Climate chaos

I wrote this for my newsletter, but it’s worth reposting here… as well as adding more based on some reader feedback.

People usually say “Amsterdam is burning” for Pride week (started Saturday), but we’re really burning up. The last few days have seen record temperatures in the Netherlands (as in never recorded at this level) and Europe. It’s 30C in my office (86Freedom units) and it’s going to be 37± later today. The Economist writes the obvious: Record temperatures in Europe and the US are the result of climate change. Also read the article for its discussion of “attribution,” as in, “these temperatures (or this hurricane) are 5x more likely due to climate change.”

I think our name for these trends needs to change again. We’ve gone from global warming to climate change, but I think climate chaos is clearer. (Others have added a new season: The Bad Season.)

What does climate chaos mean? “At Amsterdam’s Schiphol airport the taxi runways are being sprayed with water to stop it from melting.” Or here’s a personal example: I ordered an air conditioner* for delivery yesterday, but PostNL’s IT systems failed, and it’s a day late. (Sleeping last night with 28C indoors was not easy.) Can PostNL blame record temperatures? Maybe. Maybe that’s why Schiphol’s fuel systems also failed on Wednesday, stranding thousands of passengers.

Speaking of flying, I flying Tuesday (hopefully) for a week in California. Is this another selfish act *like the A/C purchase, above? Yes and no. Yes because I am flying and buying an A/C, both of which contribute to climate chaos. No because it’s my best response to two failures of collective action: In California, my 86-year old dad has no safety net so I need to fly there to sign service contracts with private providers. I also need to buy an A/C because so many politicians have decided that it’s more important to make money now from burning oil than protect our atmospheric, earth and oceanic commons — and our futures. Since 90+ percent of people will follow in my logic (rather than the logic of that noble minority that will denying themselves everything to help the collective), we’re going to see a lot more damage result from our attempts to avoid damage.

These days, I cannot be too pessimistic about where we’re going as a species, but I have a few ideas. First, we’re going to suffer damage via a thousand little cuts (e.g., delayed flight, dead trees, or falling oxygen levels) that will reduce our quality of life for the first time since the beginning of the Industrial Revolution. (People will not be able to handle this psychologically, socially or politically, since our institutions are built on growth and increasing prosperity.) Second, people are going to divert more time, money and resources to adaptation. In 2052: A Global Forecast, Jorgen Randers (of the team behind Limits to Growth) suggests that this spending will help mitigate climate chaos, but I think that damages will be coming too fast for us to notice that upside. Third, I think that a slow shift in our spending and behavior will turn into a tidal wave that will overwhelm the “old economy.” Demand for quality of life goods (everything from new electronics to cars, to larger houses) will drop as people shift to defensive spending. These shifts will hit share prices (thus portfolios and retirements) and jobs (thus housing markets), leading to a massive panic to dump shares, sell houses, and so on. (Will the rich be immune, in their enclaves? Only in the sense of The Titanic.) I’m not sure if this panic will take 10 years or 1 year, but it’s going to have bigger economic and social (and thus political) impacts than the Great Recession.

We could have prevented most (if not all) of this if political leaders had embraced change 40 years ago. Even oil and gas companies could have pushed the effort along, if they had been sufficiently and persistently motivated to shift their focus to delivering energy (I still think there’s a chance, by diverting carbon tax revenues to them), but that didn’t happen. So, buckle up: it’s gonna be a long, ugly ride down 🙁


(1) WA responded with:

I definitely share your pessimism about the future. In particular, I get anxious thinking about climate change and our future well-being (socially, economically, etc.). I know there are people who fear this future less, and emphasize our ability to adapt. They also have many historical examples on their side. I would say I’m more susceptible to the “this time is different” reasoning, and if there was ever a time this was right, I think it has to be for climate change/chaos. Yet at the same time, to try and save for retirement (~35 years out), I think the only option is to maintain an optimistic view of the world and tuck away as much of my paycheck as possible into low-cost, equity based funds.

I guess my question would be, do you see this “massive panic” as something that would eventually lead to a result where we right our course? I.E., we’re going to sustain self-inflicted wounds, but at least there would be some albeit slow course correction. Would you take a similar “optimistic” approach about investing for a longer time horizon? I feel like if I don’t adopt this mindset, I won’t at least give myself the chance to have a solid nest egg in retirement (note: that’s assuming I don’t go medically bankrupt in my elder years in this broken healthcare system). 

