August 29, 2007
Towards an age of abundance
Ignore the critics of economic growth who claim that prosperity makes us unhappy. We need to win the war against scarcity once and for all, so that everyone can enjoy the benefits of longer, healthier and wealthier lives.
Daniel Ben-Ami in Spiked Review of Books:
Imagine an egalitarian world in which all food is organic and local, the air is free of industrial pollution, and vigorous physical exertion is guaranteed. Sound idyllic?
But hold on… Life expectancy is 30 at most; many children die at or soon after birth; life is constantly lived on the edge of starvation; there are no doctors or dentists or modern toilets. If it is egalitarian it is because everyone is dirt poor, and there is no industrial pollution because there are no factories. Food is organic because there are no pesticides or high technology farming methods. As a result, producing food means long hours of back-breaking physical work which may end up yielding little.
There is – or at least was – such a place. It is called the past. And few of us, it seems, recognise the enormous benefits to humanity of escaping from it. On the contrary, there is a pervasive culture of complaint about the perils of affluence and a common tendency to romanticise the simple life.
More here.
Posted by S. Abbas Raza at 12:39 PM | Permalink
Comments
The classic and dishonest straw-man defense of unlimited economic growth.
Person A states that economic growth has diminishing marginal utility, and this utility may now be negative in the developed world. We have regulate our economy now in such a way as to disguise this fact.
Person B states that if person A doesn't believe economic growth is the meaning of life, they can damn well go live in a cave. They then go on to state that person A is suggesting the developing world should continue to live in poverty.
A perfect example of studied ignorance of the argument in front of a person. Here's the truth for dummies:
The top billion people do not need more material wealth; they are past the point of diminishing returns.
The bottom billion desperately need even a small fraction of the top billion's material wealth; they are way short of the point of diminishing returns.
A good start for the top billion would be to set a better example for the billions of people in the middle.
Posted by: Bruce the Canuck | Aug 29, 2007 6:39:27 PM
Source watch's entry on Spiked
Posted by: Bruce the Canuck | Aug 29, 2007 6:48:16 PM
The top billion people do not need more material wealth; they are past the point of diminishing returns.
Well 'need' is an ambiguous term -- basic food, water, and shelter is all you 'need'. Nobody 'needs' to be educated or entertained or even ever to travel outside their own little village (and many generations did, indeed, live out such circumscribed lives). In that sense, yes, nobody 'needs' anything more.
But if you mean that the top billion have reached a point where their lives cannot possibly be improved by additional economic growth or material wealth -- sorry, that's nonsense. Dangerous nonsense (or, it would be anyway, if the people who believed it were more than a fringe).
Posted by: Slocum | Aug 29, 2007 8:56:03 PM
The boundless growth argument is an old one in environmental discourse. To simply argue against environmental limits with a limitless faith in technological innovation to solve whatever problems we may encounter is hubristic.
And what about entropy?
Posted by: Kelly | Aug 29, 2007 9:41:16 PM
That would be average life expectancy.
And it's presented as irrefutable hard evidence-backed scientific fact. The truth of life in the so-called pre-historic, what it was really like, is unavailable, so it's left to the biased imagination. We're all biased, the problem is doctrinaire chauvinism has heretofore owned the conversation.
Without any evidence whatsoever I'll testify that people in the Pleistocene had a sense of humor, as well as songs, flowers, treats, games, and dreams.
Heresy of a kind, but an heretical truth with more depth and solidity than this neo-modern made-up crap.
Posted by: Roy Belmont | Aug 30, 2007 3:08:12 AM
The critique in the developed world is of consumerism, not capitalism. It is a critique that says pleasure and happiness do not have to be bought and acquired, not that pleasure can never be purchased at all.
Consumerism, an admitted product and feeder of growth , is the real target here not comfort and pleasure itself. How many people in the developed world take pleasure in their comfort? How many people appreciate a hot shower and a soft bed? They are not content with comfort because the culture of consumerism undermines contentment at every turn.
Posted by: ellenbrenna | Aug 30, 2007 11:25:41 AM
Ellenbrenna, you have said it all.
Posted by: Elatia Harris | Aug 30, 2007 11:54:46 AM
The boundless growth argument is an old one in environmental discourse. To simply argue against environmental limits with a limitless faith in technological innovation to solve whatever problems we may encounter is hubristic.
And what about entropy?
