If you’re going to start demanding a new economics, as the New Scientist just has, then it would be useful if you understood what the old economics you’re trying to replace has to say... as the New Scientist clearly doesn’t. Take this seemingly uncontroversial statement: "We live on a planet with finite resources - that's no surprise to anyone - so why do we have an economic system in which all that matters is growth? More growth means using more resources." Umm, no, it doesn’t mean that.
Certainly, growth can lead to the consumption of more resources, but it’s not a necessary outcome. "This one is built on a long-standing question: how do we square Earth's finite resources with the fact that as the economy grows, the amount of natural resources needed to sustain that activity must grow too?" No, this simply isn’t true. They’ve entirely missed how those dastardly neo-liberal economists they want to overthrow define and measure growth. Apologies to those grandmothers I’m informing about egg-sucking, but a little basic economics here.
We define economic growth as a rise in GDP (don’t sweat the details here) per capita. GDP is not measuring the use or not of resources. It’s measuring the value added in the economy. If I use sand to make a wine bottle I will add some small amount of GDP. If I use that same sand and make a computer chip instead I will add more value and thus more to GDP with the same use of resources. If I don’t use any sand at all and start singing at a concert where people pay me (with my voice, perhaps paying me to stop) then again, I’ve increased GDP with no use of natural resources at all. And just to complete the logic, if I learn how to pack more transistors onto a chip I can use less sand to make one of the same performance, allowing me to create the same GDP with less use of natural resources. There is thus no requirement for economic growth to mean an increase in the use of resources, natural or otherwise.
Now there are many things wrong with GDP as a measure of how well we’re doing, this is certainly true. But that doesn’t change the fact that the basic point that they’re trying to make, that we must curb growth because it will inevitably mean the consumption of more resources, is simply wrong.
As to the rest of it, well, sorry, but it’s essentially a lightly warmed up version of Blueprint for Survival, and it makes all the same mistakes and, quite daringly, manages to not make the good points which BfS did.
One of those earlier good points was that we need to make sure that all of the external costs of an action are included in the price paid, that the true price is paid for something. If you look around at modern economics you’ll find that this has been taken to heart in recent decades. We’re all talking about the relative merits of carbon taxes and cap and trade systems, just as one example. There’s not much that’s new here - the idea that taxation could be used to include such externalities was first floated by Arthur Pigou back in 1912 and then rather forgotten until recent decades.
There’s a great deal more of modern economics that they miss. We’ve had Garrett Hardin explaining to us the whole idea of Commons Problems. When we’ve got a resource which is being exploited in a Marxian fashion (that is, open access) well, that’s just great, but when demand becomes larger than capacity then we need to limit that access. We can do that in a societal manner or a private one, by regulation or by ownership. This is of course the problem that we’ve had with fisheries, with pretty much every pollution problem, with the atmosphere and climate change now. Modern, neo-liberal, economics doesn’t ignore these questions, far from it, it’s managed to not only spot them but to work out what you can actually do to solve them too.
And that I think is my major complaint with New Scientist publishing all of this eco-dribble. I’m delighted that scientists, scientific journalists perhaps, decide that they’d like to know more about how the messy and complex human interaction part of the world works, and that they deign to finally notice economics as a method of describing the world. But why do they have to pick on these most heterodox exemplars of the profession? These people who seem to not only ignore but actually be unacquainted with the core discoveries of the subject? As above, if you insist that economic growth requires the consumption of more resources when it most certainly does not require anything of the kind, then your conclusions about needing to restrict growth for lack of resources to consume are going to be, umm, well, wrong, aren’t they? ®
Tim Worstall knows more about rare metals than most might think wise, and writes for himself at timworstall.com, and for The Business, among others. He is a Fellow of the Adam Smith Institute.