Category Archives: Economics

A Grammar Mnemonic to Save the World

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You’ve all heard it – at least I hope you have – starting, probably, sometime in grade school: “i before e except after c.”  (Are you listening, all you caffeinated Keiths and Sheilas? And I suppose it’s a bit too late for Einstein.) Taking some editorial license, I’d like to propose a modification for the purposes of environmentalism and economics: “i before e especially after c.”

I’m not referring to the letters i, e and c here, but rather to some words beginning with those letters. The “i” is for internalize; the “e” is for externalize; and the “c?” Well, that’s for carbon. So what I’m saying here in a more or less catchy albeit derivative way is we should internalize costs, in particular, environmental costs, rather than externalizing them as we currently do in most cases. And that this is especially important when the costs involve carbon.

IbeforeE3

© David Bergman

Let me back up a moment for those who have not had the misfortune of either an economics background or regular encounters with the word “externalize.” (If you haven’t, you may need to internalize that word so that you can toss it around in, say, dinner conversations with your climate change denying relatives.) An externality, as used in the dismal science, is often defined as “an effect of a purchase or use decision by one set of parties on others who did not have a choice and whose interests were not taken into account.” It amounts to a rebuttal of “there’s no such thing as a free lunch” because an externality is, in effect, a free lunch for the party causing the cost.

Externalities are, arguably, the primary reason our capitalist system screws the environment (and us along with it). From a business’s point of view, why care about costs that you don’t have to pay for? The obvious response is to make the person or company causing the environmental costs pay for them. In the case of climate disruption and carbon emissions, the method is some form of carbon pricing, preferably a cap and dividend system like that promoted by eco-stalwarts Bill McKibben and James Hansen, and first introduced as legislation in 2009. A carbon fee would be a more direct route, but cap and dividend would offset the increased price of carbon-emitting forms of energy. In theory, that should have been more acceptable – if not actually desirable – but our head-in-the-sand, hands-in-the-money legislators thought otherwise.

The i-before-e rule can be applied to many industries. It’s most often talked about in terms of power plants. But here’s another example to ponder: if airlines or aircraft manufacturers had to pay a fee for the carbon emissions of their planes, that would have at least two effects. It would increase the costs of air travel so passengers would make more accurate decisions about when and where to fly (and could choose to use their carbon dividends to pay the higher but environmentally correct costs). Perhaps more significantly, it would shift the responsibility and the incentive to develop less polluting planes and engines to the industry. The same would hold true for manufacturers of products ranging from cars to cable boxes. (I hate that the cable boxes we’re forced to accept from the cable TV monopolies are huge suckers of vampire energy. I recently asked Time Warner if they had Energy Star-rated boxes – which do exist – and got an apathetic “nah” for a reply.)

The original “i before e except after c” is usually followed by the disclaimer “or when sounded as ‘a’ as in neighbor and weigh.” Aside from the fact that there’s a, um, surfeit (that seemed to be the appropriate word to use here) of exceptions, it’s a somewhat unfortunate addition when added to our version since we’re referring to weighing the cost of carbon in order to promote better communities among neighbors. Okay, so that last part’s a bit of a stretch. But I don’t think it means I have to forfeit the idea, unless you’re going to get feisty on me. The fact that the English language is a mess, breaking rules left and right and undoubtedly causing externalities of its own, shouldn’t keep us from adopting this eco-mnemonic.

Two Simultaneous Milestones. Is There a Relationship?

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What does it mean that the Dow Jones is surpassing 15,000 at the same time that carbon dioxide in the atmosphere is set to break 400 parts per million?headlines

Not much really. There isn’t exactly a direct tie between the two. But there is a rough correlation between the expansion of a consumer economy, which generally signals economic growth and a rising stock market, and the continuing increase in carbon dioxide and other greenhouse gases.

Of course, there are major differences, too. For one, the stock market, while tending to grow inexorably over the long term, is volatile and can experience drops, sometimes huge ones. But it has always recovered and then exceeded past levels.

The level of carbon dioxide in the atmosphere has had ups and downs as well, but over a much, much longer geological time.  The current level of carbon dioxide is the highest the Earth has seen in millions of years (I’ve seen numbers ranging from 650,000 years to 15 million) and, obviously, the highest ever in human history. The level now is about 33% higher than it was at the beginning of the industrial revolution.

The stock market, by comparison, has been around for barely a moment. If we compare the market level trend and carbon dioxide levels over the time period that the market has existed, we see a pretty close correlation.

sources: visualizingeconomics.com/blog/2010/11/03/us-gdp-1871-2009 and epa.gov/climatestudents/basics/past.html

sources: visualizingeconomics.com/blog/2010/11/03/us-gdp-1871-2009 and epa.gov/climatestudents/basics/past.html

This doesn’t, of course, mean the stock market is responsible for greenhouse gases and climate disruption. But we can view the market as a proxy indicator for the industrial revolution and growth of worldwide GDP. From there, it’s a reasonable jump to acknowledge that the industrial revolution and the growth of manufacturing have a direct relationship to the burning of fossil fuels and the release of long buried carbon dioxide into the atmosphere.

