Why Obama will sink the economy - the ecological perspective

Economics Economics Questions
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1

Important: to read this comment you will have some basic knowledge about the (somewhat tricky) concept of „ecological footprint“*.

I will begin with an important distinction „relative poverty’ compared to „absolute poverty“. Historically seen the term relative poverty has gained ever more acceptance. An increase in relative poverty means that the income and living standards of poor people might be rising absolutely but falling or remaining constant relative and in comparison to the richer parts of population. This term is obviously designed to keep us in constant panic while things in reality are going rather well. Worst of all the concept of relative poverty is in ecological terms more than just nonsense: it is outright dangerous.

The ecological impact of a nation is largely determined by it’s absolute level of wealth and consumption. For example the USA has an ecological footprint of 12 hectares per person while Bangladesh has an ecological footprint of 0,6 hectares (source: nationmaster.com). Somebody who is termed relatively rich by Bangladesh measures might still consume half as much of ecological resources than someone who is termed relatively poor by American standards.

Inside countries we know that you ecological footprint will rise when you spend more money. If you for example buy only the most expensive fruits in the supermarket chances are high that you picked those that where flown in by airplane. However the ecological footprint does not rise proportionally to income for two reasons:

  1. Richer people have higher saving rates and hence spend less on consumption.
  2. The average environmental impact of a product rises less than proportional to its price.

The later point becomes obvious if you for example compare the environmental impact of a cheap bottle of whine from Chile to a 1000$ bottle of French Champaign.

For both of this reasons income redistribution can not be done ecological neutral. To make things worse in a country with a very high ecological footprint like the USA the environmental costs of redistributive policies will be very high, too.

Now there are two ways this additional environmental costs could be distributed:

  1. If they are not reflected in the price of the product (Pigou-Thesis) than they will spread all over the world. Since the USA trades a lot with China chances are high that the Chinese population will bear large part of the costs of this especially “social” policy.
  2. If environmental costs are increasingly reflected in the price of products and if environmental problems become worse than the economic costs of redistribution will increase as well. Obama probably has chosen one of the worst points in history to move forward with his ideas.

There is evidence for point 2: Shortly before the economic crisis started natural resources like energy, metals and land where highly priced. People blamed this to speculation. However as an environmental scientist I am not surprised to see such price rise as compared to other products (f.e. labor). This will continue until we fix important technological problems such as where to get cheap energy from.

So why is the ecological efficiency in the USA so low? This is a result of Keynes and the over-stimulation of consumption. According to Keynes it is OK to dig holes and fill them afterwards to stimulate the economy. Keynes supposedly pictured heroic well-muscled workers digging holes by hand. In reality chances are high that an oversized excavator will show up with lots of gasoline in it’s tank. This gasoline could already drive the emergency generator in an African hospital. So even if you are not interested in environmental considerations, you should stay highly distrustful of such well-ment government stimulus.

A second reason is the over stimulation of the building sector by for example tax breaks. Buildings houses and the infrastructure around be is highly intensive in resources and energy consumption. To make concrete entire mountains have to be crashed and moved.

Thirdly due to low saving rates the American economy has difficulties to rise resources to complete the -longterm- research for cleaner technologies.

*Ecological footprint tries to measure the environmental impact of products through all the stages of their lifecycle while assuming that earth resources are fixed. It measures environmental impact against a fictive measure of (limited) fertile land which would be needed to sustain this lifestyle in the long-term. To “offset” the use of fossil fuels forested areas should be set aside. Unluckily even if you accept climate change there is insufficient evidence to show that woods have a cooling effect. For people who estimate that the price of fossil fuels will continue to raise this special bias still be acceptable for economic predictions. Even if earth resources are not limited the measure can still be used to compare environmental impacts according to current stage of technological development.

2

When will you folks conceed that it is wealth that makes the world a better place to live?

