Monday, October 15, 2007

Upsidedown World

Bloggers Unite - Blog Action Day

As an economist I have long had an interest in the incentives for behavioural change which are built into the economic system. In fact much of the study of economics assumes the reactions of a "rational person" to these incentives.

When it comes to the environment the reactions are indeed rational but, unfortunately, the incentives are for the most part perverse.

How did we end up in this pot of poo?

When I first entered economics in the sixties there was a recognition that a large part of the resources on which we depend are finite and that, at some point, they would simply run out. Therefore, any system that encouraged over-consumption or waste of resources should be avoided or at least modified.

Hence the "polluter pays" principle which, for a brief period, looked like being adopted by all. The idea was simple. The use of non-replaceable resources, whether of raw materials for production or of the environment through pollution, should be priced into the system. The price of goods and services should reflect their true cost - which must include environmental. People's rational response to the new set of incentives would then also be in line with the long term interest of the planet. Like many of the blindingly obvious reforms proposed in the 1960s, this one was by and large ignored.

Reflect for one minute on the perversity of much current behaviour and the incentives that give rise to it and sustain it against all "reason".

The disposable culture

Today we fix almost nothing. If something stops working we throw it away and buy a new one. This is partly an attitude of mind, but it is more than that. Even if we wanted to fix things rather than throw them away we couldn't. In the first place they are not made to be fixed. Even the simple plug is now most likely to be moulded to its flex. And even if things were in some way fixable, to do so would not make economic sense as the price of the labour required would far outweigh the cost of a new product.

The problem is not really the high price of labour - higher wages are a benefit - but the cheapness of the replacement product. It is cheap because its price does not reflect its true cost of production. Furthermore, the true cost of the disposal of the broken product is not priced into the system.

Fuelling the flames

Fossil fuels is another area where we have got ourselves into trouble for lack of proper eco-pricing from the beginning.

As a result of the availability of relatively cheap fuels people have settled in places where they regularly have to commute long distances (usually by car and in some countries by conspicuous gas guzzlers). And we can't start resettling millions of people to live closer to their jobs, shopping centres and so on.

Also the availability of cheap power has enabled large numbers of people to live in what would otherwise have been inhospitable environments. Think of the resources required to air-condition Houston, Texas, for example.

And to cap it all, we are encouraging people, through cheaper and cheaper fares, to regularly fly long distances for holidays and even for shopping (!).

Jesus wept - or did he?

Many of these problems have developed from a lack of courageous leadership from politicians and the rewarding of short term greed.

Politicians were concerned with getting the votes of their existing constituents and the Churches were more concerned with saving souls than saving the planet.

Reverse gear

If we make the heroic assumption that it is not already too late and that we really do want to do something about it, what exactly should we do? What can we do? Well, first we need to change the rules.

Eco-pricing for everything. The real cost of the resources we consume must be reflected in the price we pay. This will mean the "free" market will support rather than act against our long-term interest. Up to now the market has not done this because we have not set the right rules for it.

This solution would involve massive cutbacks in "living standards" and massive redistribution of income within and between classes, countries and continents. But no more so than the eventual results of doing nothing. If we do nothing we face extinction.

Complementary action would involve
  • cutting back demand for energy/resources (recycling, using public transport, shanks mare, woolley jumpers, buy local, stay at home)
  • using alternative energy sources - renewables and, for all its problems, probably nuclear (though this option is probably only postponing the inevitable if the waste disposal problem is not solved)
  • conscious redistribution of income to mitigate the effects on the (new) poor

The challenge is to get everyone on board in this effort. No one group is going to stick its head above the parapet. Hopefully today's Blog Action Day will help.

Otherwise, as they used to say in the "Guide in the event of a Nuclear Attack", put your head between your legs and ....


Anonymous said...

Rock on DeDa..


Póló said...

The disposable culture

Just a year and a half after writing the above post I have really hit the wall of the disposable culture.

My mobile phone, which I had for about 3 years, became unreliable. This is not a criticism of Nokia who make very sturdy phones but this one had been subjected to a lot of physical stress. As I need to be in contact all the time I decided to get a new one and settled on the latest version of my old one. The new version was very impressive. A huge improvement, with additional functions and a very well thought out layout and programming hierarchy. I was very pleased with it.

Two weeks later I woke to find it had not been charging for a while. I hoped the fault was in the charger rather than the phone as I had spent a lot of time customising the new phone and transferring my data to it.

Sure enough it was the charger, and the shop were making no bones about a replacement.

"So I'll just take the charger then."

"Oh no, you can't do that. We have to give you a new phone as well."

"But there is nothing wrong with the phone and I have put days of work into organising it."

"Sorry, but there is no provision for replacing the charger on its own. We have to do the lot."

Fucking nuts, but what could I do?

This wasn't even a case of something which was made not to be fixed. It was a bureaucratic system which had figured it would be cheaper to replace the whole package, even though the most costly (and stand-alone) element was in perfect working order.

You'd be a long time persuading your granny that this was any sort of sane behaviour in a world of non-renewable resources.

Anonymous said...

How would the real cost be set, are you advocating a carbon tax?


Póló said...

This orresponds with my approach. See Irish Times 17 Jan 2011

There is also clearly a need for action by the authorities right up to world level to circumscribe the activity of the market.

Póló said...


Yes, as part of a larger comprehensive package (including proper wages and conditions for sweatshop workers).