Efficiency

Tim Garrett shows that efficiency is an accelerator of economic growth rather than a means of conservation. It’s not hard to understand.

If a company increases its efficiency it will produce more profits which can be reinvested to grow the business.

Or if you insulate your home and spend the savings on an annual trip to Hawaii you will stimulate the economy and emit more CO2 than had you not insulated your home.

Efficiency can mitigate overshoot if you capture the dollar savings from the efficiency and prevent them from being spent. For example, tax all the efficiency gains and then bury the tax revenue. You could use the taxes to retire public debt but then you’d have to find a way to prevent the government from borrowing more money to replace the retired debt.

In addition, an efficient economy tends to be brittle and less resilient. For example, most businesses to increase efficiency have reduced inventories and their associated carrying costs by relying on just in time deliveries from all over the globe. If something were to disrupt global shipping and/or the credit system it depends on, most businesses would grind to a halt, including your grocery store, in a few days. Efficiency is not always a good idea. Sometimes it is wise to have some fat in the system.

Efficiency can and should be used to lessen the impact on our standard of living as the economy contracts. However people should realize that all of the low hanging fruit for efficiency has already been harvested.

I wrote more about efficiency here.

The biggest opportunities for reduced consumption are now lifestyle changes.

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