A Thinking Reed

Category: Economy

  • Skeptical of the skeptical environmentalist

    The Washington Post Sunday Outlook section ran a lengthy piece form “skeptical environmentalist” Bjorn Lomborg (based on his new book), arguing that we need to avoid the “extremes” in the climate change debate – those who deny that human-caused climate change exists on one hand and those who see it as an extremely serious and potentially catastrophic problem on the other. Lomborg concedes that it’s happening, but says that policies aimed at drastically cutting carbon emissions are inferior, in terms of their cost-benefit ratios, to policies directly targeting the problems that global warming threatens to exacerbate. For instance, deaths from malaria could be more effectively reduced by providing mosquito nets than by reducing carbon emissions. And more polar bears could be saved by banning hunting than by halting the melting of the polar ice cap. In other words, rising global temperatures may be a problem, but it’s a less serious problems than many others we face, and those problems can be tackled more effectively at less cost.

    Liberal blogger Ezra Klein takes issue with some of Lomborg’s numbers here, particularly his claim that global warming will actually save lives by reducing the number of deaths from cold. Bill McKibben reviews Lomborg’s book here. McKibben spends a good deal of his review taking apart Lomborg’s numbers, and in particular his claim (contradicted by a recent IPCC panel) that halting and reducing CO2 emissions can only be done at a prohibitive cost to the world’s economies.

    McKibben also makes this telling point against Lomborg’s claim that scarce resources should be redirected from addressing climate change to allegedly more pressing problems:

    Why has Lomborg decided to compare the efficacy of (largely theoretical) funding to stop global warming with his other priorities, like fighting malaria or ensuring clean water? If fighting malaria was his real goal, he could as easily have asked the question: Why don’t we divert to it some of the (large and nontheoretical) sums spent on, say, the military? The answer he gave when I asked this question at our dialogue was that he thought military spending was bad and that therefore it made more sense to compare global warming dollars with other “good” spending. But of course this makes less sense. If he thought that money spent for the military was doing damage, then he could kill two birds with one stone by diverting some of it to his other projects. Proposing that, though, would lose him much of the right-wing support that made his earlier book a best seller — he’d no longer be able to count on even The Wall Street Journal editorial page.

  • Increasing skepticism about free trade

    60% of Repbulicans polled are skeptical that free trade benefits the U.S. See here (HT)for a good explanation of why dismissing these folks as economically illiterate misses the point.

  • How the meat industry thrives

    Quasi-monopoly, environmental degradation, and third-world style labor practices, according to this piece.

  • Ends and means, again

    E.F. Schumacher on “Buddhist economics”:

    While the materialist is mainly interested in goods, the Buddhist is mainly interested in liberation. But Buddhism is “The Middle Way” and therefore in no way antagonistic to physical well-being. It is not wealth that stands in the way of liberation but the attachment to wealth; not the enjoyment of pleasurable things but the craving for them. The keynote of Buddhist economics, therefore, is simplicity and non-violence. From an economist’s point of view, the marvel of the Buddhist way of life is the utter rationality of its pattern–amazingly small means leading to extraordinarily satisfactory results.

    For the modern economist this is very difficult to understand. He is used to measuring the “standard of living” by the amount of annual consumption, assuming all the time that a man who consumes more is “better off” than a man who consumes less. A Buddhist economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption. […] The ownership and consumption of goods is a means to an end, and Buddhist economics is the systematic study of how to attain given ends with the minimum means.

    Modern economics, on the other hand, considers consumption to be the sole end and purpose of all economic activity, taking the factors of production–land, labour, and capital–as the means. The former, in short, tries to maximise human satisfactions by the optimal pattern of consumption, while the latter tries to maximise consumption by the optimal pattern of productive effort. It is easy to see that the effort needed to sustain a way of life which seeks to attain the optimal pattern of consumption is likely to be much smaller than the effort needed to sustain a drive for maximum consumption. (Small Is Beautiful, pp. 57-58)

  • Schumacher on the poverty of economics

    It is hardly an exaggeration to say that, with increasing affluence, economics has moved into the very center of public concern, and economic performance, economic growth, economic expansion, and so forth have become the abiding interest, if not the obsession, of all modern socieites. In the current vocabulary of condemnation there are few words as final and conclusive as the word “uneconomic.” If an activity has been branded as uneconomic, its right to existence is not merely questioned but energetically denied. Anything that is found to be an impediment to economic growth is a shameful thing, and if people cling to it, they are thought of as either saboteurs or fools. Call a thing immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations; as long as you have not shown it to be “uneconomic” you have not really questioned its right to exist, grow, and prosper. — E.F. Schumacher, Small Is Beautiful, pp. 41-42

    Schumacher’s work holds up surprisingly well considering that it was published in the early 70s. The issues he identifies are still with us and, if anything, may have intensified in the last 30+ years. The chapter that this quote comes from addresses the fragmentary nature of economics – its inability to deal with subject matter that falls outside its methodology. This is worth recalling in a time where economics has taken on something like an aura of omnicompetence, and the bestseller list is full of books applying the principles of economics to everyday life.