My reply:

“This time is different” means discontinuity, which could up-end some asset markets by 100% (similar, but different, to the way Enron’s share price dropped by 99 percent when its fraud was uncovered).

Save for retirement assumed that savings are worth something and that “retirement” can be bought. I think it’s worth putting more effort into assets (boats, land, food) and friendships, as “market solutions” will disappear. We’re seeing this now with various types of insurance against floods, crop failure…

We will not be able to “correct course” even if we want to once we pass the tipping points. We’ve not hit one this bad in human history, as climate forcing will continue for 40 years even if we stop 100% of emissions today, and GHG concentrations would not fall to “normal” (CO2 @ 280ppm) for millennia. Put differently, the weird weather, heat waves and other disruptions we’re seeing today are the result of actions dating from the early 1980s.

Finally, it’s good to be optimistic — otherwise, there’s nothing to live for — but our optimism is more likely to resemble that of gulag prisoners who find a bit of meat in their slop than winning the lottery. Dark Age Ahead.

(2) ND responded with:

What’s the economic impact of the scenario where all governments suddenly mandate to stop all CO2 emitting industries and vehicles? 

I see GDP declining massively of course. Unemployment goes up, inflation falls, we probably enter deflation. But does that mean value of money goes up? Wouldnt there be just too much money lying around for it to be worth anything, considering there is less need for it?  

And then a more self interested question: what’s the financial hedge for the above? And for armageddon? My view: invest in building a self sustaining community in the mountains. 

My reply:

A sudden stop to CO2 emissions would indeed require most industry, transport and other “lifeline” industries to shut down. There wouldn’t be a recession, but an apocalypse, as drinking water stopped flowing, electricity shut off, and so on. Only a few people, off the grid and growing their own food, would be immune. 

So that’s not going to happen. An order to phase out CO2 emissions over 10 years would do a lot less damage while protecting most of the gains, but I’d recommend a carbon tax that started at $25/ton and doubled annually (to $12,800 in year 10) as the most efficient way to kill carbon.

The impacts on GDP would be high, but not by more than 5% per year (that’s a LOT for “my dick is as big as my GDP” politicians, but not as bad as the end of civilization), especially if we stop paying attention to that flawed measure and focus on something more useful like the Genuine Progress Indicator.

(The value of money is not very important here, except if we get into international trade and other countries NOT doing anything about CO2. That’s a mess…)

As for financial hedges, I agree with sustainable community in the mountains. The break down in trade and financial markets that can result from climate chaos brings to mind an old joke:

Two economists run into each other at the coffee shop
Bob: Wow. The markets are really in trouble, and politics are worse. 
Tom: Yeah, I think it’s really bad. Losing faith.
Bob: So, what’s your investment strategy? Bonds and gold?
Tom: Nope. Guns and rice.

Be prepared.

The economics of footprints

AK emails:

What is the economically sound argument for reducing one’s water footprint (e.g. by eating less meat)? The common sense explanation goes something like this:

“There is a limited amount of freshwater that is available to humanity every year. People waste a lot of that on unimportant things. If people used water less wastefully, more water would be available for more important things. Hence, water scarcity would be reduced.”

That is, roughly, the common sense argument. But I am sure that this is the sort of question where common sense could easily be wrong, and a more accurate view of economics could provide a lot of clarity. So I was interested in your opinion. How would you describe it in economic terms?

Luckily for AK, I just wrote a draft paper on “pricing water scarcity” that deals with these topics. (I’ll be posting a draft here in a month or so, for you all to comment on.)

The key ideas here are water scarcity and waste/important, which can be mapped to supply and demand. In terms of supply, “water scarcity” means that there is too much quantity demanded at current prices for the available quantity of water. When I teach, I give students the example of 20 $0.50 beers for 20 people. At those prices, it’s probable that the 20 beers will be gone before people “lose their thirst.” At $5 per beer, that probability falls. At $20/beer, I am pretty sure that there will be beer left at the end of the night. Note that people are just as thirsty with higher prices, but unwilling to spend money that can be used elsewhere (opportunity cost) on overpriced beers. On cheap beers… they’re all in.