It doesn’t have to be this way, and that’s one of the major points of EcoOptimism as well as the writings of many others. Economic growth does not have to be dependent on burning fossil fuels and, furthermore, economic growth is not a good indicator of human growth.

But for the moment, we are embedded in a system that promotes making more and more stuff, regardless of whether we actually benefit from the stuff (check out my Wrongest Product Award nominations for examples of this). And that system is further tied to carbon-based energy. As long as this remains the case, the stock market and greenhouse gases will continue to rise roughly in parallel.

There are two very fundamental solutions to this. One is that we need to stop gauging economic health by GDP and the price of corporate stocks, especially since they are very poor indicators of human progress. The other, of course, is that we need to stop creating energy from carbon sources and switch to renewables. Then we can decouple human happiness from human self-destruction.

 

Stealing from the Future

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I thought – or hoped — Paul Krugman’s recent New York Times op-ed, “Cheating Our Children,” was going to be about an important issue involving our individual and societal responsibilities to our descendants.  It was – just not the one I anticipated from the headline.

Perhaps I was practicing wishful thinking, but when I read “Yes, we are cheating our children, but the deficit has nothing to do with it,” I assumed he was going to talk about the fact that the decisions we make today are determining the environment (and hence the future) for upcoming generations, and that those generations have absolutely no voice in those decisions.

The points he makes deal with important, fundamental issues of what kind of future we lay the groundwork for. But he’s writing specifically about financial futures, not about what I consider the even larger ethical question, the answer to which will define our children’s lives in ways beyond just economic bottom lines.

I thought he was going to build upon one of the essences, one of the foundations, of the American Revolution. (No, not the misapplied right to bear arms.) I’m referring to a concept sometimes called remote tyranny. Back then it was about a distant government that was ruling the colonies, taxing them and making laws without allowing representation. (Yep, the origin of the real Tea Party.)

Thomas Jefferson wrote of the remote tyranny of the British and later wrote of intergenerational responsibilities: “the earth belongs to the living……..no man may by natural right oblige the land he owns or occupies to debts greater than those that may be paid during his own lifetime. If he could, then the world would belong to the dead, and not to the living”

Thomas Jefferson wrote of the remote tyranny of the British and later wrote of intergenerational responsibilities: “the earth belongs to the living……..no man may by natural right oblige the land he owns or occupies to debts greater than those that may be paid during his own lifetime. If he could, then the world would belong to the dead, and not to the living”

In more recent years the concept has been adapted to a different type of distant rule without representation: intergenerational remote tyranny. (The term appears to have been coined by William McDonough, co-author of the seminal ecodesign book Cradle to Cradle.) The potential – some say the probability – exists that a generation or two or three from now, “we” will be faced with a dramatically different world, one with flooded cities, harsher weather, scarce water and fossil fuels, resulting in massive relocations and food shortages, among other possibilities. I put “we” in quotes because it is humanity, but not exactly us since many of us will not be around, and that is the intergenerational aspect.

I once asked a new client, whose home I was renovating, about her degree of interest in incorporating environmental criteria in the design. She replied jokingly “well, we don’t have kids, so we don’t really care.” It was, though, an astute comment on our inherent selfishness, combined with the fact that humans are not wired to think about abstract futures. We respond to imminent tangible dangers, like fire or attack, but we’re not as good at dealing with more distant scenarios, particularly when we haven’t experienced them before or when the timeframe is longer.

Krugman’s column was dealing with the impacts of financial debt, questioning the relative importance of imposing a financial burden on our children versus the effects of disinvesting in programs that will benefit them. There is a direct parallel in the form of environmental debt. When we use up a resource, it means it will not be available for later generations. That, too, imposes a cost. The cost will vary depending on the resource. Some will be replaceable by other resources, meaning only that the cost will rise. Others, such as water, may not be replaceable at all, thus causing a wholly different kind of burden.

A financial analogy is useful. We can think of the planet’s stock of resources as bank accounts. There are accounts for each resource: potable water, oil, oxygen, topsoil, rare earth minerals, and so on. Left to themselves, the planet’s ecosystems keep these supplies in balance: purifying water, creating oil from decaying carbon, cycling oxygen and carbon dioxide, absorbing and reflecting critical amounts of solar radiation, etc. It’s an incredible system.

