Are There Limits to Economic Growth?

September 20, 2021

Consistent with human experience over the last several centuries, conventional wisdom holds that innovation and technology have all but eliminated the limits to economic growth. But new scholarship – from outside the realm of traditional economics – contends that this is not true.

What happens when a bright and curious engineer, research scientist, and student of energy systems modeling decides to look at how the economy works, shorn of the assumptions that underlie conventional economic theory? We get a startling overview of a self-directing complex system integrating economics and the physical world in Carey King’s recent book: The Economic Superorganism: Beyond the Competing Narratives on Energy, Growth, and Policy (Springer, 2020). King tackles the contradictions and connections between narratives and data to build a framework that explains economic trends and processes that leave mainstream neoclassical economists baffled.

The three pillars of the book are (1) the Earth is finite and the limits to growth hypothesis (from the 1972 book of that name) is valid; (2) energy has a central role in all economic activity far beyond its relatively small financial share of the overall economy; and (3) the economy can be described as an economic superorganism (ESO), the sole purpose of which is growing the amount of “useful work” (defined as the product of the amount of energy available and the efficiency of its use) it can generate as long as it can.

Importantly for advisors, the ESO is ever evolving, but it is not forward looking. Thus, even if observers believe the economy is approaching physical limits, the economic system cannot perceive that, and therefore nor do prices and markets, because they are based on short-term factors, not long-term trends.

Further, the ESO cannot be easily managed, beyond small adjustments in its general forward direction toward greater fitness through control of more useful work and more resources. Fighting climate change will reduce the net energy available to society (and the ESO), which reduces useful work and perceived fitness and will therefore be very hard to make happen. The maintenance of societal structures and high human well-being might be of no concern to the ESO if it requires reduced resource consumption.

This is an ambitious (and contentious) set of conclusions. What credibility should we give them?

King received his PhD in mechanical engineering, not economics, and he is the associate director of the Energy Institute at the University of Texas, Austin. By training and inclination, he looks at data, models systems, and questions assumptions. He developed an understanding of the central role of energy and material limits in all aspects of life (including economics), but when he presented his framework to his colleagues at UT, one of the senior researchers in the audience pointed out that his framework defied standard economic thinking. This motivated King to study economics further, especially its assumptions and thought processes. He decided to write this book to explain if and why, contrary to conventional economics, natural resource and energy concerns are crucial factors in explaining economic systems and situations, and to present a model integrating energy flows, debt, and wage power with standard economics.

This is the third in a series of reviews I have presented in Advisor Perspectives with different authors challenging the assumptions and practice of standard neoclassical economics. (The others are “Energy and the Wealth of Nations,” found here, and “The Coming Revolution in Complexity Economics,” found here.) Unfortunately, the economics profession is a powerful and largely closed society whose members fill the central banks, major academic centers, and major policy bodies, and are unwelcoming to new fundamental ideas as other sciences were before their “paradigm shifts.” The ideas in these books are not finished or worthy of instant adoption, and have not yet even been debated in the forums of policy or academia.

The Economic Superorganism is very readable and systematic. There are lots of graphs and pictures, but no equations. Because we often think and make decisions based on narratives, King structures his book around several, including: Are there limits to growth (yes), and are “renewables” better than fossil fuels (probably, but the ESO just wants access to energy). He does not provide many “facts” in the form of stories – where and how do we get energy, what will happen if we hit shortages or exceed climate targets, how fast can transitions occur – but those would make a 450-page book much longer and generate numerous side controversies distracting from the main thread, which is the existence of the ESO and its nearly inevitable path.

Each of the 10 chapters takes the story in a new direction. In chapter six, he challenges the conventional models of how growth happens, which minimizes the importance of energy as an input. He then introduces his human and resources with the money (HARMONEY) economic growth model, explained further below. This is central, but hardly the only valuable insight in the book. Here are some others:

1) Humanity and the economy are part of the physical world. This world is finite and subject to laws of nature, which cannot be changed. The rules of society are human constructions, which can be changed (though often not easily). Systems thinking is a more valid way to study the economy than linear cause-and-effect models.

2) There are “limits to growth,” and the model presented in the 1972 book of that name has proven to be remarkably accurate after 50 years. It projected declines in per capita food and industrial production, followed by peaks in pollution and, later, population, during the first half of the 21st century.

He believes we have already started to experience limits that are slowing societal growth, including:

a. Spending on food and energy as a share of GDP is stagnant, after falling for 200 years.
b. The average price of oil has been much higher since 2007 than it was in most of the twentieth century.
c. Population growth has slowed in the U.S. and in most of the world.
d. Economic complexity in the U.S., which is costly to maintain, reached its maximum level around the year 2000.
e. The ratio of debt to GDP has been rising steadily since the 1970s and is now accelerating.
f. Economic inequality has been rising since the 1970s, when per capita energy stopped increasing.
g. Since 2008, interest rates have been lower than ever before.