Also note that some people don’t like beer, at any price. In the beer example, they may not play a role, except in the long run, which allows for people to change their tastes (stopping or starting beer drinking). This discussion of preferences and tastes is not as relevant with water (we all need to drink and bathe), but it can get interesting when it comes to “marginal water uses,” which brings us to demand.

It’s pretty easy to rank our preferences (or “demands”) for different water uses, beginning with “important” (drinking water) and moving to less important (in terms of your priorities but also in your willingness to pay) uses. Watering the lawn or filling a swimming pool might be seen as “wasteful” to some people, but pretty much everyone can agree that they are less important, or that people — when faced with water prices — will demand less water for their lawns without reducing their demand for drinking or bathing water. 

We consume most of our water indirectly, via eating foods or using goods that require water to produce. A meat diet indirectly uses a huge amount of water because each animal needs to eat a lot of food (food that humans can eat) before they can be turned into meat. It’s this basic thermodynamics that explains why vegans have a much smaller “diet footprint” than meat-eaters. Overconsumption of clothes, electronics, vacation travel, you name it, also results in a heavy indirect footprint. Given that indirect water consumption is often a 100x multiple of direct consumption (a hamburger requires 660 gallons/2.500 liters vs a 5 minute shower, at 5 liters/minute) and that people around the world are getting richer, we have a lot to worry about here.

Scarce water can be rationed in a few ways. Price rationing (use as much as you want as long as you pay the price) is easy to understand. Per capita rationing (everyone gets x liters, no matter their wealth or willingness to pay) is considered fair by some people but it’s harder to manage (water taps must cut off when x is reached each day) and often results in an underground market (those who use less than x sell to those who use more). Perhaps the least efficient rationing method is bureaucratic (i.e., someone deciding that you can only use water in the evenings, cannot water your lawn, or must install a low flush toilet), but bureaucrats (for some reason) seem to like that method.

Thus, we have these facts:

  • When water supply is limited, it’s necessary to forego some demands
  • Everyone has their own ranking of demands, from most to least important 
  • The easiest way to limit consumption to “important” uses is to set a price that allows people to pay for high-value uses while encouraging them to forgo low-value uses.
  • Low prices that ignore scarcity encourage consumption of water now (on the lawn) that we might need tomorrow (for drinking).

Turning to AK’s opening (What is the economically sound argument for reducing one’s water footprint, e.g. by eating less meat?), here’s my one-handed advice: Set water prices to reflect water scarcity, and people will prioritize important (to them) over wasteful (to them) water uses. This advice, given the vast quantities of water embedded in food, will mean that people who eat less meat will save far more money than people who stop taking showers. 

So enjoy your shower, flush your toilet, kill your lawn and enjoy an Impossible Burger 😉

Raising boys better

I won’t bother to provide evidence that boys have a lot of energy, take risks and cause lots of “accidents” (some of which win them Darwin Awards).

Given those facts, I suggest that we reconsider how we raise — or educate — boys. Here’s my logic:

  1. Boys are likely to grow up to be men. With longer life expectancy, there’s no need to rush boys from school to work and family.
  2. The world is getting more complex, which means that education needs to reflect that complexity. Back in the day, boys only needed muscles and energy to do a job. Now they must wrestle with abstract concepts, office politics and 30+ years of evolving, cumulative responsibility.
  3. Somewhat paradoxically, but also obviously, there are fewer men willing to do manual labor and service jobs that involve low wages and hard work. The resulting shortages can result in a society of middle managers doing bullshit jobs while the working classes make big wages just for showing up. 
  4. Boys are less considerate and communicative than girls, especially when they are told that the route to success involves taking risks (but no prisoners) and they are judged according to their salary, car model, etc. 