The problems come in when we exceed the regenerative capabilities of these systems, when we draw down these resources faster than the ecosystems can replenish them. It’s the same as withdrawing from a bank account faster than you make deposits. You can do it for a while because the account had a starting balance, but eventually you run out. In the case of fossil fuels, the earth has been slowly depositing into that account for millennia and created a huge stock. But then we started extracting and burning those fuels at a rate far, far faster than the earth’s ability to replenish them, leading us to “peak oil” and, eventually, a point where we’ve used up all that is available.

The rate at which individual resource stocks are being used up varies with the “opening balance” in the account, the speed of replenishment and the amount of withdrawals. Some resources can be thought of as having huge trust funds that are resupplied by high interest investments, and those are not likely to be a problem. Others, though, have less positive financial projections: their funds may run out in a matter of a few generations (or less). But our “nature” hinders our ability to plan for these possibilities.

Source: http://www.bbc.co.uk/bbc.com/future/img/BBC-stockcheck-02.jpg


Source: http://www.bbc.co.uk/bbc.com/future/img/BBC-stockcheck-02.jpg

Another part of this issue is that we tend to not think about, or include in our economics, the “free” things we get from nature.  In environmental economics, these are referred to as ecological services. What is the dollar value of nature’s purification of water or of a forest’s ability to absorb carbon from the air and release oxygen? Where do these appear in corporate bottom lines or in GDP? They don’t, of course. And that’s part of the rationale behind a carbon tax – it’s needed in order to correct for this omission and to make the market work more accurately.

(I discussed the idea of paying the Earth for ecological services in the post Planets, are People, My Friends.)

In terms of our topic here, Cheating Our Children, this glaring omission in our economic accounting serves to further worsen the degree of debt we are passing down. It’s the equivalent of double bookkeeping: one set that looks (relatively) rosy for us and another for our children.

Krugman’s column ends with “[O]ur sin involves investing too little, not borrowing too much — and the deficit scolds, for all their claims to have our children’s interests at heart, are actually the bad guys in this story.” In our ecological version, we ARE borrowing too much, as well as investing too little. And the bad guys? Well, to a degree it’s all of us in the consumer world, but in the analogy to the supposed debt crisis, it would particularly be the parties who profit from the double bookkeeping and the climate change deniers, many of whom have direct ties to the former.

The combination of double bookkeeping and short-term thinking are the real cheats. Krugman is right in asking why we are “shortchanging the future so dramatically and inexcusably.” His economic answers, though, only address our children’s finances without assuring there will be a livable world to spend it in. EcoOptimism says we can – and have to – do both.

 

 

The Bee-cautionary Principle

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I go on at times about the significance of the precautionary principle, the idea that “if an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific consensus that the action or policy is harmful, the burden of proof that it is not harmful falls on those taking an act.”

Illustration: Peter Harris via Building Green

Illustration: Peter Harris via Building Green

Here in the U.S., regulations tend to work strongly in the opposite direction in a sort of innocent-until-proven-guilty approach to things like synthetic chemicals. This means we can be subjected to substances that are suspected of being dangerous to our health or to the environment up until the point (and perhaps after) they are proved dangerous.

Europe, on the other hand, has adopted the precautionary principle as policy: “the precautionary principle may be invoked when a phenomenon, product or process may have a dangerous effect, identified by a scientific and objective evaluation, if this evaluation does not allow the risk to be determined with sufficient certainty.”

What a disappointment, then, that in the face of the potentially disastrous bee colony collapse disorder, and mounting evidence that neonicotinoid pesticides are a major part of the cause, Britain along with Germany and Spain are pushing to defeat a ban.

Image source: Inhabitat

Image source: Inhabitat

Bees have a crucial role, far beyond their occasional annoying habit of stinging us when provoked. They are the great pollinators, without which many types of agriculture would be close to impossible. A true die-off of pollinating bees could trigger a food disaster. (This is just one example of the free services provided to us by nature; services that we tend to destroy without understanding the costs or ramifications.)

This ties together two fundamental concepts of environmentalism: the precautionary principle and the valuation of nature’s services. Neither one receives nearly the amount of attention deserved. Ignorance of either one of these, let alone both, paves the way for catastrophically bad decisions.

Biking and the Fallacy of Zero-sum Environmental Thinking

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The great James T. Kirk once said (or is it ‘will say’ since it takes place about 270 years from now?) “I don’t believe in the no-win scenario.” My much less quotable version of this might be “I don’t believe in the zero-sum scenario” — at least not in the case of environmentalism, where I like to point out the many win-win and win-win-win scenarios.

A zero-sum game is “a situation in which a gain by one person or side must be matched by a loss by another person or side.” Because of misperceptions of competing interests, environmental issues are often seen as resulting in, at best, zero-sum results. Gains for the environment, for example, are seen as necessarily won at the expense of jobs or energy prices. Developed countries are pitted against developing countries. You get the idea.

