On 1/15/07, William M Connolley <[EMAIL PROTECTED] > wrote:
On Mon, 15 Jan 2007, James Annan wrote:
> After all, we cannot simply assume that future generations are richer,
And yet this *is* the assumption that all the economic modelling makes.
On what basis is it made?
And it
is supported by historical trends.
Is it supported by anything else?
If that is its only basis, it is a pretty shabbly basis for a transition
from an underpopulated and underdeveloped planet to a populated and
developed one. There is a phase transition happening, and simple
extrapolation is an awfully shabby way to plan for it.
Barring catastrophe, is there a plausible
reason for it to be wrong (presumably in cash-type terms, interpreting
"richer"
literally)?
First of all, I'm not even convinced that on the long term it is even
meaningful. Recall that wealth is defined in terms of constant dollars, and
constant dollars are redefined in terms of a "basket of goods" that
represents typical purchasing patterns. I don't know how often the basket is
redefined, but it is surely more frequent than a century. It seems to me
that one could end up with identical purchasing power with several distinct
path dependent estimates of intervening growth.
That's related to the larger more commonly made criticism, which is the
argument that money is a poor proxy for well-being anyway. Both issues
assert that economics simply asks the worng question altogether.
Ignoring all of those concerns, consider the question. In any physical
system, if one observed a finite positive growth rate, one would never ask
"is there any reason for this to go away"? One would ask instead "what sets
this rate?" and "what process will eventually limit it?"
Someone else on this list suggested that a quantity that could grow
indefinitely it is meaningless. I won't go quite that far, but I certainly
have some suspicions in that direction. I say it boils down to
1) the quantity cannot possibly grow forever (at least as measured as an
extensive property of a finite planet)
2) the quantity measures nothing meaningful
or
3) the quantity is dramatically different from typical meaningful quantities
in nature
It seems to me that all this talk about economics implicitly claims the
third point, but it is quite an extraordinary position and seems to me to
require some defending. This blithe assertion that 2% growth is a "law" of
some sort strikes me as ludicrous.
The Stern report ends up deciding that a potential loss of 20% of future
consumption would be very bad, which is a loss on top of considerable
gains. If
you can plausibly assert that we wouldn't be richer at all, then in Stern
terms
this is a complete disaster, with or without climate change.
I really don't know what any of that means. We will have more iPods and less
horses than our grandparents. Are we richer or poorer?
If we need concrete bunkers to protect us from daily tornados, (I am not
suggesting that this is literally going to happen) that will stimulate a lot
of economic activity. Does that mean tornados make us rich?
I am not being deliberately obtuse. This whole way of thinking seems totally
broken to me as applied to long time scales. I believe we do, urgently, need
to have a way to think quantitatively about long term policy, but I am
entirely unconvinced that the approach that is commonly promoted by
economists means anything at all.
I also think that the conventional approach, specifically applying short
term thinking to long time scales, fails in a number of ways that will
eventually be as obvious as the failures of the Easter Islanders are to us
now.
In short, if there is an optimum level of economic activity for human
happiness, a strategy for maximizing economic activity will make things
better for a while, and then it will make things worse.
mt
-W.
William M Connolley | [EMAIL PROTECTED] | http://www.antarctica.ac.uk/met/wmc/
Climate Modeller, British Antarctic Survey | (01223) 221479
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