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.