Commentary

Everything’s Coming Up Roses

By Julian L. Simon
This article was written for Bridge News and also appeared in the Journal of Commerce.

Bash the economists and save the environment, environmental activists proclaim.

The February issue of Wired magazine, for example, has an article headlined, “Futurist Hazel Henderson has a modest proposal: Abolish economics and make way for the economy of abundance.”

Why the war on economics? The essence of economics is that you can’t have your cake and eat it, too. So economics gets in the way of many government programs that environmental activists favor. And that’s why they seek to discredit economics.

The special target of the anti-economists is population growth. Activist Stephanie Mills says that “an impediment to perceiving and acting on overpopulation has been conventional economics … a form of brain damage.”

And biologist Paul Ehrlich laments the “blunders” that economists “commit when they attempt to deal with problems of population, resources and environment.”

Economists insist that one must examine the consequences of policies before adopting them. Economics demands that people face up to the trade-offs involved in any governmental activity. But such assessment is anathema to those who want to have their cake and eat it, too.

The enviro-critics evade the issue by claiming that economists miscount national wealth. The “ecological economists” charge that mainstream economics undervalues the bad things that people do to the planet. Therefore, they say, economics cannot understand that humanity is made worse off when additional people are born.

For example, the April cover story in Mother Jones, Paul Hawken’s article “Natural Capitalism,” decries what he supposes to be wasteful economic practices. He opens with, “Somewhere along the way to free-market capitalism, the United States became the most wasteful society on the planet.”

But Mr. Hawken’s entire analysis, like much of what is known as “ecological economics,” is based squarely on a linguistic confusion between two meanings of the word “waste.”

Typically, Mr. Hawken first defines “waste” as “money spent where the buyer gets no value,” such as trash consisting of “newspapers, paint cans, potato peels, cigarette butts, chicken bones, dryer lint and an occasional corpse.”

Then he calculates amounts such as $58 billion for highway accidents each year, adds it all up and finds that “of the $7 trillion spent every year in the United States, we waste at least $2 trillion.”

This analysis confuses what is avoidable without any cost (by simply working smarter) with what is unavoidable but called “waste” nevertheless, such as chicken bones and corpses.

No one has produced a boneless chicken or figured out a way to live without leaving a corpse behind. So including chicken bones, old newspapers and corpses in any calculation of the cost of “waste” is just foolishness.

The living human body is an example of this linguistic confusion. Our excrement, urine, carbon dioxide and even the heat we produce are called “human waste.” But by emitting them we do not “waste” them. They are necessary byproducts of living.

Anyone who calculates the cost of handling sewage and treats it as an avoidable cost errs grievously. Exactly this blunder is at the very heart of ecological analyses like Mr. Hawken’s.

More generally, much environmental fear results from faulty thinking. One crucial example is assuming that the quantities of resources are ultimately limited, and then deriving conservation policies from that assumption.

The idea of nonfinite resources boggles the mind, of course, but the idea has withstood all scrutiny since it was first published in 1981.

Another crucial error in environmental thinking is calculating the negative effects of individuals and groups on other individuals and groups — for example, the “negative externalities” of industries that put harmful pollution into the air and water. Analysts stop there.

But one must also take into account the positive externalities, the most important of which is the new knowledge that people produce and for which they do not receive the full economic benefit.

An example is Nobelist John Bardeen, co-inventor of the transistor. The invention might be worth a trillion dollars to the public every year, but Mr. Bardeen’s salary as a professor topped out at $46,500 in the 1970s.

Indeed, the positive externalities of human beings generally outweigh the negative, as proven by the fact that humanity, by living longer and having more wealth, continues to progress in every material sense with every passing decade.

Leaving out the positive externalities leads to a negative assessment of humanity’s situation, when in fact everything is coming up roses.

Julian L. Simon teaches business at the University of Maryland and is a senior fellow at the Cato Institute.