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?