    The argument is pretty straightforward: economics, valuable as it is within its own domain, presupposes a host of non-economic facts as given. And its quantitative nature renders it inadequate for dealing with questions of quality (or, we might say, value). Thus we get a model of “the Market” where there is an inexhaustible supply of goods, and everything is, in principle, convertible into everything else (i.e. there are no incommensurable values).

    The market therefore represents only the surface of society and its significance relates to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalisation of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself. It would be “uneconomic” for a wealthy seller to reduce his prices to poor customers merely because they are in need, or for a wealthy buyer to pay an extra price merely because the supplier is poor. Equally, it would be “uneconomic” for a buyer to give preference to home-produced goods if imported goods are cheaper. He does not, and is not expected to, accept responsibility for the country’s balance of payments. (p. 44)

    What’s in question is not the usefulness of the model, but the consequences of mistaking the model for the reality:

    Economics deals with a virtually limitless variety of goods and services, produced and consumed by an equally limitless variety of people. It would obviously be impossible to develop any economic theory at all, unless one were prepared to disregard a vast array of qualitative distinctions. But it should be just as obvious that the total suppression of qualitative distinctions, while it makes theorising easy, at the same time makes it totally sterile. Most of the “conspicuous developments of economics in the last quarter of a century” (referred to by Professor Phelps Brown) are in the direction of quantification, at the expense of the understanding of qualitative differences. Indeed, one might say that economics has become increasingly intolerant of the latter, because they do not fit into its method and makes demands on the practical understanding and the power of insight of economists, which they are unable or unwilling to fulfill. For example, having established by his purely quantitative methods that the Gross National Product of a country has risen by, say, five per cent, the economist-turned-econometrician is unwilling, and generally unable, to face the question of whether this is to be taken as a good thing or a bad thing. He would lose all his certainties if he even entertained such a question: growth of GNP must be a good thing, irrespective of what has grown and who, if anyone, has benefited. The idea that there could be pathological growth, unhealthy growth, disruptive or destructive growth is to him a perverse idea which must not be allowed to surface. A small minority of economists is at present beginning to question how much further “growth” will be possible, since infinite growth in a finite environment is an obvious impossibility; but even they cannot get away from the purely quantitative growth concept. Instead of insisting on the primacy of qualitative distinctions, they simply substitute non-growth for growth, that is to say, one emptiness for another. (pp. 47-48)

    One of the most important qualitative distinctions Schumacher has in mind is that between primary and secondary goods. Primary goods are those which human beings don’t produce, i.e. natural resources. Secondary goods are the products and services which we make, but which have their ultimate origin in the natural world. To pretend that all goods are equal in the sense of being convertible in principle and given a monetary value is to fail to recognize the essential incommensurability between these different categories of goods.

    Additionally, he refers to meta-economic factors which are presupposed by economics but not adequately dealth with by its concepts. The entire natural environment, especially things not amenable to private appropriation like air, water, and soil, constitutes the framework that any economic activity depends on, but they typically fail to appear in economic calculation and therefore the damage that economic activity may cause them is ignored. This is a bit like sawing off the branch you’re sitting on.

    All of these considerations can, perhaps, be summed up under the heading of ends versus means. Economics can tell us what means are most efficient for acheiving given ends, but it can’t tell us what ends are worth pursuing. It may be that it’s not the economists who are at fault here, but the policy makers who are too timid to question the value of things like limitless growth. Debates about things like trade agreements or how best to address climate change are almost inevitably couched in economic terms, with the unspoken assumption being that anything which threatens aggregate economic growth is ipso facto bad and anything which promotes it is good, regardless of their effect on non-economic values.

