The overconsumption debate, part I of III: A fear of Chinese motorists

I originally wanted to write a single blog posting on this topic, but it started to get really long. So I broke it up into  three parts. Here’s the first one below. I hope you enjoy.

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Over the years I’ve heard a lot of people – very often Baha’is – assert that our current level of consumption is not sustainable, whether on the level of the country or of the whole world. The phrase “overconsumption is the problem”, or some variance of that, often comes up in our discussions about what’s wrong with the economy. I thought I would write a blog post on what exactly I think this means, and share my thoughts on where this idea has merit and where it doesn’t.

Why am I writing this? It’s for a couple of reasons. First, I have always felt that usually when people make statements like these, they lack specificity and actual scientific thinking, and because of that they’re just not very useful. Second, my sense is that in the current economic environment – our ongoing recovery from a devastating world recession, talk of the need for consumers to start spending again, environmental problems, higher gas prices – the question of consumption is naturally on people’s minds. That the Occupy Wall Street movement has brought certain critiques of capitalism  to the forefront certainly has helped.

First, let me lay out exactly what I think the “overconsumption” idea is actually referring to. I think we’re talking about at least three different commonly-expressed themes here:

Overconsumption theme #1“Eventually, we are going to run out of natural resources if we keep consuming them at this rate.” This is the idea, for instance, that as Chinese people (or any other people) become wealthier over time, they will all drive gas guzzling cars like we do, and this means we’re doomed to a fate of either running out of oil, horrible climate change, or both.

Overconsumption theme #2“Economists’ view of the world encourages selfish, voracious consumption, which is bad for the economy and, more generally, society.” This is the notion that the economists and their discipline are selfish and cynical, and that this has resulted in a corrupt economic system.

Overconsumption theme #3“We’re bombarded by messages urging us to consume, and promoting the notion that happiness comes from the collection of material things. All this leads to is misery.” In other words, this is the notion that the promotion of a “consumerist” style of living is bad for society.

I think there are various degrees of merit in these. Let me tackle #1 only, and I’ll leave the other two for future posts. As always, I would be very intent on reading what this blog’s readers think in the comments section.

Theme #1: “Eventually, we are going to run out of natural resources if we keep consuming them at this rate.”

There are instances where this statement has value, which I’ll touch upon below. But when people make this type of comment, usually I think they’re overlooking a bedrock principle of economics: as things become more scarce, their prices rise, and people respond to this by consuming less. For instance, the price of oil has risen in recent years, in part because developing countries are growing and demanding more of it. As a result, our behavior in the developed world has begun to change (as an illustration, there are a lot more small, fuel-efficient cars in the American market than there used to be). That this is happening is a good thing.

Some people are concerned that if the prices of natural resources rise and we consume less of them, this necessarily means we’ll collectively be worse off. In other words, if we can’t all drive cars because oil is scarce and because we’d ruin the environment if we did, then future generations must be worse off than we are, right? This sounds reasonable but is actually false. The reason why is that even though we consume less of a particular thing, we have money left over to consume other things. Our consumption “shifts” from one good to another. In this case, we shift from consuming things that are resource intensive to consuming things that aren’t. Just because you take the train or walk to work doesn’t mean you’re poor. People in New York (or Japan, or Europe, or lots of other places) already get this.

Here’s where the statement holds water. The “social” costs of burning fossil fuels (that is, the costs born to society as a whole) are greater than the “private” costs born by each individual. In other words, the true downside of driving a car isn’t fully reflected in the price of gas – the true cost is much higher because of global warming – and this creates a distortion. We end up consuming way too much oil because of the lower-than-optimal price, and this leads to big trouble for the environment and the human race, as the carbon byproduct of that consumption gets dumped into the air. Economists call this a “negative externality”, when there are extra costs to others which are not fully born by the person consuming the good.

We already understand this as a human race, and for years we’ve had clever ideas to deal with the problem, the most efficient of which is a “cap and trade” system where the world agrees to a target for carbon emissions, and then we trade the rights to pollute with one another. So why aren’t these solutions being implemented? In my opinion we overlook the role that pure selfishness and dishonesty play here. Those who stand to lose from a higher cost of carbon have thrown huge amounts of money at convincing us that climate change is false and buying the votes of flexible politicians willing to block these solutions from being implemented. And most of the rest of us sit idly by, knowing that future generations will have to deal with the bulk of the mess that we’re making.

If Baha’is and like-minded individuals want to carve out a very valuable niche within this debate, this would be it: the moral dimension of the overconsumption of the earth’s natural resources. This is one more place where it’s clear that selfishness within the human heart is not just destructive to the individual; in the aggregate, it imperils the welfare of the entire human race. If you can understand this, then in my opinion you’re well on your way to understanding the whole point of Baha’u’llah’s blessed life. Let’s move forward boldly on this, but intelligently and with a tight scientific argument, and not just with the usual vague platitudes.

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One thought on “The overconsumption debate, part I of III: A fear of Chinese motorists

  1. Nice essay. I agree with almost all of what you say. I myself support a cap and trade system (or a carbon tax, whichever is more politically palatable). My only quibble would be asserting that shrinking natural resources won’t make us poorer. If we define our standard of living by our consumption, then having fewer resources should constrain our consumption choices. Even if people choose to spend more on resources that we’re not running out of, they would prefer to spend that money on the resources that are shrinking if only their prices weren’t rising. Having said that, I am optimistic, though, that we’ll find renewable sources of energy to replace the carbon-based fuels without energy costs rising too much. I have a lot of faith in human ingenuity!

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