From all of these trends, I think we should rethink male careers and education along these lines:

  1. Make sure boys complete their high school education.
  2. Do not let them into higher education until they are 25 years old.
  3. In the middle years (18-25) encourage them to do manual labor, military or civil service, go traveling, etc. The goal here — and the point of this post — is that these “aimless” years will help them learn about themselves, work off excess energy, deliver on obligations to employers and friends, and so on.
  4. After these rumspringa years, they will have more knowledge, patience and confidence, such that they may go to higher education — or not. The key is that they will be able to benefit from the experience and opportunities, unlike the case now where lots of young men seem more lost than found (I’ve seen a few examples).
  5. I’m guessing that men who are graduating at 30 years old will have plenty of time to start families and careers that will last a lot longer than many families and careers now do for young men who lack the emotional depth and confidence of experience that comes from taking care if yourself for some time. (I’m biased, as I traveled between 25 and 30, only starting graduate school when I was 32. I’ve also met plenty of “mature” students who got far more out of their education.)

My one-handed conclusion is that men mature later than women, and that our systems and institutions need to reflect that fact and the ways that the modern world has complicated “traditional” male roles. It’s time to raise boys in a system that recognizes how they mature.

What do you think?

Decline

I have time to write this because my return to Amsterdam has been delayed by 34 hours.* To say that I’m angry is a considerable understatement.

The reason I’m delayed (American Airlines declared a plane unfit for flying) is not on its surface objectionable, but let’s step back a moment…

On my flight to a conference here, American changed my connecting flight to one that was 4 hours later, which forced me to stay at a shithole airport hotel in Indianapolis and delayed my reunion (after 25 years) with my family on my mother’s side. That cost me $80 and a lost night of sleep.

I had to rent a car to get to my family because there’s barely any public transportation in a country built around cars. That cost me another $200.

Yesterday, we heard “Flight 204 to Amsterdam is cancelled.” I, along with 250 other people, scrambled. I was able to improve on their initial offer (a flight 48 hours later) by flying to London for a day-long layover. I will be home 34 hours late. In compensation, American gave us sandwiches and a hotel voucher. There was no transportation, so I paid $30 for a taxi.

While I was reveling in the ongoing bad news, I met other passengers who had already had other flights cancelled and delayed. One (un)lucky one knew  what to do, as she’d already been cancelled, so she was one of perhaps a dozen able to escape last night.

(I blame these delays and snags on a corporate culture that trims maintenance and redundancy to a minimum, which leads to cascading failures when anything goes wrong. Second, these corporations “follow the law” in terms of minimum compensation — $12 of food and a hotel room — without regard to the value of our time or other costs. Many people will miss work on Monday without AA paying any damages.**)

When we arrived at the hotel, the taxi driver resisted my credit card (drivers pay massive surcharges to use the credit card terminal). He wanted a tip (for driving?), but I did not pay, so I unloaded the massive bag of my pregnant companion. People on the edge do not have time to help.

Although this hotel room is nice, the lobby looks like a 60s relic. I didn’t feel like going out (City Hall is across the street) as I’d already walked past a dozen homeless people and beggars. I gave one of my sandwiches to a homeless woman who was setting up for the night.

My main goal over the next two days is to not lose my luggage, to use the least dirty of my clothes, and try to enjoy my involuntary 24 hours in Philly and 10 hours in London. Let’s see.  

America’s president is a conman and human rights abuser. Its Congress is a dysfunctional scrum beholden to lobbyists from the swamp. Its streets are lost to the homeless, idiots in cars blasting music after midnight, and predatory cabbies. Farmers are losing their crops to storms caused by climate change their tribe denies. Businesses profit through extortion and lies. Send thoughts and prayers.

This country is not becoming “great again.” Its decline echoes that of the USSR, which imploded from failing systems, corruption, greed, and the departure of anyone who could excape.

I am done with America. It’s no longer the land of my birth, of opportunity, of righteousness, of compassion. I have many friends here. I have family here. I know that there are many innovators, caring individuals and passionate problem solvers here, but I have lost faith that these good people can overcome the downdraft of America’s failing institutions, greedy oligarchs, and corrupt politicians.

It’s time for me to exchange my citizenship for another, so that I can live permanently in the system that’s improved my life for the past 9 years.

What a pity.