    The trouble about valuing means above ends–which, as confirmed by Keynes, is the attitude of modern economics–is that it destroys man’s freedom and power to choose the ends he really favours; the development of means, as it were, dictates the choice of ends. Obvious examples are the pursuit of supersonic transport speeds and the immense efforts made to land men on the moon. The conception of these aims was not the result of any insight into real human needs and aspirations, which technology is meant to serve, but solely of the fact that the necessary technical means appeared to be available. (p. 51)

    It may be that in a diverse and pluralistic society “growing the GDP” provides a convenient lowest-common-denominator goal that (nearly) everyone can agree on. But I think it’s safe to say that in the last 30 years or so since Schumacher wrote this we’ve become more aware of the impact the pursuit of growth at all costs is having not only on the natural world, but on our communities and human happiness. What’s less clear is that we still have a public language for debating whether things are not only “uneconomic” but “immoral or ugly, soul-destroying or a degradation of man, a peril to the peace of the world or to the well-being of future generations.” “Mere” aesthetics, value judgments, philosophy, religion, etc. have been largely relegated, at least among the elite classes, to matters of private judgment or sheer preference, while economics retains its reputation as a hard-headed empirical science. As such, it seems to provide a more “objective” basis for policy-making, despite well-founded critiques like Schumacher’s.

  • Political self ID – a Christian humanist?

    This is an exercise in bloggy narcissism (or is that a redundancy?) so feel free to skip this post.

    The other day a friend asked me to describe my political outlook and I couldn’t come up with a very satisfying answer. Having persued the blog he suggested religious conservative, but to me that sounds a bit too close to Jerry Falwell.

    I definitely thought of myself as a conservative at one point, though lately I’ve been toying with the idea of “Christian humanist” as the best descriptor of my overall outlook.

    Anyway, here are a handful of posts on my various statements of political principle and self-identification, if anyone’s interested.

    “Apologia pro vote sua” (On voting for the Green Party in 2004)

    “…on Sort of Going from Right to Left or How I Became a Quasi-Pacifist Conservative Vegetarian Pro-Lifer”

    “Am I a Conservative?”

    To me, what a “Christian humanist” position would emphasize is the dignity of the human person rooted in a transcendent moral order while at the same time recognizing human frailty and our limited apprehension of that order this side of the eschaton.

    This leads me to be in favor of strong limits on government power and to oppose, or at least be extremely wary of, the destruction of human life in the forms of abortion and euthanasia (traditional “conservative” views).

    On the other hand, economics was made for human beings not vice versa, so the idolatry of the free market has to go (see Schumacher’s Small is Beautiful, Roepke’s A Humane Economy). State killing in the form of war and capital punishment is at least equally as troubling and difficult to justify as other threats to life. And human beings can’t flourish while despoiling the environment.

    Throw in a general skepticism about bio-engineering (see Lewis’ Abolition of Man, Huxley’s Brave New World) and trepidation about unchecked technology more generally (Borgmann, Jardine, Ellul) and you’ve got an electric conservative-liberal-green-libertarian stew.

  • Contra the contrarians

    Bradford Plumer debunks the claims of some of the recent debunkers of conventional wisdom about battling climate change, but concedes that they have a point in that navigating a “green” lifestyle is in fact a tricky thing to do (e.g. eating local food is a good rule of thumb, but there are exceptions). However, he also points out that serious political action (e.g. a carbon tax) would make this much simpler.

  • Faith on the farm

    The New York Times looks at a variety of religiously-motivated farmers concened with good stewardship, humane treatment of animals, and fair treatment of farm workers.

    It’s always tough to know how widespread the phenomena discussed in these kinds of “trend” stories actually are, but it’s heartening to think that “environmentalism” is no longer a dirty word even among some very conservative religious believers. I think this may well be a function of age; an older generation of religious leaders may have dismissed environmental concerns as inimical to our glorious system of “free enterprise” or even condemned it as a kind of ersatz religion, but younger believers don’t seem to be carrying that baggage:

    “Food and the environment is the civil rights movement for people under the age of 40,” said the Rev. John Wimberly, pastor of the Western Presbyterian Church in Washington.

  • CO2 emissions for me, not for thee

    Ross Clark points out that certain high-profile policies in the developed world ostensibly aimed at reducing global warming actually function as a protectionist racket against the developing world.

    The two most significant that he mentions are the attempt to enforce caps on emissions on countries like China and India without taking per capita emissions into account and the popularization of “food miles” as short hand for carbon emissions – thus favoring local food over imported – when the reality is far more complex (Jim Mason and Peter Singer talk about this in their The Ethics of What We Eat – “buy local” may often serve as a good rule of thumb, but not as a hard-and-fast rule).

    The entire article is well worth a read. Clark worries that “increasingly the politics appear to be shifting the burden of cutting carbon emissions on to the world’s poor: they must be kept in a state of noble peasanthood so that we can carry on living pretty much as before.”

