This post originally began as one on where economic growth comes from. After working on it for a while I realized that a blog post was not a good format for dealing with the topic. It was a book and the book has been written many, many times over.
We don’t really know where economic growth comes from. It’s a product of savings, debt, money, work, natural resources, and the tremendous extent and enormous pliability of human wants. No one of those things is sufficient to create growth. In general, government debt and money that’s simply spent into existence by the government create less growth than private savings and debt because of deadweight loss.
We have not reached the fully realized extent of human wants. There are still millions of Chinese and Indians who are desperately poor, in want of even the basics of life. Even in the United States where most people have the basics of existence there are two things which exemplify that even here we have not reached the fully realized extent of human wants: the self-storage industry and the iPad. Even at the depth of the recession the self-storage industry was reporting stable earnings or growth. The iPad is, in essence, a loss leader for apps. Apps have possibilities as limitless as human ingenuity. That has not yet been fully realized, either.
We have also not reached the fully realized extent of the available natural resources. I won’t document that but, rather, give you a little parable that should give you the general idea. Once upon a time obsidian was traded over an enormous area—tens of thousands of square miles, the full extent of the known world. It was used for tools, decorations, everything that made life possible and enjoyable. Obsidian became scarce. Some clever nutcase began to use copper instead. They began to supplement copper with bronze because it was cheaper and tougher. Then iron. Then steel. Then glass and plastic and in the near future smart sand. Human beings live in a tiny skin on the outside of an enormous planet and all of the resources we utilize have been obtained from that skin. There’s a lot more planet and a lot more planets.
Finally, other than a few mentally ill individuals nobody wants healthcare. We want health. Unless and until we figure out a way to start paying for health and stop paying when we don’t get it, we’ll get care but we won’t get health. We should not be surprised when, if we’re willing to compensate people almost indefinitely for care, we get a lot more care.