Translated from German with the help of AI. The original is the authoritative version.
For a long time, progress counted as unreservedly good: as something we should all perceive as an imperative. Today, however, books become bestsellers that call for "green shrinkage" (Ulrike Herrmann, Das Ende des Kapitalismus) or "liberation from abundance" (Niko Paech, Befreiung vom Überfluss). These stand paradigmatically for the degrowth paradigm that has emerged over the past decades, according to which what was previously called progress is not good but bad.
This new perspective on progress and related concepts such as growth, however, rests on a misunderstanding of the concept of progress. A misunderstanding, though, to which not only some critics of progress but also some of its defenders have fallen prey.
This misunderstanding lies in an objectivist concept of progress, that is, the idea that progress can be thought of detached from what people deem good. Closely tied to it is a misinterpretation of the concept of goods, according to which goods are taken to be objective. Together, these two misunderstandings issue in the regularly refuted forecasts of limits to growth.
Progress and the growth closely bound up with it refer to how subjects see the world. Progress and growth therefore do not exist in a world in which there is no one for whom something changes. We cannot detach them from the subjective perspective: progress means that an actor has success, that he advances along the path of realizing his goals. And someone experiences growth when he enjoys more welfare, in most cases because this person can reach more goals or can do so more cheaply.
So when we speak of progress and growth, we mean by it that we are better off — we get more of what is valuable to us!
The subjectivity of progress and growth entered economics in the course of the so-called marginal revolution, dated to 1871. While the classical economists — Adam Smith, David Ricardo, or even Karl Marx — assumed a notion of value that was objective at least in part, Carl Menger, Léon Walras, and William Stanley Jevons showed that by value we mean something subjective. From there it is then only a small step to the claim that, if value is subjective, progress and growth likewise have a subjective character.
The three pioneers, however, pursued subjectivism to different depths. Menger’s Austrian line carried it all the way into the concept of goods — the Grundsätze open precisely with the explication of the good as something subjective. Mainstream economics, by contrast, was inspired more by Walras’s and Jevons’s approaches and, swimming in their wake, missed a radical realization of the subjectivist insights. The marginal revolution was thus not a completed breakthrough but a development begun and only partly carried through — continued with broad consistency only by a few thinkers, such as Ludwig von Mises, Friedrich von Hayek, Erich Zimmermann, Julian Simon, or Israel Kirzner.
Within economics, subjectivism has largely established itself at least for the concept of value; in the broader public, by contrast, the discussion is often shaped by an objectivist understanding. This may also have to do with the fact that the indicators economists use — think of GDP — contain objectivist elements. But these are merely indicators, not the values, the progress, and the growth that these indicators are supposed to register in practice — and which are subjective.
The insight into the subjectivity of progress and growth in itself already suffices to expose the talk of limits to growth as false. For if these things are about how subjects evaluate their world, then it is obvious that the physical limits of that world are, in the end, irrelevant to how those actors evaluate it. Put starkly: since progress and growth refer to what someone finds good, but this is independent of the world — the monk may find very little of the material good and thus grasp the path toward it as progress and growth — the limits of the world cannot imply any limits to progress and growth. And this is purely an analytical insight — no empirical assumptions are needed.
Now one might object that very few people share the values of an ascetic. Against this backdrop one could then arrive at practical limits to growth: given the way most people simply are, endless growth in a finite world is not possible. But this line of defense, too, proves brittle on closer inspection.
Its error is an objectivist concept of goods and resources. Just as little as we mean something objective by “value,” we mean something objective by “good.” While things are in the world, by goods we mean what actors deploy in their action to reach their goals — based on their conviction that these goods help them attain those goals. The properly understood concept of goods, which Carl Menger placed so centrally in his Grundsätze der Volkswirtschaftslehre, shows the independence from the world of the goods, resources, and means that we deploy to achieve growth and progress. A good example is the rare earths, such as neodymium. Today neodymium is used, among other things, for magnets in smartphones. But the material has not only lain in the ground for aeons; it was already first isolated in 1885. It became a good only when the conviction matured that one could put the substance to corresponding use — and when corresponding action followed.
So from this perspective, too, it does not follow that the limits of the world determine the limits of goods, resources, and means. Rather, the subjectivity of these entities means that our imagination — insofar as it does so — sets us limits. But insofar as no limits are set to it, from this perspective too there are no limits to growth and progress. The creative entrepreneur can, in a sense, create new goods out of nothing — as the Japanese inventor Masato Sagawa did with the neodymium-iron-boron permanent magnet.
At this point, however, two steps must be distinguished that, in growth debates, often slide into one another. That goods are subjectively constituted is an analytical insight: it deprives the talk of limits to growth of its conceptual footing. That human creativity in fact always creates new goods out of “neutral stuff” fast enough to prevent the wanted from becoming unattainable once the old goods are exhausted is, by contrast, a contingent, empirical thesis — Julian Simon’s dispute with Paul Ehrlich was, after all, ultimately a bet on real, concrete price movements, which Simon won.
But even the economists, who did indeed take long strides through the development of the subjective theory of value in the course of the marginal revolution, were unable to win this insight into the subjectivity of the concept of goods consistently. True, there were pioneers like the already mentioned Carl Menger, or the American economists Erich Zimmermann and Julian Simon, who clearly recognized the subjectivity of goods as well and laid it out in their works: Zimmermann, for instance, distinguished clearly between “neutral stuff” and “resource,” which “become” — that is, when someone puts this “neutral stuff” to his own purposes; and Julian Simon emphasized, against this background, that human creativity is the “ultimate resource,” since it is precisely what ensures that resources come into being.
But the thoroughly subjectivist concept of goods has not really prevailed even among economists. A good example may be the discussion of public goods, which is often invoked as a justification of state intervention, yet is not subjected to the test of a subjectivist concept of goods. This merely insufficient subjectivism of the economists may be the reason why, in the argument against the limits to growth, the main focus seems to fall on the technological ingenuity of free enterprise.
This is problematic not only because the sharpest weapon in the confrontation with the critics of growth and the like remains unused. It is also unfortunate because the practical recommendations for action would be different.
For against the backdrop of the subjectivity of goods, the institutional framework is not incidental but constitutive. If goods arise from “neutral stuff” through entrepreneurial action, then what exists as a good at all depends on whether actors have the freedom, as well as the knowledge (always so emphasized by Hayek) and the incentives, to carry out such action. Israel Kirzner worked out precisely these conditions in his theory of “entrepreneurial alertness” and the discovery of profit opportunities: ‘false’ prices open up profit possibilities, profit possibilities awaken entrepreneurial alertness, and entrepreneurial alertness lets — in Zimmermann’s words — “resources become.” This chain presupposes a settled market economy, that is, private property rights, free exchange, and freedom of contract. A system without these institutions does not merely supply fewer goods; it prevents them from arising at all: the market can function as a “discovery procedure” (Hayek) only when actors are free and have the confidence to be able to exchange with one another.
As a philosopher or economist, one should advocate a precise concept of value and goods. As a liberal, one should internalize the subjectivity of these concepts: progress and growth always depend on each individual: insofar as we analytically conceive of actors as striving for the success of their action, we can call progress and growth good in this subjective and individual sense: it is precisely what the actors want. And then, when the actors are free to create goods, we will all profit, in the course of the cooperative division of labor.
