There is a dangerous belief amongst many environmentalists and biologists that economics and free markets stand to harm the environment, not help it. This is a result of a long history of a robust economy coming at the cost of acid rain and destroyed rain forests. I largely think that this is a result of two things; first, smug economists love getting their kicks off of proving dooms day theorists wrong and second an antiquated notion of 19th century utilitarian and the terrible memories of the industrial revolution. The smug economist is best exemplified by Julian Simon who embarrassed the sensationalist neo-Malthusian Paul Ehrlich (John Tierney famously detailed this here and made a great analogy of it to oil here). This contentious relationship has radicalized both sides of the debate, giving the impression that the approach supported by economists is mutually exclusive to that supported by many biologists; further review actually demonstrates the opposite. In fact, when economic reasoning is tempered down and actually applied the catastrophic possibilities of future myopic economic growth policies, neo-Malthusians and economics can come to reinforce one another; neo-Malthusians providing the impetus and economics providing the mechanisms whereby grave trouble can be averted.
In a fantastic, but ultimately flawed essay in his book Consilience, biologist and staunch environmentalist E.O. Wilson splits the world into two camps, (1) naturalists, those for a responsible environmental ethic, and (2) exemptionalists, those who believe in the myopic exploitation resources for the short-term benefit of the economy. While Wilson represents the naturalists, he argues that the academic force behind exemptionalism is economics. To Wilson, economics represents, “the single greatest intellectual obstacle to environmental realism.” But while it is easy for Wilson to say this when economics is represented by the caricature of 19th century neo-classical pigheaded economics that is Julian Simon, a deeper inspection of Wilson’s claims and specific examples dismantles Wilson’s implication that economics and environmental realism are mutually exclusive.
First it is necessary to make a distinction between private and public goods because it is a result of this distinction that Malthus and Ehrlich were wrong and precisely the reason that Wilson may be correct. A private good is one that can be easily divided, made excludable, and sold on the market (e.g. widgets or books). A public good is one that is not scarce and can not be made excludable to those who do not purchase it (e.g. the atmosphere, national defense, the environment, or the ocean). The importance of this is that economics teaches us that private goods are efficiently used, while public goods are almost never used efficiently (though they can be, but on coincidentally).
Let’s first examine private goods. The best argument used by ignorantly optimistic economists is that they have yet to be wrong. This is best exemplified by the gloating of some economists over the success of Simon’s wager with Ehrlich. But this wager was successful because economics teaches that if demand increases from increased population that prices will rise, prompting an increase in investment in technological growth and a decrease in consumption. It also teaches us that producers will never use their property in a myopic way; lest they put themselves out of business (the most vicious anti-environmentalist will always protect the biodiversity of his farm or the safety of the cattle on his ranch). These lessons demonstrate why food, water, and oil (to name a few) have not run out, as Ehrlich once prognosticated. Wilson discusses the prospect of a water crisis as a result of future population increases, but in so far as water is a perfectly private good, we will never run out of it (of course nothing is a perfectly private good, but stay with the argument). This is because, if the price of water rose, the otherwise needless consumption of it would plummet. If the price of everything related to water increased, then use of those things would decrease and so would use of water. This would leave water left for those who value it most. On top of this, if the price rose, then so would incentive to create alternatives to use of water (leaving it for essential use only, e.g. so we could wash ourselves with something other than water, leaving it for drinking). David Gertham discusses technology in What is Economics and Why Study It when he explains how, “current technological changes toward miniaturization promise to conserve even more of countless different resources.” Wilson dismisses the prospect of future miracles by stating that even, “technologies have limits.” But an important distinction has to be made here. Simon is correct in that there is no limit on the ability for humans to expand the technologically feasible possibilities, but Wilson is correct in that the present economy runs on some irreducible resources that will eventually reach their breaking point.
