to this argument. While it would be a mistake to completely ignore GDP as a useful measure of economic development, it would be equally a mistake to focus solely on GDP. GDP is incomplete weighing. The report counts the government's wasteful social programs, destructive military spending, and spending on natural disaster recovery as contributions to economic growth. It also significantly underestimates growth in housing production and black and gray markets, which evade government statisticians' calculations.
This premise betrays perhaps the most central fallacy at the heart of degrowth and central planning in general. Both assume that the optimal use of scarce labor and capital is obvious or can be ascertained through big data and burgeoning artificial intelligence technologies.
As the Austrian School emphasizes, this is not the case. Instead, the market is the next step. Discover Optimal use of resources. This discovery is made by the actions of entrepreneurial agents who make judgments about the uncertain future value of the resources under their command and who can profitably direct the resources to higher-value uses. You can get
Under degrowth policies, resources directed by state bureaucrats, PhDs, or machine learning algorithms are not subject to market profit and loss calculations, but to the whims and subjective evaluations of economic planners. Dew.
Degrowthers also misunderstand monetary policy and its role in business cycles. For example, Hickel and his coauthors argue that recessions “bring chaos and social instability and occur when growth-dependent economies are no longer able to grow.” According to degrowthers, recessions are the result of “growth dependence,” including the fiduciary duties of corporate managers, unreliable funding for pensions and social programs, and cross-border capital flows. (How scary!)
The economist Ludwig von Mises, a central figure in the Austrian School, proposes an alternative to this view. Austrian business cycle theory. In this theory, business cycles (that is, cycles of expansion and recession) are caused not by growth dependence but by credit expansion at the hands of central banks. By artificially lowering interest rates, central banks induce the implementation of long-term projects that would not be initiated at market rates. When interest rates return to or approach the market's natural rate of interest, as is probably happening now, the unprofitability of these misguided projects rears its head and leads to failure. What follows is a period of recession, or “bust,” in which economic activity slows or contracts, during which resources previously devoted to failing projects are reallocated to more profitable projects. Masu.
From an Austrian perspective, bankruptcy is an unpleasant but necessary corrective mechanism to right the wrongs caused by expansionary monetary policy. mises I will explain:
A return to financial stability will not cause a crisis. It only exposes fraudulent investments and other mistakes made under the illusion of illusory prosperity created by easy money. People realize the mistakes they have made, are no longer blinded by the illusion of cheap credit, and begin to readjust their activities to the real conditions of the supply of the material factors of production. It is this – admittedly painful but inevitable – adjustment that constitutes depression. ”
Contrary to the degrowth perspective that recessions are an inherent feature of growth-oriented market capitalism, recessions allow markets to wipe out misallocated and wasteful resource allocations that would not have occurred without central government. Mises shows that it is a means. Banking and degrowth advocates themselves may oppose it.
By focusing on GDP and private “growth dependence,” degrowth theorists miss what may be the central cause of much of the U.S. economy's negative effects. federal reserve system. Without the Fed's inflation policy, recessions would have been milder and less frequent, and the financial sector would have been less central than Hickel and others lament.
If degrowth advocates want to improve the functioning of the market economy, they should join forces with libertarians and conservatives to demand a stable currency. influenced by market forcesnot political gain.
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