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I am sympathetic with the essential point
you are making, Arthur. Fortunately those vines will grow back, all the better
appreciated. Beyond the metaphorical story lies a worse
problem: we lose institutional memory when people die, and so as a species
learn only a fraction of the lessons that as individuals we are treated to. This makes me wonder how lessons might be
disseminated and remembered more effectively, at the level of the species as a
whole. It is temping to say: this can be done
through a ‘world bank of learnings’, but then we run up against two
problems:
Nice story, young Arthur! Cheers, Lawry From: Cordell, Arthur:
ECOM [mailto:[EMAIL PROTECTED] I am the story teller. And, yes, you
are right I over stated the case just to make the point. I wrote this
piece lo those many years ago. It really should have been that Crusoe cut
the minimum he needed but even then he missed what was now gone. (I suppose as
will our society, when we realize what has been lost without having been
counted as part of the cost of production) arthur From: Lawrence
de Bivort [mailto:[EMAIL PROTECTED] Seems silly of Crusoe to cut
‘all’ the vines. Why would he not only cut the minimum he needs?
Or maybe the story-teller is trying too hard to make his/her point? Cheers, Lawry From:
[EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED] On
Behalf Of Cordell, Arthur: ECOM In cleaning up some old files I came
across this piece....from many years ago. I pass it along for what it's
worth. Originally
published in 1974, in a now defunct publication called
Survival. This tells a story of how economies function or
mis-function. Arthur
J. Cordell ROBINSON
CRUSOE ECONOMICS One
insight into the relationship between economic growth and environmental decay
may be seen in the following example. Let
us assume that a shipwrecked Robinson Crusoe arrives on a desert island. He is
without implements and quickly begins to worry about such things as food. Fish
abound, but they can only be caught by hand. Mr. Crusoe find that he can catch
2 fish per day by hand–but he really would like to have more. He
tries to push thoughts of food out of his mind by relaxing and enjoying his
very beautiful island. He particularly likes the scenic hanging vines and the
stands of young trees. Mr.
Crusoe is then struck with an idea. Why not build a net so that more fish can
be caught? "I wonder how long it will take? Is it worth the physical
expenditure of effort? How many more fish will I catch?" He will naturally
only build if it seems worthwhile. Mr. Crusoe is an economic man– he
doesn’t engage in wasteful activity! Mr.
Crusoe estimates that it will take him one day to build the net. For that one
day, he will catch no fish– he will forego consuming 2 fish. Thus he must
restrict consumption in order to make an investment in the net. Restrictions
on consumption equal savings, and savings are used for investment. So it is
with Mr. Crusoe, and so it is in our larger society as well. Now,
how to decide whether it is worthwhile building the net? In our society
businesses try to relate what they get to what they give up. What they give up
is an alternative use of their savings, and what they get is a return on their
investment. Mr.
Crusoe can use his savings in many ways. He can build a net, or he can explore
the rest of the island, or he can rest, or he can build a non-productive investment
like a monument. Mr.
Crusoe makes a decision based on the range of alternatives that are available.
Two fish per day is certain without the net; three fish might be caught with
the net. Three fish would amount to a 50 per cent daily increase in fish: Not
bad! Mr.
Crusoe is engaged in a decision process, the outcome of which will determine
whether and to what extent economic growth takes place on the island. Mr.
Crusoe finally decides to make the capital investment. He then begins to look
for raw materials. After all, a net must be constructed of something. Since no
one owns the beautiful hanging vines and young trees, he cuts them all down to
construct his net. Mr.
Crusoe is interested in keeping his costs low. By using the free vines and the
young trees, his costs are only the two fish that he foregoes in the
construction of the net. A
free good is one which has no market price; in economic theory, the unlimited
use of a free good by any one party does not create scarcity nor does it deny
use of that good to anyone else. Air and water are usually cited as examples of
free goods. Mr.
Crusoe is a successful entrepreneur. His net works. He is catching and eating
three fish per day. Daily gross national product or GNP (measured in fish) has
increased by 50 per cent. But–
you guessed it – Mr. Crusoe is not happy. In fact Mr. Crusoe is not happy
at all! Why? Let Mr. Crusoe answer: "I thought those beautiful vines and
those slender young trees were free goods; they belonged to nobody. I thought
the costs were all external. But I didn’t realize that when I cut them
down, I would be depriving myself of the this intangible source of pleasure.
Since I am the only one on the island and will be here for some time then it is
clear that I did not correctly evaluate my true costs of production." Poor
Mr. Crusoe. His true production costs were his foregone consumption (that is,
the two fish) plus the loss in future aesthetic pleasure that he would have
derived from the trees and vines. Mr.
Crusoe came from a society where his reasoning would have been perfectly
acceptable. Free goods do not belong to anybody. One can dump waste into water,
cloud the sky with smoke, cut down trees and make arid vast expanses of land. Where
Mr. Crusoe came from, costs of production only refer to private costs.
Smoke damage, water damage and environmental damage may all take place in the
production process; however, these actions do not show up as costs to the
business. While they are certainly costs to someone, they are generally
dismissed as "social costs" or "external costs." The
critical lesson for Mr. Crusoe is the critical lesson for mankind. It is
increasingly the case that what we do affects someone else. And what someone
else does will affect us. Mr. Crusoe learned his economics in a society where
free goods were there for the taking. Only society loses when the free goods
are ruined. When
Mr. Crusoe becomes the surrogate for society, it becomes clear that a method of
capital accumulation which does not take into account all costs will
lead to environmental disruption. Similarly economic growth as it is
conventionally measured must involve a continuing externalization of costs over
time. Businesses
are not evil in their actions. It is simply that traditional accounting methods
have a private orientation and only measure certain particular aspects of
business behaviour. The
process outlined in the case of Mr. Crusoe is evident throughout our entire
economy. In most cases pollution is caused by the externalization of costs.
Industrial production leads costs which are not borne by the producing unit but
by society at large. These costs are associated with waste in the water, smoke
in the atmosphere, and noise in surrounding community. The
price of the product reflects only part of the costs of production. The private
costs are absorbed by the producer while the social costs are absorbed by
society. It is these latter costs which cause the deterioration of the
environment. End. |
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