Updates from 25 June:

* I ended up changing flights 3 times (routing thru LHR to arrive 34 hours late, then to arrive 30 hours late, then getting on the same flight 24 hours later, which was 4 hours late — thus 28 in total — due to another plane failure). In the process of making these changes, I was told by three different AA staffers that this summer has been hell due to grounded 737Max planes (caused by Boeing’s lies about safety) and weird weather (climate change).  I can see how these problems can cause delays, but I think they are actually caused by a system that’s set up on a “run to fail” basis, overworked staff and undermaintained planes are always on the edge. (The staff are only paid when the plane is in the air, so they got nothing for 4 hours of sitting on the ground.)

** This is AA’s entire apology:

I find it comically inadequate and asked for my $988 ticket to be refunded. Note that I would have received €600 back under EU regulations if I’d booked the flight via KLM, which codeshares with American 🙁

How’s your local ecosystem?

Ten years ago, I wrote that we should talk about “local warming” rather than “global warming” if we’re going to make the topic relevant for people.

This post touches on the same subject: Doing something for your local ecosystem for pride, rather than doing something because “it’s the right thing to do.”

  • Don’t “eat organic” to save bees you’ll never see, do it because you’re caring for a fruit tree in the neighborhood.
  • Don’t drive a “clean car” to prevent climate disruption, but to save the lungs of your poorer neighbors living next to the road.
  • Don’t avoid having children “for the Earth” but because you’re going to adopt an orphan or help with local education and cooperation.

I’m writing these ideas as examples because I’m more interested in what you do (in your own way) to improve the ecosystem that supports your quality of life and your community. I’m also asking you because I believe that people can find many imaginative ways to contribute to the public good.

My one-handed conclusion is that we don’t need to wait for a major power to fix a global problem; we can make a difference ourselves, locally.

Keynes on productivity and leisure

A few weeks ago, I wrote on our (collective) problem of people turning productivity gains into additional consumption rather than additional leisure. This is a collective problem because more consumption is bad for sustainability but also because everyone loses if there’s more (zero-sum) competition for position goods such as houses in good neighborhoods or places in good schools.

In that post — which I sometimes summarize as “hipsters can save the world” — I mentioned Keynes’s 1930 essay “Economic possibilities for our grandchildren” [pdf] which I had not read. Now I have, and I have a few thoughts to share.

  1. Keynes is very aware of the long term benefits of productivity.
  2. He attributes most of the gains from the industrial revolution to technical improvements and capital accumulation. Under technical improvements, he includes coal, steam and petrol, but he does not pay much attention to their nature as “non-renewable” resources. This oversight is expected in 1930, just as is the problem of missing the long-run impacts of burning fossil fuels.
  3. By “capital accumulation,” Keynes refers to the treasure and revenues from colonialism and other ventures abroad. He appeals to the “miracle of compound interest” in explaining British wealth, while completely ignoring the fact that most of this wealth was from theft rather than forming or growing capital.
  4. Keynes refers to the “economic problem” of finding enough food, clothing and shelter for everyone, and that progress has put the solution to this problem within sight. His assumption that people will enjoy more leisure when the “economic problem” is solved turned out to be  wrong, as most people (even the poor) used the gains from productivity to compete for positional goods rather than settle for an acceptable level of economic goods such as food and shelter. He also ignores the ongoing problem of colonial/social systems that exploit the poor for the benefits of the rich.
  5. Keynes assumes that our prosperity will accelerate as population stabilizes (in 1930, it was just over 2 billion), as there will be no need for more children. He was obviously wrong there. (Keynes was gay bisexual and perhaps underestimated the desire of “breeders” to have children.)
  6. He guesses that output per person will be 4-8x higher in 2030 than in 1930. The jump from 1929 to 2016 was about 4x.
  7. Keynes labels consumption of positional goods as “non-economic” consumption, and then dismisses such demand as a distraction from our achievement (food and shelter) and better uses of our time (leisure), on these terms:

    The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.

  8. They were not discarded, as Keynes was over-optimistic:

    I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.

  9. Alas, instead we get this reality (from The Atlantic this week):

    Helping consumers figure out what to buy amid an endless sea of choice online has become a cottage industry unto itself. Many brands and retailers now wield marketing buzzwords such as curation, differentiation, and discovery as they attempt to sell an assortment of stuff targeted to their ideal customer. Companies find such shoppers through the data gold mine of digital advertising, which can catalog people by gender, income level, personal interests, and more. Since Americans have lost the ability to sort through the sheer volume of the consumer choices available to them, a ghost now has to be in the retail machine, whether it’s an algorithm, an influencer, or some snazzy ad tech to help a product follow you around the internet.

