New economic model is not just cutting costs

Of course, costs fall over the life of a product, and technology leads to constant replacement, just as the emergence of smart mobile phones have replaced the tape recorder, camera, MP3 player, navigator, watches, flashlights and other products we once thought indispensable. Even the makeup industry is not immune - a smart mobile phone equipped with a camera is capable of replacing the traditional cosmetic mirror. This is one of the characteristics of the third industrial revolution.

Wind and solar energy production costs are relatively low because they tend not to need long-distance transportation.

These examples highlight two social trends encompassing both rising and falling costs, where prices are high initially and fall later in the production cycle.

I would like to put forward the concept of "non-growth development." Future economic development will not model typical economic growth. The human economy will change from "efficiency improvement development" to "cost improvement development." The external performance of economic development will change to cost reduction through promoting efficiency.

The past promotion of economic efficiency has mainly been due to the use and improvement of machinery and automation. Future cost reductions will come from digitalization and changes in energy sources. Efficiency improvement development can promote economic growth, while cost reduction development will shrink total economic output, thus human beings will probably, for the first time, encounter a situation in which economic development leads to a GDP decrease. This is in line with Rifkin's ideas.

However, the role of cost reduction remains unproven. Some products can be shared, but most are difficult to share. For example, office desks cannot be shared, nor can houses or household appliances. In fact, most non-digital products cannot be shared, and even car sharing is very limited.

The writer is the head of the World Economy Project at the Chongyang Institute for Financial Studies, Renmin University of China.

This article was translated by Li Jingrong. Its original unabridged version was published in Chinese.