Author Archive

Renewable Resources: Phony Economics

September 18, 2007

“Renewable resources” are supposed to be superior to “non-renewable” resources because, well, they’re renewable!!!  Those who advocate renewable resources are responsible, care about the earth and care about leaving something to future generations.  Those who just use resources without regard to renewability, therefore, must not care- they want to party like it’s 1999, damn the consequences, the waste, and the future generations.    If this is a gross over-simplification, let me know.

I’m fed up with the notion that “renewable” = superior.  I’m fed up with the notion of “renewable.”  Resources are resources, and their value or usefulness exists in the minds of people who use the resources to fulfill their goals.  If there is less of a resource than people could make use of, it is an economic good and people will economize its use based on its cost.  Hence the only relevant indicator of superiority of a resource is it’s cost, not whether it’s “renewable.” 

Let’s take a quick example: the corn interests and (some?) greens push ethanol, because it’s renewable!!  Renewable means: we can always make more, as opposed to oil, which, they predict, will all be gone someday.  However, for the time being, we can make more oil as well, and it’s cheaper to make a gallon of gasoline or diesel than a gallon of corn alcohol, and you get more energy from it to boot!  So enough about the corn-hucksters’ claims of superiority.  The main issue for me and, I contend, most people, is cost, not some empty claim of “renewability” which amounts to moral posturing.  When the oil runs out, actually long before the oil runs out, it’s price will rise, and ethanol will become more and more attractive.  At some point perhaps ethanol will become economical, but at that point I won’t need the corn-hucksters’ notion of moral superiorty, of “caring about the earth” or what have you, to compel me to use their product.  I’ve already got a far more superior concern- cost- which, it turns out, is a far better motivator for getting the most out of resources, whether “renewable” or not. 

Economists ought to say, “Don’t tell me it’s renewable.  Tell me it’s cost-effective.”

I suppose it’s a sign of extreme wealthiness when people can afford to economize resources based on moral claims and not solely on money costs, but it bugs me immensly when these greens/renewable advocates tell me that I should care about whether a resource is renewable.  I don’t.


Could Global Warming be Efficient?

January 23, 2007

I’ve come across some people with no scientific inclinations nor training who are worried about global warming, due mainly to Al Gore’s premonitions.  Leaving aside for the moment the debate over the science behind global warming (I’ll even concede that Al Gore is right about temperature changes), my inner economist asks, why is this necessarily bad?  Sure, I know those who see global warming as a big problem cite things like rising sea level/ coastal flooding, depredation of ozone layer (which could lead to higher incidence of skin cancers?), increased volatility and ferocity of the weather, etc., as some major costs of global warming.  But what about the potential benefits that might arise from global warming?  Some things come to mind: longer growing seasons in temperate zones leading to greater crop yields, ability to do more outside work in winter (e.g. more construction can be done due to less frozen soil),  fewer resources spent heating homes and buildings in the milder winters, better year-round ocean shipping due to less sea ice, etc.   Has anyone, to your knowledge, discussed the potential benefits of warming?  I’m not suggesting the benefits would outweigh the costs, but I’m suggesting that they might, and we as economists should get busy doing some careful studies to see if they do or don’t.  Who knows, perhaps, if Al Gore is right, the money I save on firewood, heating oil, cheaper food, etc., might just outweigh my higher air conditioning bill and the need to wear long sleeves and broad hats in August (which I do anyway ;).  Also, if the ice caps do melt away, sure, Miamians might have to move inland, but think of all that prime pasture that will open up in Greenland! 

I think that most environmentalists are undisciplined by economics.  They see changes that they perceive as bad, and then cry out for these changes to be halted.  They often don’t consider the potential benefits of the changes for other folks, nor the costs or even the feasibility of halting the changes.  Finally, they take it for granted that their values are supreme.  As for me, I would gladly trade the extinction of Polar Bears (which I have never seen except in a zoo and neither think about or care about much) for, say, a 10% increase in my real income, if that’s what global warming wrought. 

If you know of any studies about the benefits of global warming, please tell me about them!