  • McKibbon, Roepke, and John Paul II

    Caleb Stegall reviews Bill McKibbon’s Deep Economy (which I still haven’t read) in a recent issue of The American Conservative. In the course of the review he mentions this great exchange between economists Wilhelm Roepke and Ludwig von Mises:

    In 1947, two titans of 20th-century economic theory, Ludwig von Mises and Wilhelm Röpke, met in Röpke’s home of Geneva, Switzerland. During the war, the Genevan fathers coped with shortages by providing citizens with small garden allotments outside the city for growing vegtables. These citizen gardens became so popular with the people of Geneva that the practice was continued even after the war and the return to abundance. Röpke was particularly proud of these citizen farmers, and so he took Mises on a tour of the gardens. “A very inefficient way of producing foodstuffs!” Mises noted disapprovingly. “Perhaps so, but a very efficient way of producing human happiness” was Röpke’s rejoinder.

    Roepke was a free market economist, widely credited with Germany’s post-war economic recovery. He was also a deeply conservative thinker in the best sense who recognized that life is more than the market. His A Humane Economy argues that the market requires strong social, cultural and legal frameworks in order to function as it should without reducing social values to market values.

    Here’s a snippet:

    The questionable things of this world come to grief on their nature, the good ones on their own excesses. Conservative respect for the past and its preservation are indispensable conditions of a sound society, but to cling exclusively to tradition, history, and established customs is an exaggeration leading to intolerable rigidity. The liberal predilection for movement and progress is an equally indispensable counterweight, but if it sets no limits and recognizes nothing as lasting and worth preserving, it ends in disintegration and destruction. The rights of the community are no less imperative than those of the individual, but exaggeration of the rights of the community in the form of collectivism is just as dangerous as exaggerated individualism and its extreme form, anarchism. Ownership ends up in plutocracy, authority in bondage and despotism, democracy in arbitrariness and demagogy. Whatever political tendencies or currents we choose as examples, it will be found that they always sow the seed of their own destruction when they lose their sense of proportion and overstep their limits. In this field, suicide is the normal cause of death.

    The market economy is no exception to the rule. Indeed, its advocates, in so far as they are at all intellectually fastidious, have always recognized that the sphere of the market, of competition, of the system where supply and demand move prices and thereby govern production, may be regarded and defended only as part of a wider general order encompassing ethics, law, the natural conditions of life and happiness, the state, politics, and power. Society as a whole cannot be ruled by the laws of supply and demand, and the state is more than a sort of business company, as has been the conviction of the best conservative opinion since the time of Burke. Individuals who compete on the market and there pursue their own advantage stand all the more in need of the social and moral bonds of community, without which competition degenerates most grievously. As we have said before, the market economy is not everything. It must find its place in a higher order of things which is not ruled by supply and demand, free prices, and competition. It must be firmly contained within an all-embracing order of society in which the imperfections and harshness of economic freedom are corrected by law and in which man is not denied conditions of life appropriate to his nature. Man can wholly fulfill his nature only by freely becoming part of a community and having a sense of solidarity with it. Otherwise he leads a miserable existence and he knows it. (A Humane Economy, pp. 90-91)

    Here Roepke sounds a bit like John Paul II, who recognized the value and importance of markets for production and exchange, but the equal or greater importance of maintaining the value of things, especially human life, that cannot be reduced to exchange value. As he wrote in the encyclical Centesimus annus:

    It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to needs. But this is true only for those needs which are “solvent”, insofar as they are endowed with purchasing power, and for those resources which are “marketable”, insofar as they are capable of obtaining a satisfactory price. But there are many human needs which find no place on the market. It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied, and not to allow those burdened by such needs to perish. It is also necessary to help these needy people to acquire expertise, to enter the circle of exchange, and to develop their skills in order to make the best use of their capacities and resources. Even prior to the logic of a fair exchange of goods and the forms of justice appropriate to it, there exists something which is due to man because he is man, by reason of his lofty dignity. Inseparable from that required “something” is the possibility to survive and, at the same time, to make an active contribution to the common good of humanity. (Para. 34)

    It’s probably no coincidence that Roepke, the son of a Lutheran pastor, enunciated a similar kind of Christian Democratic vision. American conservatism has, unfortunately, tended toward a kind of “vulgar libertarianism” in theory, which valorizes “the market” as the solution to all social problems. And in practice it has ironically tended toward corporatism – favors for big business that actually end up shielding them from the vicissitudes of the market.

    The interesting question to me is whether there is a space for Roepke-style “humane conservatism” to join with McKibbon-style grass-roots progressivism in offering an alternative to the kind of neoliberal version of globalization that many would argue threatens the social, moral, political, and ecological health of our society.