On a smaller — and therefore perhaps more personal — scale, bicycling as an alternative form of transportation often ends up in verbal skirmishes with drivers (played out in the news and, sometimes, the courts), who see bike lanes as stealing space from vehicle lanes, and business owners, who fear shoppers won’t come if they can’t park in front.

(Yes, the bicycle light had just turned red.)

(Yes, the bicycle light had just turned red.)

There are, of course, some valid complaints about cycling. Here in NYC, there is a sort of Wild West legacy of riding in which cyclists until recently had no safe turf. Hence a fend-for-yourself attitude developed whereby many, especially delivery bikers, would ride wherever and however they could to get where they needed to be. Since drivers gave them no respect, the feeling became mutual. (I don’t, by the way, have any such rationale for cyclists who scare or endanger pedestrians.)

With the recent expansion of bike lanes here and elsewhere and an accompanying growth in cycling, both bicyclists and drivers are in a transitional learning period. Cyclists – especially the “old timers” – need to adjust to the fact that they are now a legitimate part of cities’ transportation networks and, as such, need to be responsible. (I’ve been cycling in NYC for over 30 years both for utility and recreation, and have more recently become more, um, law-abiding, in part to be a cycling “ambassador” and offset some of the ill-will generated by more selfish riders.) Drivers, for their part, should realize that every bicycle represents one less car and, therefore, that much less traffic congestion and that many more available parking spaces. Win-win, like I said.

A NYC safety campaign poster. (The real bike lane is on the left side of this street.)

A NYC safety campaign poster. (The real bike lane is on the left side of this street.)

 

Actually, it’s better than that, with at least three wins we can tally. But let’s back up slightly to a story that made headlines last week. Washington state Representative Ed Orcutt believes bicyclists get a literal free ride in that they don’t pay gas taxes while using roads. (The bigger headliner was that he also said that cyclists pollute because they exhale more carbon dioxide while pedaling. He later partially retracted that Onion-ready statement.) Never mind that gas taxes often don’t cover a lot of the costs of road construction and maintenance, or that the idea of person plus a 30-pound bicycle, utilizing a space maybe 2 feet wide by 4 feet long, contributes any sizeable wear to roads compared to a 4000-pound, 16’ long by 6’ wide car is ludicrous.

Amount of space required to transport 60 people by bus, by bike and by car. “The image succinctly illustrates the greater space efficiency of bus and bicycle travel,” spokesperson for the Cycling Promotion Fund (CPF), Mr Stephen Hodge said. “In the space it takes to accommodate 60 cars, cities can accommodate around sixteen buses or more than 600 bikes. Image source

Amount of space required to transport 60 people by bus, by bike and by car. “The image succinctly illustrates the greater space efficiency of bus and bicycle travel,” spokesperson for the Cycling Promotion Fund (CPF), Mr Stephen Hodge said. “In the space it takes to accommodate 60 cars, cities can accommodate around sixteen buses or more than 600 bikes. Image source

 

Orcutt isn’t alone in proposing bicycle taxes. Special fees have been proposed in adjacent Oregon (and I thought the Pacific Northwest was the bastion of treehuggers!), are in place in Hawaii, and sales taxes are actually being levied in Colorado Springs. I’ve written about perverse subsidies (here and here); these are perverse taxes in that they discourage an activity that is beneficial to society.

Let’s enumerate some of those beneficial aspects of cycling.

  1. Cycling is virtually emissions free. I say virtually because the human pedal power comes from calories which, of course, come from food. But the incrementally larger amount of food needed to generate that human power is negligible, especially when compared to the power required for other means of transportation.
  2. As mentioned above, cycling requires far less infrastructure and space than most other types of mobility. This also means that…
  3. Cycling reduces traffic congestion and saves time for all, including drivers. This is true even after accounting for traffic lanes removed for bike lanes.
  4. Bicycles have a weight-to-person ratio of around 1:5 as opposed to cars, which are something like 22:1 (if there are no passengers). Even with four passengers, the ratio is still around 6:1. That’s a lot more material and resources consumed per person. (Before you write in, yes, I know that doesn’t account for miles travelled.)
  5. Cycling also has public health benefits. Driving, as a sedentary “activity,” can’t make that claim. In an age of obesity and lethargy, we all benefit from the reduced health costs.

So we have a many-times win if we are looking at the supposed tradeoff between cycling and driving. How about the interests of businesses?  Here in NYC and, I’m guessing, elsewhere, proposals for bike lanes that reduce the number of parking spaces or make curbside access more difficult inevitably elicit objections from storeowners who fear that customers will choose other stores where they can get from their cars to the store more readily. The fallacy in their thinking is that, in urban shopping districts, most customers are local and are therefore on either foot or bicycle. So a bike lane serves to entice more customers, not fewer. This has been documented:

….businesses on Eighth and Ninth Avenues in New York saw a 50 percent increase in sales receipts after protected bike lanes were installed on the corridor. On San Francisco’s Valencia Street, two-thirds of the merchants said bike lanes had been good for business….[and there’s] a Memphis neighborhood where people, without authorization, spent $500 on paint and made their own bike lanes. Six months later, commercial rents on the strip had doubled, and all the storefronts – half of which had been vacant – were full.

