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I’ve often claimed that the only surefire way to “save the planet” if you wish to eschew the price system and compel people to do something about their environmental “footprint” is to ask folks to consume less.

Now, the counterpoint to this is that the data is pretty overwhelming that richer is greener, and if lower levels of consumption take us back down the environmental Kuznets curve, then we’ll actually wreck the planet by consuming less. For example, if we consume less, it may be the case that we stop exploring for earth friendly oil (don’t laugh, think of its energy density as compared to alternatives) and start using more wood to warm ourselves and cook our meals. We’d wreck the world’s forests trying to do that.

But ignore that for the time being. Given our wealth and stock of knowledge, isn’t it plausible that reducing our consumption would reduce resource use?

I’m not so sure what that means. I think for this to truly have any meaning we’d have to argue not just that we have to reduce our consumption but rather we have to reduce our overall wealth in order to see any effect. So this means not only do we have to stop buying second cars and fifth televisions, but so too do businesses have to stop consuming, but so too do governments. I wonder if the anti-growth folks out there are willing to extend their argument out this far? See last Friday’s post for more.

Suppose we limit our thought to asking consumers to cut back on some of their spending. What will happen in an economy that does this? Well, what options do we as consumers have if we choose not to consume today? It would seem to be most likely that we save those resources instead.

But what is saving but consumption by another name? And it is consumption by another name for two reasons. First, savings just don’t sit under a mattress, they are funneled through the financial sector and “used” by folks that place a greater value on accessing those resources today than we do. In other words, they are invested. That “investment” is simply current consumption by firms to expand plant, equipment, training, etc. I don’t see how consuming a larger factory is any different than consuming more televisions today. And of course what impact does this have? The second impact is that such investments today encourage more consumption out in the future. That’s the point! Indeed interest rates will continually adjust until at the margin we are indifferent between consuming one more television today and one more television tomorrow.

So it doesn’t seem like it is even possible, in principle, to reduce our consumption today.

Or is it?

Again, ignoring the strong positive relationship between growth and environmental quality, it would seem to be the case that what the plea to consume less means is that we all, collectively, have to produce less. I wonder how that would sound on a public service announcement? “Hi folks, if you are trying to save the planet, make sure you start showing up late for work!” But that is really all that it could mean. I don’t think that all of us producing a little less would spell the end of the world, but I wonder what the save the planet advocates would have to say? You can’t consume less without producing less. And basic economics teaches us this – and that is because the sole end of production is consumption.

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6 Responses to “Debating Myself, A Continuing Series”

  1. jb says:

    Great post, and great fodder for conversations with conspicuous non-consumers tooling around proudly in their Prius’s and who badger me about recycling. Saving is, after all, by definition, that which we do not consume. Savings are made available to capital markets in one way shape or form, where somebody, ultimately, uses them to consume materials to produce stuff. Wow. Let the greenies chew on that one for a while. The only way to “reduce my footprint” I guess, is that instead of saving , I would have to cash that portion of my pay I that I do not consume and burn the currency. But that would risk deflation and also release carbon dioxide into the atmosphere, so maybe I should bury it, but wait, landfilll….boy it sure ain’t easy being green…

    • wintercow20 says:

      You couldn’t even burn your money, because of course as you say this only changes the value of the currency – and not the quantity of goods being produced. We truly would have to enforce Harrison Bergeron-like shackles on our productive capacities.

  2. Harry says:

    If you wish to eschew the price system and compel people to do something….

    Wintercow’s reasoning is sound here. And there are a lot of people who want to eschew the “price system” which is the voluntary exchange between two parties.

    Just read the latest issue of the Huffington Post, or the December 1977 issue of Mother Jones, or any op Ed by Paul Krugman. The idea is to consume less so you can afford to pay more excise, income, real estate, payroll, and wealth taxes which government is better able to allocate more wisely. The hidden promise is that there will be enough money left over for the Nomenklatura to live in dachas in Jackson Hole.

  3. Harry says:

    Isn’t that the Laffer curve, or the law of diminishing returns? This is a question Wolf Blitzer should ask our commander-in-chief.

    • jb says:

      Right on Harry. Hey that’s an interesting question to post. If you could participate in a Presidential press conference, and were guaranteed the right to ask one, but only one question of the President, what would it be?

  4. jb says:

    Right on Harry. Hey that’s an interesting question to post. If you could participate in a Presidential press conference, and were guaranteed the right to ask one, but only one question of the President, what would it be?

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