3) Energy is the key to all activity, including economic activity. Interestingly, the first attempts to measure the size of “the economy” through GDP, came in the same decade that the word (and concept of) “ecosystem” was defined, the 1930s. In a parallel to other ecosystems, the economy pursues the “maximum power principle,” with a goal of “appropriate[ing] as much power, or energy flow, from the environment as possible,” to improve its fitness for growth and survival. (p 328)

4) A surprisingly informative measure of the physical size of the economy is the amount of “useful work” created, which is defined as the product of energy availability and the efficiency of using that energy. There is an almost perfect correlation between energy and GDP, but useful work explains even more.

5) Neoclassical economics largely assumes away the role of resources and energy, reducing everything to labor and capital. This creates a large ill-defined residual called “total factor productivity” that accounts for more than half the “cause” of economic growth. Including energy, and especially “useful work,” as an additional factor to capital and labor successfully explains growth very well. In fact, in King’s model, growth is enabled by excess net energy, roughly the difference between its cost and its value as an input. Most integrated assessment models, commonly used by economists in climate discussions, are worthless because of their defective treatment of energy systems.

6) The economy is a very efficient processor of information through the market price mechanism, but that system is not forward-looking, relying mostly on spot pricing, unable to raise prices in a competitive system to anticipate shortages that are expected but not yet present. Neoclassical economics does a poor job of explaining inequality, debt, and wage growth, all factors of time.

7) King’s HARMONEY model attempts to integrate biophysical economics, resources, debt, wages, and economic growth in a single system. The full model is not in the book – the latest version was released in June 2021, and can be found here.

The model centers on the role of natural resources: they are required to operate capital, to make new capital, and to sustain human livelihood. The share of the economy going to different sectors changed in the 1970s. As the growth in per capita energy slowed, it was necessary to replace surplus with debt, and wage growth slowed, something neoclassical economics fails to explain. His model tracks both the changes in the overall economy and the trends observed in the limits to growth projections, while standard economics models have not.

8) The global economy is best viewed as a single unit, the ESO. This is (or has become) largely self-organizing, with a purpose of always increasing its access to useful work through acquisition and use of resources at the lowest-possible marginal costs, but in a finite environment. There is no formal structure to the ESO. Due to its global nature and extreme complexity, no one is in charge of it or capable of making major changes in its direction, other than by destroying it or waiting for it to confront the physical limits it is ultimately subject to. Even those with a more accurate understanding of the economy, with more complex models that are less “efficient” in operation than simple marginal short-term supply-and-demand pricing, will struggle to win influence for policy and investment within the ESO. Long-term planning for structural change rarely works.

9) The cost of energy and food as a share of the overall economy stopped declining around the year 2000, which is an indicator of reduced net energy available to power economic growth. There have been three recent energy eras for the U.S. – 1900-1970, with increasing per capita energy availability; 1970-2000, with steady per capita energy; and since 2000, with declining per capita energy. The Boomer generation grew up in the first era, when growth was easier, and retains expectations that can no longer be met.

10) There has been a relative reduction in energy use per unit of economic activity, but less than the increase in overall activity. Contrary to the hopes and beliefs of many, there is no evidence of an absolute decoupling of economic activity from the use of energy and other material resources, when imports and exports are properly measured.

11) Because greenhouse gas emissions are the direct result of energy consumption (most of which is based on the burning of fossil fuels), land use, and manufacturing processes, the only way to reduce these emissions significantly in the next decade or two is through a reduction in economic activity, including personal consumption. This will be very hard for the ESO to accomplish, or for those who want to influence policy to make happen. The Yellow Vest protests in France were merely one example of the resistance that can be expected.

This book challenges conventional thinking in many ways and does a good job of translating the model concepts underlying the “limits to growth” and biophysical economics into the language of more mainstream economics. By emphasizing the role of data, King gives a realistic presentation without relying on “hope,” assumptions, and not-yet-invented technologies. He has developed a framework that is well worth further study and response.

This is not a story many advisors welcome. Promising endless growth, with any problems solvable with whiz-bang new technologies, is something clients want to hear. Endless growth is much more fun than a world with limits. Unfortunately, endless growth on a finite planet is impossible. As one scenario for the future they are planning for, advisors should include this when talking about what will happen.


Teaser photo credit: A coral colony, which is an example of a superorganism. Public Domain,

Richard E. Vodra

Richard Vodra, J.D., is the president of Worldview Two Planning of McLean, VA. He is retired from a 27-year career as a personal financial planner, and received the 2019 Lifetime Achievement Award from the National Capital Area chapter of the Financial Planning Association. He is an original member of the Nazrudin Project. He currently focuses on the linkages between financial planning, climate change, and resource constraints. He can be reached at

Tags: economic superorganism, limits to growth