Tuesday, March 23, 2010

When you get to the bottom. Stop digging.

I encountered this description of Growth Model economics while I was researching Paul Romer.

“Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. Possibilities do not add up. They multiply.”

I have serious doubts that those at the tiller of the New Zealand economy (the geniuses behind building a cycle track as a pathway out of recession) have the slightest clue about how to grow a sustainable future.

Proposed mining of conservation land makes no sense whatsoever. Indeed mining mineral deposits inherently has no future. The short-term gains, if they eventuate, can only ever be a short term bonanza. Minerals are not renewable. The damage to the environment cannot be undone. Nor can the damage to New Zealand’s ‘clean green’ reputation on which we have invested so much.

The government owned company Solid Energy digs coal out of the ground and either uses it to fire electricity generators or to ships it off to China to power smelters and power stations – the carbon emissions from excavation in New Zealand and exhaust in China belongs on our carbon balance sheet.

The sustainable future for New Zealand doesn’t lie in scrounging about in the muck it should be centred on innovation and the creation of ideas that can be shipped without atoms. A computer game or iPhone application can be sold thousands of times at little or no additional cost. The same can’t be said for a sheep carcass (even one that has been skilfully butchered in to premium cuts) or a Central Otago Pinot Noir – even one with the finest nose.

My idea for Idealog magazine was centred on this philosophy. If the United States, the world’s most powerful economy (still, if not for long), can profit more from copyright (movies, music, books, games, …) than any other export - then so can New Zealand. We need to develop a creative economy - not one based on primary production. Ideas are the currency of the future and we should be investing in them and mining our minds.

At the moment we are simply digging a hole for ourselves by aiming too low.


  1. Great post David.

    I think of NZ as a brand much the same as I think of my company. In the best interest of my company and in any decision i take I respect what my company is about: giving a child a smile, organic natural ingredients, fun, community, healthy....

    at the same level, the main interest for NZ is its green/clean reputation. everybody knows it, even my grand mother 93 years old, she knows NZ is a clean, green country.

    If they do not get it.. it is not because they need a branding lesson by me or you .... it is hard for me to believe they do not understand the advantages of building a more sustainable economy. They clearly have personal interest, and they clearly put their personal short sighted fucking interest first, and then the common interest. It has happened in America and in Europe for many years.. and now it is happening here as well.

    NZ doe not have a clear resolution on CO2 and when we are becoming carbon free...
    Costa rica and vatican city will be carbon free country in the next 5 years apparently..
    Not organizing and promoting organic villages, crop with 100% organic productions, like it is happening in other parts of the world, not opposing to whaling... being favourable to digging and mining destroying our landscape and so on and so forth.. are all the opposite of what we expect.

    They are bankers dressed as strategists and politicians and now that the story unfolded and we know what bankers are like we should understand where this poor, short sighted choices are coming from.

  2. You just changed my mind David (and I can be quite stubborn so that's quite an achievement). I thought "as long as they do some landscaping after they've finished mining, that's ok", but you've helped me to see that the future isn't in consuming those non-renewable resources, it's about consuming & trading in ideas. Thank you sir.