Your perspective is based upon faith in the principal that the wealthy are destroying the planet when the exact opposite is true. You seem to understand that world wide socialism will not help but you still do not have faith in individuals to solve these problems.

If you want to save mankind from itself or if you truely believe that the planet is in danger then do the following:

  1. Start a business that makes cleaner techology of some kind.

  2. Make a profit by selling this technology in the market place.

  3. Acquire all financing on your own without the help of any government.

If you want people to follow you then lead by example and live like the average person in Bangledesh does while at the same time doing 1 to 3 above.

3

This article was ment to point out how wealth redistribution creates ecological problems. Wealth redistribution by the same mechanism I described would create ecological problems if you start redistributing money from the USA to Bangladesh (commonly called “development aid”). The obvious problem here (to obvious to mention) is that there is no productivity gain, which would be the case if the market was behind shifting wealth or rising living standards in the mentioned countries while there are clear environmental costs of such policys. How wealth creation can create means an technologys to solve environmental problems was outside of the scope of this (already long) article. I nevertheless thank you for taking the time to read it.

4

Richer people have higher saving rates and hence spend less on consumption

That’s about the most ridiculous statment I have ever heard, no offense. Richer people have higher saving rates, of course. It is much easier to consume less than your income when you are wealthy. But how you transltated this to “hence spend less on consumption” I fail to see.

A guy owns 5 houses and 15 cars, a yacht, the most expensive food, 23 televisions, a smart phone, 8 computers, he powers all those houses, etc, etc, etc… and he spends less than someone renting their house and buying Value TIme food?

5

“Saving rate” derives from the word “ratio” which is Latin for relation. The saving rate by definition is always calculated in relation to consumption and overall income while absolute spending is not taken into account. A rich guy hence spends less on consumption only in relative terms. This is nevertheless significant because if you redistribute you will automatically decrease the saving rate of the population as a whole. This will artificially increase consumption and hence harm the environment.

Germany has half the ecological footprint per head than the US and the Suisse is known as one of the most environmental friendly countries of the world. The Suisse has a saving rate of 13% while Germany has a saving rate of 11% . I hence suspect that high saving rates make a country more environmentally friendly. From my post you can see that I don’t claim the reduction in consumption alone can explain differences of that size but that low saving rates must have some long term damaging effect on the industry. Thiscould be due to Keynesian policies and artificial low interest rates (the European central bank never got as low with interests as the FED).

The problem here is that politicians are already inventing a new concept called “Green Keynsianism”. I would like to make it clear that that word itself is already an antagonism.

By the way it is highly unlikely that your guy will buy 23 televisions, he might buy larger televisions and by this drive inovation. I think this time you are describing the rich as more irresponsible than they are :slight_smile:

6

Sorry, I tried to make the point more clear but I can’t edit the original post anymore.

7

But you’re talking about ecological footprint here. (You’ll have to forgive us as ideas like Cap-and-Trade make us very suspicious of anyone talking about ecological issues.) A person who owns 5 houses and 20 cars certainly alters the ecology more in absolute terms than someone who does not. I don’t see what the savings rate has to do with it, unless you mean to infer their savings are used to invest in new technologies which could, possibly, reduce ecological footprint.

8

I again repeat: if you redistribute income systematically from person with high saving rates (the rich) to persons with low saving rates (the poor) you will decrease the overall saving rate of that nation. That’s why leftist politician like it so much, they claim this additional consumption will stimulate the economy. There is of course a chance that in environmental terms nothing will happen because of the ensuing inflation.

Even if you don’t accept the concept of ecological footprint (I pointed out some weaknesses already) you can still use the example of the cheap wine and the expensive wine to see that energy consumption will rise less than proportionally if you buy more expensive products – and that is what richer people like to do: they don’t buy 23 televisions (quantity) they buy better quality (bigger television, biological food). So redistribution will rise energy consumption artificially as the redistributed money translates into quantity. A rise in Energy consumption is not exactly what the environmentalist want.