My one-handed conclusion is that Keynes was right in predicting how prosperous we’d become but wrong in assuming that humans would use prosperity for personal development and neighborly relations. Instead, we’ve seen ongoing (and unsustainable) competition for status via conspicuous consumption 🙁

Addendum (29 Jan 2022): “The diminishing returns of productivity culture

Productivity should improve your life

In his 1968 “The Tragedy of the Commons“, Garrett Hardin explained how population growth threatened ecosystems that lacked the carrying capacity for billions of people. In her 2000 “The IPAT Equation and Its Variants” [pdf], Marian Chertow reviews the history of I=PAT, an equation that summarizes how (Environmental) Impact rises with Population and Affluence but falls with Technology.

In my Jive Talk with Brian Czech of the Center for the Advancement of the Steady State Economy, I was frustrated with Czech’s advice that humans “restrain themselves” from over-consuming as a means of replacing consumption and economic growth with renewal and economic stability. Indeed, Hardin, who thought little of self-control, called for “mutual coercion” as a means of “relinquishing the freedom to breed” [pp 1247-48].

Clearly, there are problems with reducing Impact via reductions in Population or (the wages of) Affluence. There are also, I think, problems with hoping (or assuming) that Technology will advance fast enough to overcome pressures of Population or Affluence. I hold this view because most technological advances increase supply by lowering prices or providing larger quantities at the same prices, which usually means that innovations bring more rather than less consumption. This dynamic is known as the Jeavons Paradox, and we can see it in the way that additional food from the Green Revolution led to population growth, increases in auto efficiency led to larger cars, cheaper clothes led to larger wardrobes, etc.

Are we doomed? 

There’s no sign, after 50 years, of Hardin’s “mutual coercion, but I think we have a few chances to save ourselves by reversing our burden on resources and ecosystems. I’ll go from least to most promising.

First, there’s a small chance that technological breakthroughs will bring about an increase of sustainable supply that is so significant that we can eat our cake and have it. In this category, I’d put something like a fusion reactor that sucks CO2 and methane from the air while making energy so cheap as to replace all fossil sources. This “Elon-the-savior” solution is unlikely.

Second, we could price damages and protect collective property via changes in laws and regulations. This step includes global carbon taxes and actions to replace political management of the commons with property rights for all citizens. I’ve written about this idea for national water, but I don’t see the political will to take away all those goodies from the 1 percenters who currently enjoy excess wealth at our expense.

Third, I think that there’s a strong business model for short sellers who use science and public pressure to ban or bankrupt firms contributing to climate disruption, biodiversity destruction, and ecosystem death. In most cases, short sellers bet that stock prices will drop so they can make money. It’s my suggestion that they cause prices to drop by getting businesses penalized or banned.  The UK Labour Party has floated the idea of delisting firms that do not keep to climate limits. Many asbestos firms were bankrupted by their legal liabilities. This idea is more powerful than divestment or boycotts that do nothing to undermine these companies’ basic purpose.

Fourth (and the purpose of this post), I think there’s the chance of a paradigm shift in which people decide to consume less than their affluence would support (and perhaps even have fewer kids). This “inward shift of demand” would lower economic growth without lowering our quality of life.

How would it work?

Let’s begin with a definition and a misunderstanding.

The definition: Economic output = productivity * work effort, holding constant capital stocks and allowing proportional input of raw materials. This concept underlies economists’ claim that our prosperity advances with our productivity. It also explains why GDP/capita is the target measure of choice for most economists. High GDP/capita defines the difference between rich and poor countries, but it ignores inequality as well as sustainability. (I prefer the Inequality-Adjusted Human Development Index and Genuine Progress Indicator as measures of success.)

The misunderstanding: Productivity automatically means more output and consumption, when it need not mean more of either. A recent Economist repeats this assumption by asserting that “improving productivity is generally agreed to be the best way to achieve faster economic growth and higher living standards.” Economic growth is neither necessary nor sufficient in providing higher living standards once a minimal level of food, clothing and shelter is achieved.

