Oh Dear George

On Sunday I visited the only biosphere reserve in Wales: the Dyfi estuary. As is usual at weekends, several hundred people had come to enjoy its beauty and tranquillity and, as is usual, two or three people on jet skis were spoiling it for everyone else. Most economists will tell us that human welfare is best served by multiplying the number of jet skis. If there are two in the estuary today, there should be four there by this time next year and eight the year after. Because the estuary\’s beauty and tranquillity don\’t figure in the national accounts (no one pays to watch the sunset) and because the sale and use of jet skis does, this is deemed an improvement in human welfare.

Err, no. Most economists would say that the sale of jet skis indicates a rise in GDP and would then, if you\’d just sit still for long enough to understand what they\’re trying to tell you, point out that the noise is what is known as a negative externality. That this is one reason why GDP isn\’t actually the be all and end all of the system and certainly, that a rise in GDP can accompany a decline in human welfare due to those very same externalities.

This sort of stuff is covered in A Level economics, even the new simple version for today\’s state educated. Might be worth buying one of the textbooks perhaps.

For he more advanced, a huge chunk of economics over the past few decades has been devoted to exactly this matter: the difference between economic growth and growth in human welfare. The two are not synonymous and the interesting questions are about when they diverge and what we do about it when they do.

Where economists do divide on such matters is what to do about the situation. Some would advocate taxing the jet skiers (Pigou taxation). Another idea (one I would support myself) is that the reserve should be private property and the owner charge people for watching the sunset, and for riding jet skis. A profit maximising owner would then balance the higher fees willing to be paid by the small number of skiers against the larger number of people and their smaller fee for going "Ahhh!" at the setting sun. We would thus find out who vaued the resource more, by what people are willing to pay, and in that process of discovery we would also find our solution: that scarce resource would be being used for its most highly valued use.

The massive improvements in human welfare – better housing, better nutrition, better sanitation and better medicine – over the past 200 years are the result of economic growth and the learning, spending, innovation and political empowerment it has permitted. But at what point should it stop? In other words, at what point do governments decide that the marginal costs of further growth exceed the marginal benefits? Most of them have no answer to this question.

Because it\’s not actually a question that governments should be asking. We don\’t hire our governors to decide such things for us., We hire them to do only those things that must be done collectively and with the monopoly of violence and impulsion that the State possesses. Whether there should be economic growth or not (which at heart is the question of whether there should be technological advance or not) is not one of those things for the State to decide.

Is it not time to recognise that we have reached the promised land, and should seek to stay there? Why would we want to leave this place in order to explore the blackened wastes of consumer frenzy followed by ecological collapse? Surely the rational policy for the governments of the rich world is now to keep growth rates as close to zero as possible?

It would appear that George hasn\’t actually read his own beloved IPCC reports. Specifically, the SRES.

In the A1 scenario family, demographic and economic trends are closely linked, as affluence is correlated with long life and small families (low mortality and low fertility). Global population grows to some nine billion by 2050 and declines to about seven billion by 2100. Average age increases, with the needs of retired people met mainly through their accumulated savings in private pension systems.

The global economy expands at an average annual rate of about 3% to 2100, reaching around US$550 trillion (all dollar amounts herein are expressed in 1990 dollars, unless stated otherwise). This is approximately the same as average global growth since 1850, although the conditions that lead to this global growth in productivity and per capita incomes in the scenario are unparalleled in history. Global average income per capita reaches about US$21,000 by 2050. While the high average level of income per capita contributes to a great improvement in the overall health and social conditions of the majority of people, this world is not necessarily devoid of problems. In particular, many communities could face some of the problems of social exclusion encountered in the wealthiest countries during the 20 th century, and in many places income growth could produce increased pressure on the global commons.

Energy and mineral resources are abundant in this scenario family because of rapid technical progress, which both reduces the resources needed to produce a given level of output and increases the economically recoverable reserves. Final energy intensity (energy use per unit of GDP) decreases at an average annual rate of 1.3%. Environmental amenities are valued and rapid technological progress "frees" natural resources currently devoted to provision of human needs for other purposes. The concept of environmental quality changes in this storyline from the current emphasis on "conservation" of nature to active "management" of natural and environmental services, which increases ecologic resilience.

So, to achieve lower population, we need higher growth. To get lower carbon intensity, we need high growth. To pay for the tranistion to a low carbon economy we need high growth (it\’s one ofthose things they discuss, that to get rapid technological turnover you need high growth).

Of course, George says that to get these things we should have no growth. Lucky he\’s so well read, isn\’t it?

9 comments on “Oh Dear George

  1. “no one pays to watch the sunset”

    Bollocks.

    Apparently they have banned water skiing completely in the Lake District by imposing a speed limit of 10 mph.

    Now, I personally find water skiers most irritating, but seeing as there are ten or so lakes and reservoirs up there, would it be so terrible to allow unlimited speedboating and water skiing on the least picturesque lake (Bassenthwaite springs to mind).