That initial concerned reaction from storeowners is understandable in the context of our car-centric culture. And like the common but incorrect assumption that adding lanes to highways reduces congestion, it intuitively makes sense. You know all that advice about intuition and trusting your gut? It’s not always right. Data tend to be more conclusive.

Are there losers when space or funding is taken from cars for bicycles? Certainly. But all pointers seem to indicate that there are far more winners, including among drivers and storeowners. Since I started here with a quote from Star Trek, it seems fitting (if geeky) to conclude with one, this time from Mr. Spock:  “logic clearly dictates that the needs of the many outweigh the needs of the few.” The few here are a smaller subset of the small number who drive in cities, a fraction relative to the numbers of pedestrians and cyclists and the good of the public in general.

The basis of EcoOptimism is the win-win symbiotic ecological and economic solution. Environmental initiatives, when implemented well, result in more jobs, a stronger economy, a healthier population and, for our added convenience, a world we can still live in.

 

Sometimes the succinct version says it best…

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EcoOptimism doesn’t have to be predicated on being anti-corporation — after all, there are some good eggs out there, just as there are more than a few positive aspects to a market economy — but it’s hard to get around the problems resulting from the current “reign of the corporation.”

Dave Johnson at the Campaign for America’s Future has saved me from penning (and you from reading) a much longer and less succinct post:

Our Current Economic Mess, Explained With Headlines

He writes: “I was doing research, gathering headlines for a post. But the headlines told a story of their own. So here they are:”

2010

November 2010, Corporate Profits Hit New Record, U.S. Workers Still Struggling

2011

January 2011, Profits Are Booming. Why Aren’t Jobs?

May 2011, Corporate Profits At All-Time High As Recovery Stumbles

June 2011, Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, Just One Percent Went To Wages

July 2011, Corporate profits’ share of pie most in 60 years

July 2011, A Boom in Corporate Profits, a Bust in Jobs, Wages

August 2011, Companies near record profits amid high unemployment

October 2011, While Corporate Profits Are At 60-Year High, Main Street Businesses Continue To Struggle

November 2011, GDP revised downward; corporate profits up

2012

February 2012, Corporate Margins And Profits Are Increasing, But Workers’ Wages Aren’t

May 2012, Corporate Profits Return To Prerecession Levels, But Job Growth And Investment Remain Weak

June 2012, Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low

July 2012, The Economy Stinks, but at Least Corporate Profits Are at 60-Year Highs!

December 2012, Corporate profits hit all-time high as wages drop to record low

2013

Today, March 4, 2013, Corporate Profits Have Risen Almost 20 Times Faster Than Workers’ Incomes Since 2008

Redefining Growth

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I thought maybe I coined a new word recently: physophilia, meaning love of growth. It describes the — at times irrational – preoccupation with and addiction to economic growth that possesses politicians and many economists.

This misplaced attachment has already been the focus of several EcoOptimism posts, especially here and here. (While we’re not physophiles, I guess you’d have to say we have a love of the topic itself.) The essence of the problem is that economic growth, at least as it is usually defined, is not the great objective most of us think it is. It is neither advisable nor desirable.  Yet it remains an assumed good.

In a post at one of my favorite blogs (you know you’re an eco geek when you regularly read posts from a site called the Center for the Advancement of a Steady State Economy), Brian Czech dives into this, noting that President Obama, as well as almost-President Gore, try to sell the idea that we can simultaneously address environmental issues and grow the economy. In his recent State of the Union address, the president said: “Now, the good news is, we can make meaningful progress on this issue [climate change] while driving strong economic growth.”

At first blush, this sounds like a strong and positive pronouncement, a “Yes, We Can” for environmentalism. But there’s that intractable little problem (as we’ve previously discussed – see the links at the top) of living on a finite planet, a place where infinite economic growth – especially one based on materialism – is a physical, mathematical impossibility. That’s the reason Czech calls the president’s declaration a “slippery slope” in which he “capitulate[s] to paltry cynicism” in not acknowledging the linkage between economic growth and pollution.

So growth is bad, right? That depends on what we mean by the word “growth.” And this isn’t a Bill Clinton “it depends on what the meaning of is is” hairsplitting moment. Economic growth is usually taken to mean an increase in the popular indicator, Gross Domestic Product. The problem, as so many have noted, is that GDP is a crappy measure of well-being. It’s entirely possible to have strong GDP “growth” while people are becoming worse off, which in fact is what’s happened in much of the developed world (and parts of the developing world as well) over the past few decades.

