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America's Greatest Problem; The Misunderstanding of Exponential Growth:

By       Message Mike Folkerth       (Page 1 of 2 pages)     Permalink    (# of views)   12 comments

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Exponential growth (or geometric growth) is growth by a fixed rate, such as 5% per year. This is opposed to linear growth which is growth by a fixed number. For example, if a family consumes a loaf of bread every week, they would consume 52 loaves of bread per year, year in and year out. While over time, the consumption of the family would grow linearly, or on a cumulative basis, their annual consumption would remain constant.

 

The first year our family would consume 52 loaves, the second year 52 loaves, for a cumulative total of 104 loaves and then 156 in the third year and so on. This is much different than the U.S. economic system of exponential growth, which grows geometrically or in proportion to it current size.

 

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Should we have applied exponential growth to our loaves of bread and factored a growth rate of just 4% per year, after 17.5 years the family would be using 2 loaves of bread per day. In another 17.5 years, 4 loaves of bread per day and so on to a point that over a given period of time there would not be enough bread in the world to fill the demand.

 

After reading the above example, how many of you thought, “Seventeen and half years is a long time to double?” It is my belief that the total and complete disconnect from time is the culprit that allows us to base our economy on an impossible mathematical foundation; that of exponential growth. Any exponential growth calculation, when applied to a tangible resource in a finite environment, is a model only valid for a temporary period of time.

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The other possibility for our mystifying acceptance of the impossibility of exponential growth (other than misunderstanding the element of time), would be that we view the time that the growth scheme will wor k as being sufficient to last through our personal life span.

 

Could it be that as a whole, we simply don’t care what happens to those who will come after us? And that we justify our greed and inaction under the thin veil of “they” will find a way? I’ll leave that for you to decide.

 

Our system of economics in the U.S. is in fact based on exponential growth. Every politician from small town mayor to the president of the United States promises growth. Not linear growth, but exponential growth.

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When our government bean counters say that the economy is growing by 4% annually, they are referring to 4% of the current economy. Or, that our overall economy is now 104% of what is was last year. This promised growth will continue only until such time that it reaches an impenetrable barrier such as 100% depletion of a given critical resource, for instance…oil. Or, the inability of resources such as farm land to produce sufficient food for the exponentially growing population of the world.

 

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Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 

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