You seem to be suffering from a Soviet Five Year Plan sort of thinking where growth is measured in tons of steel and concrete. Economic growth is growth in the value of goods and services. Goods and services don't have use more energy and raw materials to be more valuable. And, in fact, the trends are that the use of energy and raw materials declines even as value grows (compare a 55 Chevy to a Toyota Camry). At the extreme, many of our valuable goods and services have become disembodied information (music, film, newspapers, magazines) that require vanishingly tiny quantities of raw materials and energy.
Posted by: Slocum | Aug 30, 2007 12:23:00 PM
The 'egalitarian' population sounds much like an animal population, much like a world in balance.
Posted by: Mike | Aug 30, 2007 2:26:51 PM
One argument for the environmental benefit of cars was that they reduced the amount of horse-droppings (waste) in the streets. While energy efficiency has been vastly improved, growth includes the incorporation of greater and greater numbers of consumers along with increased levels of consumption. A Camry still requires a tremendous amount of energy to produce and transport around the globe. Any argument that holds up past innovative gains as a hope for the future neglects the possibility that current, not to mention increased, levels of consumption may not be sustainable. Furthermore, any technological fix or advancement has the potential for unseen complications.
Posted by: Kelly | Aug 30, 2007 2:53:30 PM
Slocum: But if you mean that the top billion have reached a point where their lives cannot possibly be improved by additional economic growth or material wealth...
No. First, let's separate material wealth from "economic growth" measured in value. What I mean is that the value of material wealth has diminishing marginal value as you have more of it. It also has a cost, to the consumer and in externalities. What I'm saying is that these curves intersect somewhere, and we disguise the point where they do through various subsidies and government incentives. If the GDP stops growing, we move the levers available to do whatever it takes to promote its growth again, without regard to net benefit.
>You seem to be suffering from a Soviet Five Year Plan sort of thinking where growth is measured in tons of steel and concrete. Economic growth is growth in the value of goods and services....
>Slocum
A valid enough point, conflating value with material consumption is the root problem.
Why not test it then? Put overall, conservative caps on material throughput and land use. As an open policy. Then let the economic do what it will within that sandbox. If the numbers supposedly representing value continue to grow, so be it.
Posted by: Bruce the Canuck | Aug 30, 2007 3:21:52 PM
First, let's separate material wealth from "economic growth" measured in value. What I mean is that the value of material wealth has diminishing marginal value as you have more of it.
Sure, but that's true from dollar one. Even for a very poor person, the first $100 are worth more than the second $100 and the second $100 is worth more than the third.
It also has a cost, to the consumer and in externalities.
Yes, And when people find that free time is more valuable than what they could buy by working and earning more, they chose more leisure rather than more work. As for externalities, the solution is to price those in (but let's make sure they're real externalities -- air pollution for example -- rather than nebulous political 'externalities' as in pricing in the cost of 'consumerism').
Why not test it then? Put overall, conservative caps on material throughput and land use. As an open policy. Then let the economic do what it will within that sandbox.
OK, how about let's leave the heavy-handed central planning out of it and let scarcity and prices impose the constraints? For example, where land is scarce, is naturally expensive and populations are dense (e.g. Tokyo). Where land is not scarce, it is cheap and populations are sparse (e.g. North Dakota). But there's no good reason at all to try to impose Tokyo-appropriate land use policies on rural North Dakotans.
If the numbers supposedly representing value continue to grow, so be it.
Supposedly? Is this the Samuel Johnson theory of value (if you can't kick it, it doesn't really exist)?
Posted by: Slocum | Aug 30, 2007 4:46:15 PM
>...rather than nebulous political 'externalities' as in pricing in the cost of 'consumerism').
Here's an example: People did not appear to be consuming "enough" around 2000, due to their own (rational!) sense of economic conditions and the costs/benefits of debt vs consumption. The Fed then pulled interest rates artificially low to prompt continued consumption that, on balance, citizens would have rather not had. Artificial growth via removing negative feedbacks, just what I was suggesting.
>OK, how about let's leave the heavy-handed central planning out of it and let scarcity and prices impose the constraints?
The problem with "natural" constraints is that the market heavily discounts future interests. Market price does not reflect long term resource, land, or biodiversity conservation interests. Arguments to the contrary tend to lean heavily on techno-optimism and a false belief in the infinite ability to substitute one resource for another.
The classic example here is the old argument by whaling nations that they had an economic interest in preserving the resource. But if average market return on investment (say 7%) exceeds the growth rate (about 3%) of whale populations, the most economically rational action is to liquidate the whale population entirely and invest the money in another resource sector; the pattern then repeats. The market is in fact very poor at dealing with time horizons greater than about 10 years.
