Friday, December 14, 2007

"What's the point of life if you can't afford a big TV?"

On science vs. economics

Most economists would define their field as the study of human action. Individual human action is as relevant to economics as collective human action. Now, economists has traditionally concentrated on human action in the realm of commercial interests, but there is a growing field of economics that examines human action outside of the commercial realm. For instance, Nobel prizes have been handed out to economists who specialize in the study of human action in public settings (the so-called "public choice" school of economics).

"The marketplace" is simply jargon for that theoretical realm where people voluntarily exchange goods and services. Sure, voluntary exchanges between A and B might under certain circumstances affect the decisions of C, but more to the point, it's the place where many of our individual decisions to act are carried out. Hence, to be against something called "the market" is to be against the voluntary exchange of goods and services. I doubt that's what most people mean when they rail against "the marketplace," which means a bit more precision is necessary before I can figure out exactly what complaints are being made.

All "society" is is the aggregation of a certain subset of people. A certain subset of people in the United States is engaged in the activity of maximizing revenue. Other subsets are engaged in other interests, other activities, and the pursuit of other ends. Economists, by they way, refer to this activity as "maximizing utility." And to complicate matters, most of us are involved in different societies that simultaneously pursue different ends. Aggregating those millions upon millions of distinct "societies" into something called "our society" is analytically so problematic that it probably isn't worth the effort.

The interesting thing about human history is that, for most of it, economic growth did not occur in any meaningful sense. For over millennia, life expectancy, real wealth, and almost every useful metric of human wellbeing changed nary at all. Then along came the industrial revolution and everything changed radically.

The A1F1 scenario of society through 2085 employed by the IPCC is akin to the "nightmare scenario" from an environmentalist's standpoint. That is, it assumes for the sake of analysis that a "business as usual" world (that is, one in which climate change occurs but government does little about it) will yield breakneck economic growth, rapid technological change, and extremely high fossil fuel use. As a consequence, CO2 concentrations in 2085 will be at 810 parts per million, global temperatures will have risen by 4 degrees C, and sea levels will have increased by 34centimeters.

The lead author of the most recent IPCC Working Group on climate change impacts (that is, Working Group II), find that even under this scenario:

the global population at risk from hunger will decline from 15-17% in 1990 to 1.7% in 2085;
the global population at risk from water stress will decline from 26% to 21%;
the global population at risk from coastal flooding will change from 0.2% to somewhere between 0.1% - 0.6%;
the amount of land necessary to meet future agricultural demand will decline by more than half;
net GDP per capita in developing countries will grow from $875 to $43,000, while net GDP per capita in developed countries will grow from $14,500 to $69,500; and
total human mortality from hunger, malaria, and coastal flooding will decline from 4.4 million to 2.3 million.

A net decline in wealth or personal well-being is not by any means inevitable if the IPCC is correct about the future. Regardless, if the environmental movement were to enthusiastically embrace an ideology of decline, it would become irrelevant to American politics rather quickly, which is why I don't believe such an agenda will ever surface from politically meaningful parties -- regardless of its merit.

"Decline isn't bad news in an airplane. Decline is about reaching your destination. Perhaps there is some level of economic activity beyond which life gets worse? Perhaps in some countries we have already passed that point? Could the time where we'd all be better off with a gradual decline have arrived?

"I think the soft landing is still within our grasp. The longer we treat the people who call themselves economists as a priesthood above criticism rather than as a human subculture with serious dysfunctions, the bumpier the best landing we can achieve gets."

"Climate change is just a symptom, though an increasingly salient one. I suggest that the core problem lies in our collective failure to consider what human decency means and to use that understanding to manage what money means. We don't have to listen to people who get that backwards."

Liberally taken by Cato's Jerry Taylor responds to Michael Tobis

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