Question

Do you agree with the following statement?

"Because the environment is fragile and natural resources are finite, ultimately economic growth must come to an end" (Frank, Bernanke, Antonovics, & Heffetz, 2013, p. 514).

Why or why not? Provide support for your thoughts.

Answer 1

The statement is not necessarily true. It is true that growth in real GDP may be limited by natural resources due to pollution or depletion of resources. However, the growth in real GDP may not always be linked to growth utilization of natural and environmental resources. The growth in real GDP can also be attributed to -

1. Growth in real GDP may be due to increase in production of higher quality products or services. Service sector, that can improve overall quality of goods, may emerge along with other sectors and hence may lead the growth.

2. The increase in wealth and productivity expands the society's ability to take charge of safeguarding the environment. Some of the rich countries can often improve the pollution problems by investing in technology to further improve their living standards. However, this may not be possible with developing countries.

3. The markets often function well to take care of scarcity of natural resources. For e.g. If the crude oil becomes scarce then over a longer horizon of time investors will put their money in technologies that reduce fuel consumption.

Thus, the limits to growth can actually be dealt by markets or political processes.