Wilson would probably argue that he is not so much concerned about the potential for technological evolution to fix problems in the short run, but more that he is concerned that there is only a small chance that all these technological revolutions will lessen man’s environmental impact. Essentially that even though water can be sold as a private good, it is a scarce good that is ultimately a public good, in so far as its overuse has negative effects on the rest of society not compensated for (or in economic lingo, negative externalities). An example of this would be if a river was rerouted, causing an environmental hazard on the scale of that which destroyed the biosphere II experiment, which was miserable failure at attempting to create a completely independent biosphere (to many this proved that man is incapable of ever creating or even controlling the intricacies of the earth's ecosystem which is efficiently discussed here) . The harm of that would be felt by all, but the person who rerouted the river would suffer no harm because of his actions. The reason the catastrophe happened in this hypothetical case is because the river was not a private good, it was rather one relied on by everyone (thus public), and when it was overexploited it ruined everyone. However, had it been privately owned by all that were effected by it, then economics tell us such a catastrophe would never be allowed to happen. Similarly, Wilson talks about fishermen who are notorious for over fishing the ocean (a public good), but compare this to the long-term viability of an Emu farmer, who would never in a million years slaughter his flock to extinction. Jared Diamond also discusses the overuse of public goods in his examination of the fall of the Easter Island civilization in Collapse. Diamond singles out the destruction of the hauhau and toromiro trees as the tipping point that led to a drastic drop in food production, which in turn led to cannibalism, and the eventual ruin of society.
But further inspection seems to indicate that the spoil of Easter Island could have been avoided with property rights (and proper knowledge, which I will discuss later). If the trees were the only means of building canoes, spears, and ropes as Diamond explains (and thus essential for the Island's economy), then the sale of such wood from those trees would be immeasurably lucrative. As a result, if there were property rights, then those trees never would have gone extinct (assuming that people would have been able to figure out what was causing the extinction of the trees, which is not so much an obstacle for modern man as it would have been for those of fifteenth century Easter Island). This example is just a microcosm of the danger that inefficient use of public goods (which tend to also be the goods most vital to life) pose to civilization. Luckily economics provides a means for making such essential goods “privitizable”. The most popular mechanism is tradable permits. These allow a government to establish a sustainable level of pollution or number of fish that can be caught. Firms then can buy and sell permits, but the total amount of environmental resources used remains constant. This is the best solution to the biggest problem Wilson talks about: global warming. Simply capping the acceptable level of carbon dioxide pollution would avoid the devastating impact of rising temperatures.
But with environmental biology and economics united, the remaining hurdle is the synthesis of politics and human desires. Wilson talks about how the historic Agenda 21 agreement that would have solved, “virtually all of the general problems of the environment,” was made worthless in the face of, “political squabbles arising from national self-interest.” Of course, a shrewd observer would notice that the political problems associated with this are not just derived from national self-interest but also politicians who need to please their constituency, a constituency that, as Malthus convincingly postulates, has an undying passion for procreation. This may end up being a non-issue due to advances in contraceptives and trends in female rights that severely limit procreation (something economics has extensively studied). But if we are not that lucky, then we have discovered that any potential crisis is not a matter of population growth, but of a necessity to sustain population growth through the harmful exploitation of public goods. While economics has prior been used to speed up the necessary economic growth that facilitates the demand for population growth (and as a result is often myopic and threatens our ecosystem), it can also be used to set the constraints on the economy that would stop its destruction of earth’s delicate ecosystem. In that world, technological advancement would have to evolve under the confines efficiently set up by bio-economists, allowing for continued improvement of GDPs and increases of population, but while keeping mankind’s ecological footprint at the same, sustainable level.
Instead of squabbling, economics and biology ought to incorporate one another. Wilson makes a great suggestion when he calls on economists to use “full-cost accounting, which includes the loss of natural resources.” But Wilson creates little interdisciplinary friendship when he characterizes all of economics as neoclassical and blames it for the failure of Agenda 21. In fact, many of the most conservative economists (namely Becker and Posner) are on record as supporting caps on pollution in order to avoid global warming. This, of course, was not achieved until economists saw all the relevant data. But this should be seen as a positive sign, economists are an obstacle to environmental realism only in that they have to be convinced of long-run and short-run marginal costs and benefits. They are not all interested in promoting an undying optimism about the future of mankind and the earth (like Simon). In fact, economics is the sight of an enormous level of interdisciplinary interaction. Over the past three decades it has synthesized its tools with disciplines as diverse as law, religion, sports, and criminology. Hopefully a similar level of academic synthesis will occur over coming years with environmental biology providing the necessary data for economists to examine and in turn make policy recommendations that will allow a sustainable, ethical, and efficient environmental ethic. Of course enormous political struggles will still exist, but at the very least the squabbling could become between academics and politicians, as opposed to being amongst the academics themselves.
-Mr. Alec
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