Friday 18 April 2014

In defense of the tree-huggers

Paul Krugman has recently published a blogpost and a chronicle talking about the evolution of the economics of fighting climate change. In it he states that people of both the left and the right are guilty of fallacies -to be fair he also says that the fallacies of the right are much more serious and damaging.

But we have come to expect that. So let's see what are the fallacies of the left:
"there are some people on the left who keep insisting that economic growth is incompatible with reduced emissions, and that therefore we have to turn our backs on growth." is from the blog post.

Strictly understood, and in a theoretical economics framework, this is of course a fallacy, as you could have plummeting emission intensity (ie, emission per unit of GDP).

Now, let's look at what it means in practice, and when you are not just in an economics framework:

First, while a huge drop in intensity, to the extent that total emissions are reduced while still growing can be considered as a possibility, it is not something that has ever happened. Yes, intensity has fallen (most of the time) with economic development. But total emissions have not -indeed, that's a major reason why intensity has become such a popular measure. Worse, some of the drop in intensity has been due to outsourcing the dirty stuff (at the cost of higher total emissions, since transportation is not neutral and developing countries have worse technology). Take that away and even much of the intensity reduction goes away. Ecologists are not as interested in theoretical debates as in practical results, and thus have some reasons to believe that growth is not a great eco idea.

Second, in order to avoid catastrophic consequences (if that is still possible, which it may not be absent an active reduction of existing CO2 and other gases), it's not just "reducing emissions" that's needed. It's pretty much stopping them altogether. So they would have even stronger reasons to reckon that a theoretical possibility that has failed to ever even reduce total emissions could eliminate them entirely in time.

Third, and this is where the frameworks could create an issue, we'd need to define "growth". Probably in the eyes of an economist it means GDP. But that is an imperfect indicator. Let's have a very extreme experiment: in period 1, a society produces a single good, A. In period 2, it produces a single good, B. When was GDP higher? As far as I understand, it is impossible to answer the question. GDP growth is somewhat (it has terrible other flaws, but let's not go into those this time) meaningful between two relatively close periods -although even then, statisticians need to work wonders to account for changes in composition. When a new product appears, its price relative to older goods will have to be used to evaluate its contribution (which means that, in my silly thought experiment, the answer would depend on relative prices in period 1.5, which in turn would probably depend on whether product B was launched massively or a scarce product). But if the society is completely overhauled (I don't mean producing lots of extra goods, but completely different ones), it ceases to have much meaning.

And there's the rub. Whichever way you look at it, we are going to have to consume far less in goods. Yes, we may get more services, but I don't see how we could consume the same quantity of goods, and I've really looked at it.
You see, it's not (at least in the mind of the ecologist) just carbon emissions. It's carbon and other gases, and water and rare earths and metals and arable lands (and...) scarcity. And societal equity (people on the left assume that consumptions inequalities will be reduced, as there is little reason why the West should be so much richer than the rest of the world for all eternity).
And whichever way you look at it, I have not seen any way that the same quantities of goods could be consumed (by an increasing population) while meeting all those constraints. Not with existing technologies -although the drop in the price of solar is great news, solar panels are not carbon neutral over the full life-cycle, their production and disposal create other problems, and of course, they take space. Yes, they are a good improvement. But they do not solve everything.

And that's almost the easiest: energy. A comparatively easy to change component of goods production. But we're also running out of inputs, and we have problems cleaning.
Take air conditioning: it leaks massively potent and unbelievably long-lived greenhouse gases.
Take cars -not only do they require a lot of metals (and mines are hardly a clean activity), they need a lot of electronic equipment these days, which calls for rare earth. Oh, and while we're on transportation, don't expect solar-powered planes ever. Not for commercial flights anyway.
Once the goods are discarded, things don't improve. Waste management is a major problem as it is. Now, in your mind, try multiplying Chinese consumption by 3 (and Indian by 10) -they'd still be consuming less than us. But you'd be under severe stress.

So, it might be that GDP (certainly nominal GDP, which is what matters for financial stability, but maybe even real GDP) can keep growing while we bring emissions down to zero, while reducing inequalities and stop running out of inputs while cleaning our countries. But that's an artifact of the metric. What ecologists mean is that we'll have to adjust to a completely different lifestyle in order to achieve that.

And I've got news for you: it would not be half bad.
Think about it. As it is, we need a lot of marketing wizardry to convince us to buy lots of things that we have no use for, otherwise our economies end up in depression, all the while being under a lot of stress at work and finding it very hard to maintain a decent work-life balance. We could, instead, consume time -time to think, to relax, to laugh, to interact with people that we would no longer so easily see as antagonists.
I can imagine zero-emissions society with rather little that I would miss from the change, except for one thing: I happen to have friends in very distant parts of the world. I already try to avoid flying more than once a year for peronal reasons, yet I guess that even that will (at least temporarily -we may one day manage to take CO2 from the air and turn it into fuel on an industrial scale, for example, and with nuclear fusion we might have enough energy to do it enough to maintain quite a lot of air transport) need to shrink. And I will miss them, even though I'll keep in touch thanks to modern networks. But the consumption society? No, I don't think I would miss it at all.

So, unless someone comes up with a detailed description of the contrary, it does seem that environmental constraints will require in practice a reduction in consumption, certainly of physical goods. As far as I understand, this is what ecologically minded people mean when they say that we will have to forget about growth -certainly to forget about growth as the main target (and that is a point I made in a Krugman conference, where I asked if the right goal should not be jobs rather than growth, with a full employment stagnation being more desirable in developed countries than a jobless recovery). It may be a fallacy in a theoretical economics world, maybe ecologists should phrase it differently, but I do not see it as fallacious per se. And in any case, we in the developed world have long gone past the point where growth ceased to be a desirable target, even without environmental constraints. With a reasonable sharing of what we have already, we would all be better off with more time than more goods. So let us not worry too much about what impact on growth environmentally friendly policies would have.

1 comment:

  1. I know your face, i am not sure if it is from Boucher or Charlemagne. I would say global warming is beneficial as it may slash this polluting civilisation. It is a welcomed regulatory mechanism. Probably that will mar krugmans retirement scheme, but who gives a fuck.