Ingenuity Beats Scarcity

Lynne Kiesling

I’ve been spending the past few days revising my Environmental Economics course in preparation for fall quarter, so my mind is in an environmental place right now. One of the inspiring things I’ve read this week is this Rocky Mountain News oped from Terry Anderson at PERC. Terry discusses how human ingeneuity and creativity push back the constraints of scarcity, and how environmental quality is a normal good (i.e., as your income goes up you are willing to buy more of it). The meat of his argument:

The relationship between environmental quality and economic success breeds ongoing improvement. Quantitatively, we know not only that higher levels of income promote environmental quality but also that the improvement in quality is better than a 1-to-1 ratio. That is, if income rises 10 percent, the demand for environmental quality rises more than 10 percent.

At lower levels of income, people trade environmental quality for economic growth – preservation of self is the primary goal, not the preservation of nature. But that situation can change quickly. In general, the annual income level at which the demand for environmental quality appears is between $4,000 and $8,000. The demand for water quality comes at even lower levels. Similar relationships exist for the preservation of endangered species and even the relatively obscure concern over carbon emissions.

Moreover, the point at which the demand appears trends downward as new environment-enriching technologies appear. Wealthy countries export the technology to poorer ones, who can simply acquire what they need to improve the quality of, say, water or air, at lower levels of income.

I also particularly like the Wildavsky quote with which he chose to close:

Scarcity has yet to win a race with creativity.

Iain Murray has a post touching on the same anti-Malthusian ideas over at The Commons. Iain is writing in response to Sunday’s New York Times article on the state of the “population bomb” debate. As Iain points out, the past 30 years and the dynamism of creativity and technology have made Paul Erlich ridiculous, yet he continues to sound the apocalyptic Malthusian warning. Iain’s conclusion is witty and on point:

So in order to drive population down, we should move away from the “idiotic” pursuit of liberty and standards of living, which have been proven to drive population down, and instead return to a “saintly” agrarian lifestyle, which drives population up?

The man truly is a genius.


4 thoughts on “Ingenuity Beats Scarcity

  1. Markets do much more than most people realize. But at the heart of Terry Anderson’s argument is a statement that is unclear to me:

    “Quantitatively, we know not only that higher levels of income promote environmental quality but also that the improvement in quality is better than a 1-to-1 ratio. That is, if income rises 10 percent, the demand for environmental quality rises more than 10 percent.”

    This statement implies that there are commensurate units by which to measure incomes and “environmental quality.” Are you confident of those units?

  2. Actually, such a statement only requires that there be quantitative measures of income and demand for enviromental quality, not that they be comeasurate; The units all cancel out when computing such a ratio.

  3. You’re right. I was assuming too much, namely that Terry Anderson was evaluating all of the elements of environmental quality and assigning them dollar costs and benefits.

    So I asked him to clarify how he does the calculation, and what the units of “demand for environmental quality” are. “Measures of environmental quality,” Terry Anderson says by email, “vary with the problem at hand, e.g. SO2 emissions, acres in parks, Carbon emissions, etc.”

    So in principle you could show that increases in GDP are always accompanied by proportionally greater improvements in these three measures. That’s the kind of thing that everyone wishes were true.

    So the next question is where are these calculations? Terry, by amail, has promised that they are in a recently edited book. I’ll keep you posted.

  4. Although Ehrlich’s research has been debunked, so to speak, his ideas live on. In the UK, when the population issue appears in the media, we sometimes hear from an organisation called the Optimum Population Trust who want to halve Britain’s population to a so called sustainable level. I linked to it last week here http://parossi.blogspot.com/2004/09/immigration.html
    This is the problem with ideas – once they become detached from fact, they can cause all sorts of problems. In this case, theories on so called sustainable levels of population are being used to justify restrictive immigration policies (which then legitimise, to some extent,racist policies) and all manner of interference in personal affairs.

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