In short, economic growth – at least in its GDP definition – is neither sustainable nor desirable, even if we didn’t have environmental issues to deal with. Fortunately, economic growth is not really what we want. Economic growth is not the same as improved quality of life, and sometimes it’s the opposite, for instance if it means longer work hours or harsher conditions, or if it feeds off the “hedonic treadmill” in which we constantly have to work more to buy more.

Czech asks if we have to get the president off this slippery slope of promoting economic growth alongside environmentalism, and concludes that, no, “he’s too far into it.” That conclusion, though, makes the assumption that Obama can’t use his bully pulpit to educate and inform. Yeah, I know he hasn’t been great at that to date, but here’s my proposal:  instead of sending the misleading and incorrect message that “there is no conflict between growing the economy and protecting the environment,” change the emphasis to address what we really want by saying “there is no conflict between improving the quality of our lives and protecting the environment.”

‘Growing the economy’ is an abstract goal that’s mostly irrelevant to living better lives. Many economists and environmentalists know this; the U.S. data have indicated as much since the middle of the last century. But the public, by and large, doesn’t realize this because of the fixation that politicians and the news media have on reporting GDP and other markers like the stock market. (A secondary proposal: can we please get the news media to stop putting GDP front and center?)

That word I thought I had coined – physophilia – well, it turns out that Juliet Schor and others were there first. There goes my shot at a wordsmith credit. Merely getting rid of physophilia, though a necessary prerequisite, will not solve everything. Much of our current economy is based on a presumption of growth; how else can investment be encouraged and debt be retired? There are, in fact, other economic models – truly sustainable ones, unlike what we have – such as the world described in Enough Is Enough. (See my review here.) But as I’ve mentioned (ad nauseum, or so it seems at times to me), it’s a communication issue. How do we eschew something as seemingly positive sounding as growth? It will take a convincing group of voices, with resounding sound bites, to change the goal from wins for the economy to wins for people. Czech sounds as if he’s given up on Obama taking the lead in this. “He’s uttered the win-win rhetoric one too many times; now he’d have to admit his mistake in addition to explaining the trade-off between economic growth and environmental protection.”

The EcoOptimist in me isn’t ready to do write Obama off just yet. In one sense, Czech is right: no politician wants to admit a mistake. But Obama doesn’t have to. He can instead redefine – in populist terms – what the goal really should be. It’s not the economy that we want to win; it’s us. It’s human growth, not economic growth.

It’s Not the Economy vs the Environment

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What to make of the mixed message in Sunday’s New York Times op-ed by David Leonhardt? Dispelling the prevalent and stubborn myth that environmental measures are a drag on economic recovery is critical to efforts to gain public and political support. Leonhardt attempts to help, but misses some of the most important points.

In a piece with the overused title “It’s Not Easy Being Green” (and, speaking of mixed messages,  the opposing title, “It’s Easy Being Green,” is just as cliché), Leonhardt at first downplays the promise and economic viability of a national policy to address climate change. “The alternative-energy sector may ultimately employ millions of people. But raising the cost of the energy that households and businesses use every day — a necessary effect of helping the climate — is not exactly a recipe for an economic boom.” With that, he seems to validate the environment versus economy faceoff.

Is this how to gauge environmental policy? Image source

Is this how to gauge environmental policy? Image source

He then tempers that a bit when he writes “Alternative energy may not be a solution to our economic problems. But neither is it guaranteed to make those problems much worse, despite the continuing claims of opponents.” Faint praise, but at least it’s not condemnation.

And he starts to get it right with “The stronger argument for a major government response to climate change is the more obvious argument: climate change.” Problem is: climate change, in and of itself, has not proved to be a strong enough argument, at least not in our current head-in-the-sands, corporate-driven political arena. It’s clear that in a head to head battle, even with a public relations boost from Sandy and Nemo and the like, the environment still loses out to the economy. So it doesn’t help when Leonhardt continues:

In some cases, [government environmental programs] may even save taxpayers money over the long run. In most cases, however, they probably will not. Government agencies, like households and businesses, use dirty energy today because it is cheaper. And while it’s true that new clean-energy companies may help the economy by earning profits and employing workers, the same is true of coal and oil companies.

Leonhardt misses the boat in exactly the same way, as I pointed out last week, the pro-nuclear power advocates do – seeing only parts of pictures rather than wholes. When he says dirty energy is cheaper, he is looking only at a partial set of costs, ignoring major “external costs” like public health, resource depletion and national security. The savings he refers to are merely the direct ones like reduced energy bills and (inconclusively, in his mind) new jobs. Those are well and fine, but it’s incomplete accounting.

