MODERN TIMES
by Art Hobson
Economics As If Earth Mattered
In a cartoon I used to show to my classes, two individuals lie nearly crushed beneath a giant pile of trash.One of them, while tossing yet another empty can on the heap, says to the other, "Recycle?Nah.It would be too much trouble."
Today, when humankind appropriates 40 percent of Earth's total plant growth, has degraded or irreversibly transformed 50 percent of Earth's land surface, has overexploited or made extinct 66 percent of marine fisheries, is removing natural forests at a rate of 35 million acres each year, "fixes" (or converts into organic molecules) an annual amount of atmospheric nitrogen that is equal to the amount fixed naturally, appropriates 60 percent of accessible freshwater runoff, is extinguishing other species a rate that is 1000 times the natural rate and that is unprecedented since the great extinction event of 65 million years ago, and is burning fossil fuels so profusely that atmospheric carbon has risen by 33 percent above the highest level in the past 20 million years, we are all crushed beneath the trash.There are two basic sources of the problem:overpopulation, and our ways of doing business.Let's reflect on the latter.
E. F. Schumacher wrote his classicSmall Is Beautiful:Economics As If People Matteredin 1973.It was the first of the "new" economic analyses that incorporate planetary health into the economic system.Since then, forward-looking books such as Herman Daly'sBeyond Growth: The Economics of Sustainable Development,Lester Brown'sEco-Economy:Building an Economy for Earth,David Roodman'sThe Natural Wealth of Nations:Harnessing the Market for the Environment,and Paul Hawken, Amory Lovins and L. Hunter Lovins'Natural Capitalismhave broadened Schumacher's approach.
Their common theme:If the environment is to survive in our market-driven world,it must be valued within the economic system.It's arguably the most fundamental principle of environmentalism.
Garrett Hardin's famous 1968 essay "Tragedy of the Commons" illustrates the point.Several ranchers own herds that graze on a pasture open to all--a "commons" for everyone's welfare.However, each rancher seeks to maximize profits by increasing his or her herd's size, which leads to warfare or environmental collapse as the pasture approaches exhaustion.The problem:An economically valuable commodity, the pasture, was not included in the economic system.The solution:Environmental services must come at a price that will guarantee the sustainability of those services.If they had paid such a price, the ranchers would have reduced their short-term profits but averted disaster.
Today's "commons" include the atmosphere, other species, the forests, and so forth.Here are some examples.
"Acid rain" from industrial sulfur dioxide emissions polluted our lakes and streams during the 1970s and 80s.The problem was solved when Congress enacted a "cap-and-trade" system for sulfur emissions.Here's how it worked:To all emitters, the government issued permits to emit the amount they had emitted the previous year.Then, the permitted amounts were decreased annually until total emissions reached a "sustainable" level that would prevent future harm.The permits could be traded:Emitters who decreased their emissions could sell permits to other companies, creating economic incentives for cutting emissions.This system solved the acid rain problem, and market efficiencies made it far cheaper than predicted.Free market fans should love it.
Global warming is similar to acid rain, except it arises from carbon instead of sulfur.Although some nations are already capping-and-trading carbon emissions, a global system is the real solution.But that is not likely to happen until the Kyoto Global Warming Treaty enters into effect, and that might have to wait until the USA undoes President Bush's colossal mistake of withdrawing from the treaty.
Europeans are figuring out how to change the economic calculations of our two friends at the bottom of the trash heap.For example, Germany requires manufacturers and distributors to recycle all packaging, and consumers can leave excess packaging behind in retail stores.Car manufacturers will soon be required to recover and reuse 85 percent of the weight of "end-of-life" vehicles, and 95 percent by 2015, with costs borne largely by manufacturers.Such laws provide pro-environment incentives, and increase the costs of products in a manner that reflects each product's environmental costs.The "hidden hand" of the market guides both producers and consumers toward environmental sustainability.
The price of gasoline is an important and egregious example.A pervasive web of unsustainable practices feed off the automobile's failure to pay its dues for car deaths, global warming, injuries, pollution, the Iraq war, and so forth.Big box stores, for example, find it profitable to build cheap sprawling buildings on acres of cheap land to sell cheap stuff far from the city center because it's cheap to drive there, and that in turn is because cars don't pay their dues.There have been many studies of this problem, and they calculate the "real" price of gasoline to be between $5 and $20 per gallon.With such a market distortion, it's no wonder the car causes innumerable problems.
Earth is now Hardin's commons writ large.There was a time when we could use the planet for free because only a few million of us inhabited it.Early humans, and, later, American pioneers, could slash and burn and move on.But we are now six billion strong and Earth is no longer free for the taking.Nature will soon teach us the lesson of the commons in spades if we cannot learn it ourselves.