To understand more about this misunderstanding, remember that economists target “utility” — often defined as happiness — as our motivating goal in life, meaning that humans will chase increases in utility when given the opportunity. But what contributes to utility? Sure, we can talk about the consumption of basic goods (food, shelter, clothing), but we can also include leisure time, a satisfying job, or good health — things that do not necessarily arrive with more money.* Going further, we also know that people spend a lot to get  “positional goods” that set them above others in some way — a penthouse apartment, for example. (These goods are also called Veblen goods after the economist whose 1899 book, The Theory of the Leisure Class, first defined “conspicuous consumption”.)

The problem is that economists, by assuming we always want as much as possible (“non-satiation”), have lost track of the different ways we maximize utility.

Higher productivity could mean less work rather than more consumption. 

Here’s an example. If I work 40 hours and make $10/hour, then I earn $400/week, which I spend on goods and services. Thus my contribution to GDP is $400/week.

If I learn skills and double my productivity, then my wages should rise in proportion (to $20/hour), and I have more choices:

  • Conventional: Work 40 hours @ $20/hour to earn (and spend) $800/week. My contribution to GDP doubles with my consumption, and that higher consumption means my “footprint” has also grown heavier.
  • Security: Work 40 hours @ $20/hour. Spend $400/week, save $400. My contribution to GDP stays the same but now I have way more financial security, and my savings contribute to capital accumulation that increases productivity and/or natural capital.
  • Leisure: Work 20 hours @ $20/hour to earn (and spend) $400/week. Now I have 20 extra hours to do what I want, which could mean doing free activities (cash consumption equal) or “self-supply” activities (e.g., cleaning my own place or watching my own kids) that will save me money but also reduce GDP.

Of course, I could also choose a mix of these three extremes that matches my preferences (subject to “frictions” around working 20-40 hours). The key ideas here are that we should use our productivity gains (i.e., the returns  to university education, work experience and the wisdom of life) to make our lives better, not just to consume more — and contribute to ecological stress. (I’m aware of Keynes’s 1930 “Economic Possibilities for our Grandchildren” [pdf] which I will read ASAP, which I blog on here.)

Can this happen? How would it work out?

Yes, it could happen. I have personally made choices that involve less work and less consumption in my pursuit of financial security and a simpler life (what a relief, selling my car). I have also explored how hipsters can pursue a low wage, low consumption path to satisfaction. In terms of social transitions in rich and poor countries alike, I see these steps:

Early stage: Hippies, tiny-house advocates, and those who agree with Thoreau in “my needs are few, therefore I am rich” perspective consume less in a consumerist society. Mr Money Mustache is a famous proponent.

Adaption: Poorer people can immediately do better for themselves if they replace wasteful consumption promoted by influencers and advertisers. The poor of rich and poor countries can pivot to better role models. The poor are still targeted by ponzi schemes, mafias, predatory preachers, and corrupt politicians, but greater financial security might give them more breathing room to step back and make better choices.

Competition: Some people think them must work harder to compete for limited living, educational or social space. That’s true, but reduced consumption of new cars, dinners out, etc. can leave “non-consumers”  with more savings or buying power.

Population: A non-trivial number of young people are thinking twice about having kids, mostly because kids are so expensive, but also because it’s hard to bring more children into a world that’s increasingly stressed under the environmental and political pressures of 7+ billion people struggling for positional success. Fewer kids mean less spending and thus less pressure to work as much.

Supply Side: The big change would happen if there’s a “tipping point” of housing demand, i.e., smaller houses replacing larger houses at a 2:1 ratio (two 75m2 flats replacing one 150m2 flat), which would mean more affordable housing, shorter commutes and denser urban spaces. Such changes would need to come with caps on parking spaces (for those who still “must” drive) and other areas of competition over the commons, but the supply shift would also reduce prices and thus the need to work as much.

Demand side: Lower consumption would means smaller stores, fewer deliveries, less waste, and many other improvements that would improve quality of life and reduce ecosystem pressures.

My one-handed conclusion is that you should think about converting your productivity gains into greater happiness rather than greater consumption.


Addendum (21 May 2019): Here’s a good podcast discussion on happiness via non-consumption.