This is the same reason elected officials from coal mining states think they’re doing the right thing in opposing environmental regulations on coal; the loss of coal industry jobs, according to this type of partial accounting, will hurt their constituents. But when true costs such as the health costs for miners and those living nearby and the costs of polluted waters and ravaged land are taken into account, that calculation is turned on its head. (Help me out here – I read a post just last week which cited numbers for exactly this example, but I can’t find it now. Send me the link if you have it.)

The costs of coal mining are far more than just CO2 emissions. Image source

The costs of coal mining are far more than just CO2 emissions. Image source

The same point can be made with mass transit. The benefits are not only in the reduced fuel consumption and air pollution that people tend to focus on, but also in time saved due to less congestion and even improved well-being arising from commuting less stressfully as a passenger rather than a frustrated driver. Not to mention the fact that you can safely text your heart away. (See “Public Transportation Saved 865 Million Hours Of Delay On US Roads In 2011.”)

At the very bottom of his column, Leonhardt almost gets it. “In the end, the strongest economic argument for an aggressive response to climate change is not the much trumpeted windfall of green jobs. It’s the fact that the economy won’t function very well in a world full of droughts, hurricanes and heat waves.” Ahah, now we’re talking about the larger picture, or at least some of it. But it’s so far down at the end that it’s all but a footnote, and an incomplete one at that.

Yes, in that battle for public support, if it’s the environment versus the economy – especially in a troubled economic time like this – the environment’s gonna lose.  But that’s an entirely wrong scenario, one created by the limited vision of conventional political-economic thinking (and avidly supported by corporate self-interests). I’ve noted this in earlier posts as, of course, others have as well. In a blog post wonderfully titled “It’s not the economy, it’s the stupid paradigm,” Paula Williams writes “the economy and the environment are not separate (contrary to the claims of many economists).”

Public support for environmentalism has been waning since the start of the Great Recession, and not just in the US, as Greenbiz.com notes.

Across eighteen countries, public concern about all six issues – water pollution, fresh water shortages, natural resource depletion, air pollution, climate change and biodiversity loss – is way down from its peak in 2009, with double-digit falls in the proportion of the public considering them “very serious.”

[O]ur figures suggest people are starting to tune…out [messages of doom and gloom]. Ultimately, the challenge for the environmental movement is to articulate an alternative to our current economic model that empowers people rather than constrains them, and that is politically achievable in difficult times.

The alternative economic model is the understanding that our environmental solutions are our economic solutions. That, along with the observation that those combined solutions – contrary once again to the claims of many economists and others — will also improve the quality of our lives, is the foundation of EcoOptimism.

 

Economic Insurrection, or Nature’s Economy vs Wall Street’s

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If you’re into economics (and, after all, who isn’t?), you probably see economic theory as divided into two camps, supply-side and Keynesian, that roughly coincide with Conservatives/Republicans and Democrats. Supply-side economics became better known as trickle-down economics while Keynesian economics is grouped with neoclassical economics.

But never mind all that. If you were reading closely (and not already bored by this slew of terminology), you may have noticed that Liberals or Progressives were not represented above. That’s because, in the eyes of many lefties, neither of those economic camps has it right. In short, both schools ignore nature and therefore are fundamentally wrong about how the world – and the economy that is a subset of it – works. They deal instead in an artificial idea of economics in which humanity essentially lives in a vacuum.

No, that’s not quite right either. If we somehow actually did live in a vacuum, we’d have to provide everything on our own. There’d be no oxygen or water or coal or, well, anything. But we don’t and can’t exist in a vacuum. Instead, we draw upon nature for everything we make or consume.

What if bees charged for pollinating?

What if bees charged for pollinating?

The problem is that conventional economics pretty much ignores that fact. It regards nature as free. We can take anything we want from it and we can dump anything left over into it. It’s the ultimate free lunch. And as fans of Robert Heinlein, Barry Commoner or Milton Friedman know, There Ain’t No Such Thing As A Free Lunch.

Conventional economics also regards nature as unlimited, at least in a theoretical sort of way. The thinking is that we’ll never run out of something because its price will increase as its availability diminishes and, as that price goes up, we’ll either use less or switch to alternatives.

But there are a lot of problems with this approach. An obvious one is that some things in nature, like oxygen or water, are irreplaceable. If we run out of those, or if they become exorbitantly expensive, it’s game over.

Yet we don’t really put prices on those things either. They’re “free as air.”  Which means we don’t know the true cost of things. (Riffing on Oscar Wilde, the authors of Natural Capitalism wrote “People now know the price of everything but the true cost of nothing.”)

We do put prices on everything we do. (Well, more or less. A lot of the most important things we do, like raising children or taking care of elderly parents, are considered to be outside the economy.) When nature does it though – when nature, for instance, grows a tree or makes oil – that doesn’t appear anywhere in our ledgers. Yet the benefits are ours for the taking.

