> > The entire economy is based on the idea of never ending growth
> I hear this a lot. As far as i know it's not actually true. Is there anything specific in orthodox economic theory that requires never-ending growth?
I think a charitable interpretation of this claim is: people's planning (which is usually limited to the short term, when it happens at all) typically assumes the optimistic case.
This is certainly true for everyone who lives paycheck to paycheck.
It's also true for companies who survive on a revolving line of credit to fund longterm operations.
There are many macroeconomic models with the assumption that populations will keep growing and worker productivity will not shrink. That alone should yield never-ending growth.
Yes. Without viable debt being possible, barriers to entry to all markets skyrocket. When barriers to entry increase, competition breaks down. Thus, viable debt must be possible. For viable debt must be possible, there must be an opportunity for the lender to realize real interests. In order for the lender to be able to expect real interest on average, there must be growth.
Thus, growth must always exist for the current system to continue.
> In order for the lender to be able to expect real interest on average, there must be growth.
Why?
This doesn't sound obviously true to me. Imagine an economy in perpetual long-term stasis, with zero inflation. There's a company which has a factory which turns a profit, because it makes useful stuff. Every ten years, they need to replace the factory. So they take out a loan, and pay it off, with interest, over ten years. The lender earns interest with positive real value from this. Is there anything in this story which is impossible? Is there a theoretical reason a world like that couldn't exist?
On average, if there is no growth in the economy, then the average debtor can not expect a positive return on investment (obviously). As a collateral, on average, a bank can not expect that the debtor will be able to pay interest on the loan. So selling loans honestly becomes impossible. This is not a theoretical concept, this is the reason why in pre-industrial times lending with interest was all but forbidden.
Let's expand on the example of your factory. Say that you have a factory, that needs to be replaced in ten years. Why would you take out a loan over ten years with substantial interest, when you can simply save up over ten years to buy another factory? Since there is zero inflation, this is incredibly better for you. And so, there is no reason for you to take a loan; and you won't take out a loan. For an economic transaction to happen, it needs to be in the interest of both party, and in a no-growth economy taking out a loan is either in the interest of the lender or the debtor, but never both, on average, for a given lending policy. This is not the case when there is growth, which is why we have banks, whereas we didn't really have any kind of lending infrastructure in times were growth was of or near zero.
The only people that might want a loan are people that don't have enough capital to get started, but in a zero-growth economy you cannot expect that they will be able to repay you, so you won't lend to them, and if you do lend to them expecting that they will not pay you back that will be at astronomical interest rates and will essentially be usury.
It's a relatively natural consequence of the fact that doing work creates value. One of the things you can work towards is creating more workers (by creating more humans, or better efficiency, or robots). Because these processes are basically exponential, you expect to see constant neverending growth.
The only real physical limit to productivity is our energy input. When we create things, we use energy and time to turn raw materials into useful stuff. Today most of our energy comes from the plants we eat (ie the sun) and from the ground. But we are not close to using even a small fraction of the energy that the sun gives us, so there is still lots of room to grow.
I always hear that there's inflation targets, and deflation and stagflation are both worse than inflation. In this sense, the price of things always goes up, but so should wages. I don't know if economists plan on purchasing power always going up.
I don't think this is relevant. Prices and wages going up aren't growth. In fact, inflation represents a _devaluation_ of a unit of held currency. There's a reason everything is measured in real prices instead of nominal.
I hear this a lot. As far as i know it's not actually true. Is there anything specific in orthodox economic theory that requires never-ending growth?