Addendum (6 June): I am reading a history of the open-source software movement, which has a strong ethos against corporate “overhead” absorbing time and money without creating social benefit. What’s interesting is that they also appeal to less, but better work:

The GNU Manifesto explicitly calls out the corporate work arrangement as a waste of time. It reads in part: “We have already greatly reduced the amount of work that the whole society must do for its actual productivity, but only a little of this has translated itself into leisure for workers because much nonproductive activity is required to accompany productive activity. The main causes of this are bureaucracy and isometric struggles against competition. The GNU Manifesto contends that free software has the potential to reduce these productivity drains in software production. It announces that movement towards free software is a technical imperative, ‘in order for technical gains in productivity to translate into less work for us.’”[106]

Addendum (25 June): An overview of the DeGrowth Movement.

Addendum (25 Jan 2020): The Swiss use their wealth to enjoy their lives.

*Addendum (12 Dec 2022):  An income effect would mean the potential for higher productivity leads to more work to get more consumption; a substitution effect means that it would lead to less work and more leisure.

Jive Talking launches

I started thinking about doing a podcast last year because I wanted to find a new way of learning, catching up with people in my network, and bringing new ideas to people. I still like blogging (and will continue to write here), but podcasting provides a different perspective, most obviously because it allows conversation.

I “soft launched” Jive Talking about one month ago with five interviews. In the past few weeks, I have had time to fix up the Soundcloud page hosting the podcast* and put a bit more time into improving “production quality.” I still have a long way to go before I am happy with these details (listen to my intro!), but they are not as important as the conversations, which are unscripted and free to flow wherever we wonder (and wander). I am not alone in liking this element to podcasting:

One of the things that’s so cool about the new media technology is that people want . . . They just want direct communication. They don’t like high-level production values, all to people on YouTube, and they’re very savvy media consumers. A highly produced television show just looks like a lie. If you’ve got something to say, they just want you to sit down and say it. They don’t even want you to edit it so that it’s smoother because that just looks like you’re spinning the content, and you probably are.

My one-handed conclusion is that you’re not going to learn anything until you try something new, so here goes! Please listen to a few episodes, tell me what you think, and/or suggest new guests (including you!)

Episodes:
01 // What do we mean by water privatization?
02 // Monja Esterhuizen on losing less water in South Africa
03 // Delton Chen on incentivizing carbon mitigation
04 // Marina Della Giusta on #metoo, teaching economics, and careers for millennials
05 // Walter E. Block on pollution, regulation, and libertarian ideals
06 // Michelle Wilbur on small-scale renewables, oil and living in Alaska


* Jive Talking is now syndicated via Stitcher. I’ll get Apple iTunes and Google Play links soon!

We understand money pretty good.

I’ve always nodded my head at the truth in Upton Sinclair’s insight that “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” but I recently realized its importance in the quest for sustainability.

It’s clear that many people who make their living from “freeing carbon” (oil workers, loggers, car makers, beef producers, etc.) are not interested in ideas about limiting carbon (and equivalents). As a result, we’re getting climate change and damages of $100 for each $1 these “vested interests” earn.

So now I realize the sad possibility that many of these vested interests — had they saved some of their “carbon windfall” — would be ok with a decarbonising world. That would be because their savings gave them other options for earning, and enjoying, their lives.

Compare Norway and Alberta (or Alaska). Norway saved and invested lots of its oil money, so it now has $1 trillion, or about $185k per citizen. Alberta and Alaska, I know, have saved a lot less. This difference in savings is important because savings make it easier to cope with risk. Norwegians would not be so worried if the “oil carbon was turned off.” Alaskans, Albertans, and the residents of most oil- carbon-exporting countries (including the US) would be terrified, because they make their living from freeing carbon.

It is thus that I arrive at my over-simplified, one-handed conclusion: If we’re going to turn off the  carbon, then we need to “take care” of those who profit from it. The simplest way to do this is pay them off. The easiest way to raise the funds to pay them off is to tax carbon. I would make the tax “dynamic” such that the burden fell for those who ran from carbon while it rose on those who strolled in the same general direction. 

It’s not about the planet, the future or technology. It’s about money.