The alternative goes by a few names. Perhaps the most widely used is ecological economics. I alluded to it in my facetiously titled post Planets Are People My Friends. The acknowledgement that conventional economics has this fundamental flaw goes back quite some time, but has only started to gain wider recognition more recently. Sometimes on the fringes: the True Cost Economics Manifesto, with strident, almost revolutionary language, seems to have appeared around 2005. (The original website is gone, but the manifesto is reposted at Adbusters, among other places.)

But more recently, perhaps as some of the signers of that manifesto graduated into the “real” world, the fringe has moved inward, with a widespread understanding that the Earth’s “commons” (its air and water and other resources) are not a fee-free dumping ground.

It’s not just a matter of calculating and finding a way to charge the “true costs” of the things we make and do. It becomes part of a larger understanding, in some ways a philosophy, of both the economy’s and humanity’s purposes. In the blog Common Dreams: Building Progressive Community, economist David Korten asks “What Would a Down-to-Earth Economy Look Like? How did we end up with Wall Street when models for a healthy economy are all around us?” He comes up with this comparison of nature’s economy vs Wall Street’s:

Korten writes: “With proper care and respect, Earth can provide a high quality of life for all people in perpetuity. Yet we devastate productive lands and waters for a quick profit, a few temporary jobs, or a one-time resource fix.”

Over at the Center for Steady State Economics, Rob Dietz (co-author of Enough Is Enough, which I reviewed here) has a two-part post “The Rise of Fantasy as the Basis for Economic Policy” and “Restoring Science as the Basis for Economic Policy.” There are, he says, two camps of economic thinking, Fantasy Camp and Science Camp, and you can easily guess which one he falls into.

At Fantasy Camp, the counselors educate campers to believe that humanity can circumvent natural limits. Campers are taught that our unstoppable ingenuity can overcome any resource shortages or manage any amount of waste generation. There’s a strong undercurrent of consumption — a desire to accumulate ever more power and stuff in an attempt to gain complete control over life (and even death).

fantasy_science_camps

(My take on this was probably decided many years ago when my parents sent me to – literally – a science camp. Unfortunately, it was long before geeks were cool. But I digress.)

In EcoOptimism parlance, Wall Street’s economy is based on “win” only and the hell with everything else, while Nature’s is win-win-win. In other words, the one per cent vs 100%.

The Growth Panacea

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In The New York Times “Room for Debate” column last week, the topic was whether growth is a good goal. Until recently, it’s been an assumption in both political and economic circles that growth was unquestionably good and essential. It’s a rare politician who will dare to say otherwise. So it was somewhat refreshing that, in the Times debate, only one of the four participants, Diana Furchtgott-Roth, supported the idea. And her point of view, as a former chief economist of the U.S. Department of Labor, was both surprisingly and typically old-school in its conventional but outdated approach. Here are some quotes from her statement (in italics), with my responses:

Economic growth raises standards of living for rich and poor countries alike.

This is the old “rising tide lifts all boats” line. I can think of plenty of unlifted (and some sinking) boats in the developed world where the tide has supposedly risen. While the argument for economic growth in the developing world is stronger, it’s still true that economic growth does not equal human growth and, as we’re finding out in the US, the opposite becomes true after a point.

And what happens when the rising tide (to continue the awful metaphor) is actually caused by rising sea levels?

The more growth, the better.

This is just fundamentally wrong because, aside from being incorrect in economic terms, it is physically impossible (unless growth is decoupled from consumption). Assuming we don’t start importing resources from other planets, we live in a finite system, technological advances notwithstanding. No matter how often the growth mantra is repeated, it cannot violate the laws of physics.

The finitely-supplied Earth seen from the Cassini probe as it passed Saturn

The finitely-supplied Earth seen from the Cassini probe as it passed Saturn

In developing countries, higher G.D.P. growth results in lower infant mortality, running water, sewer systems, electricity, better schools and education for children, as can be seen from comparative World Bank data.

So how does this explain the sad standing of the US in most of those categories?

As electric power plants replace wood stoves, the air is cleared of smog.

Sure, the localized air inside the home may be better, but replacing it with coal and other fossil-fueled plants just relocates and, by some measures, worsens air pollution and greenhouse gas emissions.

Stringent Environmental Protection Agency regulations do not come cheap.

This is a particularly old-school defense, or rather offense, against regulation. In far more cases, regulations prompting efficiency and limiting pollution result in greater profits, new technologies, new industries and more jobs.

Her post is titled “Only Growth Can Sustain Us.” She has a curious idea of sustainability.

The good news is that she represented a minority view and, judging from the comments below it, a growing number of people are realizing that economic growth is not the panacea that Wall Street and most politicians continue to believe it is.