    Then the peace loving walkers, sailors and swimmers have nine lakes to themselves (so local hotel prices etc go up) and the hullaballoos (see “Swallows and Amazons” for explanation) have a lake to themselves (so local hotel prices etc go up as well, because all water skiers and speedboat enthusiasts in North of England will converge on Bassenthwaite).

    Everybody wins!

  2. “Might be worth buying one of the textbooks perhaps.”

    Perhaps try to start with: Partha Dasgupta: Economics – A Very Short Introduction (OUP, 2007)

  3. It would appear that George hasn’t actually read his own beloved IPCC reports…

    So, to achieve lower population, we need higher growth. To get lower carbon intensity, we need high growth.

    Are you educationally subnormal, Tim? Do you have trouble grasping elementary logic? Have basic English comprehension skills always eluded you? Or are you just plain dishonest?

    Because I have pointed out repeatedly your misuse of these SRES scenarios, and yet here you are spouting the same lying guff.

    For the nth time:
    They are not economic predictions. The report you quote from explicitly disavows any interpretation of these scenarios as policy prescriptions. They say nothing about the likelihood of occurrence of any of the scenarios, including your cherished A1. Here is the most relevant section:

    No judgment is offered in this report as to the preference for any of the scenarios and they are not assigned probabilities of occurrence, neither must they be interpreted as policy recommendations.

    However much you wish otherwise, however clever it would make you feel if things were not this way, the SRES scenarios simply don’t bolster your loony pet theory. Sorry.

    Tim adds: I think it’s you that is having the problems with logic here. The report says that these are not to be interpreted as policy recommendations: that is, we are not recommending that politicians do this or that. No probabilities and preferences means that they do not want to say either, which is most likely to happen, nor which they would prefer to happen. OK, yes, we’ve got all of that.

    But none of those qualifications change the fact that they are saying that if x happens then so will y. In fact, that’s what the families do. They say that if x happens (in A1, if high growth, more globalisation etc) then we can expect to see population go down, technological adoption speed up etc. Then, from that, we can derive the emissions scenarios.

    That’s what economists are supposed to do. Tell us what are the likely outcomes of our actions. Whether we then decide to make those actions is up to us: which is why the economists insist that these are not policy prescriptions, nor do they express any preferences.

  4. Tsk tsk Tim, how could you continue to express a viewpoint a commenter has already declared verboten? Maybe when you understand this blogging thing, your site will approach the dizzy heights of indecent-left.blogspot.com!

    Anyway, I quite understand the point that no notice can be taken of anything which specifically states it is not a policy recommendation. I mean, what’s the point of people releasing reports which don’t clearly tell people what to do? Just encourages confusion and lack of Right Thinking, which is the last thing we need in the Glorious Revolution. That’s why Comrade Gore is to be admired: not letting a few scientific inconveniences stop him from setting out in no uncertain terms what everybody must do.

  5. But none of those qualifications change the fact that they are saying that if x happens then so will y.

    No they are’t saying this. As I told you before, and as you will have found during your extensive reading of the SRES report, the A1 scenario assumes a certain growth rate, and provides a back story involving technological growth, etc. Nowhere does the report make the causal claim that you are making. Nor must such a causal relation be assumed for the purposes of the report, which is to supply possible economic scenarios for the purposes of climate modelling. Why do you keep insisting they are saying something not present in the report?

    They say that if x happens (in A1, if high growth, more globalisation etc) then we can expect to see population go down, technological adoption speed up etc. Then, from that, we can derive the emissions scenarios.

    They do not say this. They do not suggest a causal link between policies you infer from the back story and the economic picture. They have not modelled the economic effect of those policies. They aren’t saying anything close to “if x happens then so will y”, and even if they did it would not prove your case. That is a correlative relation, not a causal one — and you are assuming a causal relation in your policy advocacy. Thus your enthusiasm for globalisation has no basis in the report. It is a reflection of your own prejudices, not the IPCC’s findings.

    Tsk tsk Tim, how could you continue to express a viewpoint a commenter has already declared verboten?

    I haven’t declared anything “verboten”. But Tim has persistently refused to defend his use of the SRES scenarios, yet continues to place the same spin on them. If he wants to be taken seriously, he should defend his point of view rather than simply repeating it.

  6. Stuart A,
    With reference to your previous stated views on the predictive ability of climate models. Does this mean you now accept that climate models are not predictive? If not, it does seem that your political bias is getting the better of you;)

  7. With reference to your previous stated views on the predictive ability of climate models. Does this mean you now accept that climate models are not predictive? If not, it does seem that your political bias is getting the better of you;)

    Hilarious and all, but, er… no, because I’m saying the SRES report doesn’t even claim to have modelled the outcome of the policies Tim is advocating.

  8. “This sort of stuff is covered in A Level economics”

    Quite. I did A level economics just last year and I could have told him that in the first term of AS level.

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