Where I’ve Been Lately

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Exploring the area around the Columbia River Gorge that separates Oregon from Washington…

Hiking in the Gifford Pinchot National Forest...

Where flowing water runs shallow...

Trillium Lake - watched over by Mt. Hood

Steady State Economics?

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I know very little about economics, but since the onset of the Great Recession I’m beginning to wonder if economists trained under the standard paradigm(s) know much more about it. In any case, the BP oil spill has – for a few minutes, anyway – spurred me to mull over our conventional economic assumptions about the need for ever more growth (fueled, of course, by ever more oil until a more efficient and/or less dangerous energy source is developed). And I’ve recently discovered that attacking these assumptions is one of the main passions of Herman Daly, author of “Steady State Economics“. Here’s an excerpt from Chapter 5, which I found here-

One of the most popular arguments against limiting growth is that we need more growth in order to be rich enough to afford the costs of cleaning up pollution and discovering new resources. Economist Neil Jacoby says, “A rising GNP will enable the nation more easily to bear the costs of eliminating pollution” (1970, p. 42). Yale economist Henry Wallich makes a similar point:

The environment will also be better taken care of if the economy grows. Nothing could cut more dangerously into the resources that must be devoted to the Great Cleanup than an attempt to limit resources available for consumption. By ignoring the prohibitionist impulse and allowing everybody to have more, we shall also have more resources to do the environmental Job [Wallich, 1972 p. 62].

No one can deny that if we had more resources and were truly richer, all our economic problems would be more easily solved. The question is whether further growth in GNP will in fact make us richer. It may well make us poorer. How do we know that it will not, since we do not bother to measure the costs and even count many real costs as benefits? These critics simply assume that a rising per-capita GNP is making us better off, when that is the very question at issue!

If marginal benefits of physical growth decline while marginal costs rise (as elementary economic theory would indicate), there will be an intersection beyond which further growth is uneconomic. The richer the society (the more it has grown in the past), the more likely it is that marginal benefits are below marginal costs and that further growth is uneconomic. That marginal benefits fall follows from the simple fact that sensible people satisfy their most pressing wants first, whether in alternative uses of a single commodity or in alternative uses of income. That marginal costs rise follows from the fact that sensible people first exploit the most accessible land and minerals known to them, and that when sacrifices are imposed by the increase of any one activity, sensible people will sacrifice the least important alternative activities first. Thus marginal benefits of economic activity fall while marginal costs rise. Were this not the case, our previous “economic activity” would not have been economic — less pressing wants would have to have taken priority over more pressing wants, and the level of welfare could have been increased by reallocation with no increase in resources used.

…Once we have gone beyond the optimum, and marginal costs exceed marginal benefits, growth will make us worse off. Will we then cease growing? On the contrary, our experience of diminished well-being will be blamed on the traditional heavy hand of product scarcity, and the only way the orthodox paradigm knows to deal with increased scarcity is to advocate increased growth — this will make us even less well off and will lead to the advocacy of still more growth! Sometimes I suspect that we are already on this “other side of the looking glass,” where images are inverted and the faster we run the “behinder” we get.

Again, I don’t know enough about economics to evaluate Daly’s argument here, and in any case, utopian thinking is always dangerous. The devil (or the angel) is always in the details, and dogmatic presuppositions must always be guarded against. But I do have a sort of intuitive grasp on what a steady-state economy would involve (maybe because I seem to have reached a sort of steady-state of economic well-being myself, though perhaps not an optimal one), and the question is this: would a steady-state economy – one that aims to supply each individual with an optimal level of well-being, however ‘optimal’ is defined – really be any more utopian than an economic system predicated upon the occurrence of never-ending growth (even in the most well-off societies)?

Start With The Ending

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While David Wilcox can sometimes wax just a little too sentimental for my taste, he’s a remarkably clever songwriter when he wants to be. Here’s a nice rendition of his “Start With The Ending” (it’s the best way to begin)-

Are We Less Free Than We Were 30 Years Ago?

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Since I focused on a foible of Minnesota’s Governor Pawlenty in my last post, it seems only fair to point out that our neighboring state to the west apparently has a rather bright Senator in Amy Klobuchar. I was impressed by her ability to quickly counter Senator Tom Coburn’s (R-OK) charge – made during the Kagan confirmation hearings yesterday – that the majority of Americans are very upset that they are less free than they were 30 years ago. (The following transcript of Klobuchar’s response is from the liberal website Think Progress)-

KLOBUCHAR: I was really interested and listening to Senator Coburn. … He was actually asking you, just now, back 30 years ago if you thought that we were more free. … But I was thinking back 30 years ago, was 1980. … And then I was thinking, were we really more free, if you were a woman in 1980? Do you know, solicitor general, how many women were on the U.S. Supreme Court in 1980?

KAGAN: I guess zero.

KLOBUCHAR: That would be correct. There were no women on the Supreme Court. Do you know how many women were sitting up here 30 years ago in 1980?

KAGAN: It was very striking when Senator Feinstein said she was one of two women. I thought, how amazing. So, how many?

KLOBUCHAR: There were no women on the Judiciary Committee until after the Anita Hill hearings in 1991. Do you know how many women were in the United States Senate in 1980, 30 years ago?

KAGAN: I’m stumped again.

KLOBUCHAR: No women were in the United States Senate. There had been women in the senate before, and then in 1981, Senator Kassebaum joined the Senate. So, as I think about that question about if people were more free in 1980, I think it’s all in the eyes of the beholder.

(Klobuchar later corrected herself later to note that Kassebaum was already serving in the Senate at the time, having been sworn in in 1978.)

As I was watching Coburn’s speech on C-SPAN, before Klobuchar spoke I was wondering whether African-Americans would agree that they had lost a significant amount of freedom over the last half century or so, particularly since the passage of civil rights legislation in the 60s. But Klobuchar’s response was better than mine would have been, since a different conservative talking point has been that the freedom of the majority has been diminished by the growing freedom of minorities, as if freedom were a zero-sum game. [To be fair, some conservatives have further argued that the federal government has tilted the playing field in favor of minorities (instead of simply keeping it level for all), but evidence of such favoritism is seldom offered.] Klobuchar may have recognized that no one could plausibly claim that women constitute a minority in this country. Of course, there is room for debate concerning whether more opportunity for women – as indicated by having more of them in positions of power – implies more freedom for women, but I’d be much happier arguing for that position than for its negation.

The bottom line, it seems to me, is that government action can diminish freedom or it can increase freedom (by protecting citizens from restrictions that might be imposed on them by public or private entities). It all depends on the particular government action.

By the way, to get an idea of Senator Coburn’s self-righteous (and fundamentally misguided) views on the sorts of personal religious opinions a Supreme Court Justice should rely upon when deciding cases, see this post over at little green footballs.