I don’t see how decommissioning is necessarily bad for growth. If anything, replacing infrastructure more rapidly increases capital investment, which leads to higher growth. I'd say that the main challenge is not that of coordinating this process in a way that it does not lead to price pressures. - ThreadSky

jordischroeder.bsky.social • 10 days ago

I don’t see how decommissioning is necessarily bad for growth. If anything, replacing infrastructure more rapidly increases capital investment, which leads to higher growth. I'd say that the main challenge is not that of coordinating this process in a way that it does not lead to price pressures.

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gavinjackson.bsky.social•10 days ago

There’s a misunderstanding in this. Capital produces capital services which are an input to production. Decommissioning capital stock reduces those inputs and therefore reduces output.

Think of it like a natural disaster if that helps. Rebuilding doesn’t make you richer.

jordischroeder.bsky.social•10 days ago

But precisely when natural disasters are followed by construction booms, these tend to increase output. "Growth" from a purely national accounting standpoint does not necessarily correspond to what you mean by "richer".

jordischroeder.bsky.social•10 days ago

As for carbon offsets, while the sale of emission permits itself has not net impact on GDP, the investment on carbon removal infrastructure would positively contribute to growth.

gavinjackson.bsky.social•10 days ago

You have in mind a situation where the economy is demand constrained. If it is not then we have to divert resources from other purposes to build carbon removal infrastructure.

If it is demand constrained, building that infrastructure boosts demand but so would fossil fuel infrastructure.

jordischroeder.bsky.social•10 days ago

I'd say I mainly argued from a purely national accounting standpoint, where one person's costs are another's income, and these flows drive growth. Conversely, you're thinking in terms of the Solow model, which assumes a fixed capacity.

jordischroeder.bsky.social•10 days ago

And yes, building fossil fuel infrastructure would boost demand, but it would be weird to build the same infrastructure that is being decommissioned.

jordischroeder.bsky.social•10 days ago

Ultimately, as you point out in the post, the key question is whether we see the economy as demand- or supply-constrained, and, furthermore, what our theory of interest rate determination is.

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