>>If the numbers supposedly representing value continue to grow, so be it.
>Supposedly? ...
No. GDP represents production and consumption, not necessarily value delivered; the classic example would be cancer caused by tobacco sales, which also creates a market for cancer treatment. There's also the matter, again, of diminishing marginal utility.
Posted by: Bruce the Canuck | Aug 30, 2007 8:58:02 PM
The Fed then pulled interest rates artificially low to prompt continued consumption that, on balance, citizens would have rather not had.
That's a bizarre interpretation, to say the least. You, of course, are personally able to refrain from consumption whenever you like. Now, if you're saying that in 2000 people were retrenching out of fear, then I think very few would also have stated a preference that the climate of fear (and cutbacks) be maintained rather than the Fed doing its job to keep the economy working well.
The problem with "natural" constraints is that the market heavily discounts future interests. Market price does not reflect long term resource, land, or biodiversity conservation interests. Arguments to the contrary tend to lean heavily on techno-optimism and a false belief in the infinite ability to substitute one resource for another.
You're talking about externalities again. The market won't naturally include externalities, but when they are included (in the form of taxes or purchasable credits), then we are far better off to let pricing drive changes rather than imposing 'caps' by fiat. And your skepticism about substitutability is odd given your next example.
The classic example here is the old argument by whaling nations that they had an economic interest in preserving the resource.
Whaling was a 'tragedy of the commons' problem. No individual whaling nation (or individual whaling captain) had the incentive to preserve the whale population. But what ultimately did in the whaling industry wasn't overuse of resources but the substitution of a cheaper, more readily available alternative (petroleum).
GDP represents production and consumption, not necessarily value delivered; the classic example would be cancer caused by tobacco sales, which also creates a market for cancer treatment.
And the point of the classic example is what? Smokers value both the tobacco and also the cancer treatment. Just as I value snowboards, bicycles, running shoes, etc and also x-ray machines and sports medicine doctors. Or just as I value both delicious restaurant meals and also exercise equipment at the gym. The value of the items in the first class doesn't cancel out the value of the items in the second.
Posted by: Slocum | Aug 31, 2007 10:33:37 AM
>...The market won't naturally include externalities, but when they are included...
Here's where we may agree. What I'm saying is that there should be set-asides on land and sea resources that are substantial - say 25% - and caps put on externalities such as nitrogen, carbon dioxide, toxics, etc. To stay within the caps various pricing mechanisms can be used. Taxes could serve a similar purpose for resources that may be being depleted too fast by a market that can't see decades into the future.
If the econom(ies) were managed to explicitly follow those policies, I actually wouldn't have much of a problem whatever GDP did - up down or stable. Whether it grew in the long term with honest, responsible feedback involved would be an interesting academic question.
But what we in fact do is decide what material bounds to set based on the belief it *should* grow, rather than setting responsible material-world bounds and then seeing if it *does* grow.
>>The classic example here is the old argument by whaling nations that they had an economic interest in preserving the resource.
>Whaling was a 'tragedy of the commons' problem...ultimately did in the whaling industry wasn't overuse of resources but the substitution...
That substitution at the turn of the 20th century was historical happenstance, not a reliable universal law - and a side issue to the point I'm making.
The whalers of the mid-20th century lobbied for effective privatization. They were an example of a resource-user making the argument that scarcity-responses would protect the resource, if only it was *not* a tragedy of the commons scenario. Their argument was flawed; the coldy rational act would have been to exterminate the resource and invest the money elsewhere, where the rate of growth exceeded the market average.
>[re smoking, cancer and GDP] And the point of the classic example is what? The value of the items in the first class doesn't cancel out the value of the items in the second...
It's not the best example on the tobacco side, I grant you. But the argument is still valid in general; raw GDP is a poor measure of value delivered.
There seems to be a background assumption with your set that people such as myself are not long-term optimists, or are technophobes. On the contrary, the long term future may be provide nearly unlimited abilities and freedom in many areas. But the assumption that bulk material consumption is one of those areas is doubtful; quality not quantity should be the overall cultural goal.
And to get to that future world, we have a century ahead that is a dangerous bottleneck in terms of biodiversity, resources, and threats to geochemical stability. My concern is that the rate of depletion of natural capital will constrain our future before our technological abilities mature and create a climate that stops progress, and that our culture needs to adjust to what is and is not possible long term. Even if we do not fail outright, preserving as much irreplaceable content as possible through this century's bottleneck needs to be a much higher priority.
Posted by: Bruce the Canuck | Aug 31, 2007 2:46:34 PM
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