If you are further interested in the relation between ecological footprint and income redistribution I can point you to some scientific raw data. I have the feeling that by creating the concept of ecological footprint the (leftist) environmentalists have “shoot themselves into the foot” as we in Germany would call it.

9

*Ecological footprint tries to measure the environmental impact of products through all the stages of their lifecycle while assuming that earth resources are fixed. It measures environmental impact against a fictive measure of (limited) fertile land which would be needed to sustain this lifestyle in the long-term. To “offset” the use of fossil fuels forested areas should be set aside. Unluckily even if you accept climate change there is insufficient evidence to show that woods have a cooling effect. For people who estimate that the price of fossil fuels will continue to raise this special bias still be acceptable for economic predictions. Even if earth resources are not limited the measure can still be used to compare environmental impacts according to current stage of technological development.

Completely Meaningless.

Thought up by some evironmentalists in order to convince some people that their arguements have some basis in fact or validity.

It is much like the concept of Sustainable development. Another buzzword that means nothing, but is used to justify further State control over “scarce” resources.

I’ll post further points on this later.

Gotta get some lunch.

10

Saving rates and income redistribution by example:

John Asshole, income 500 Million Dollars per year, spending for personal consumption 50 Million Dollars per year, saving rate 90%.

With 50 Million Dollars consumption John A. will have a very asshole-like impact on the environment. On second thought it is difficult to spend so much money year in year out. John A. is probably either eating gold (bad for the environment) or collecting Picasso paintings (the later will have little effect on the environment).

Found guilty of ruthless overconsumption John A. is executed. His money from now on goes to 100 000 poor people with a saving rate of 0 or below. Those people now have 5000 Dollar more per year and hence are able to save 10%. of this additional money.

So the total consumption spending of this economy has just risen from 50 Million Dollar to 450 Million Dollars a year – none of it is spend on Picassos paintings by the way.

11

John Asshole, income 500 Million Dollars per year, spending for personal consumption 50 Million Dollars per year, saving rate 90%.

Sounds to me like you don’t like people who make $500 000 000/Year.

I’ll bet he pays 10 times as mch for his car, house, island in the carribean, parking in manhattan, apartment in manhattan, etc. etc.

Sends his kids to expensive private schools, etc etc.

There is only so much food one can consume, olny so much clothing one can buy, only so many hours in the day that one could rationaly be spending on Cosuming.

Have you seen what a truly expensive watch costs? $250 000

Given that the last watch I bought cost $20, that easily will show you how someone could spend 1000 or 10 000 times what I do in a year and not have a greater “ecological footprint”

Even if something like that exists.

Which it does not.

I’ll reply to your first post later - got to make dinner.

12

Especially the watch-example shows that you have not understand my point. I would rate this as excellent example of how to spend a lot of money without having a high environmental impact. This watch could easily buy 20 new cars if spend by normal people. You seem to have missed the irony of my last post.

How to measure environmental impact (just for Redmond)

A principal problem in environmental protection is how to rate completely different forms of environmental impacts against each other.

For example: In comparison to cotton bags the plastic bags at the supermarket check-out require

  • less fossil fuel

  • no land

  • no pesticides to produce.

Unluckily they are not biodegradable. If you assume that “biodegradability” is the most important criteria to judge the eco-friendliness of bags you will still consider the plastic bag as most harmful (I will not).

The problem with “sustainable development” is, that it is most loosely defined.

The ecological footprint network in contrast makes very clear what methods and sources it uses to calculate footprints. So you can at least see how they solve problems like “the plastic bag against the cotton bag” and hence what are the assumptions behind their calculations.

Some of their comparisons have a lot of meaning. You will for example need more land if you eat a lot of meat compared to eating vegetarian. You will also need more energy and materials to send foot from one place to another than if you consume it on spot (Bangladesh lifestyle). The only thing which seems arbitrary to me is how energy is converted to land use.

Still this does not mean that it is not nice to know how much energy hides behind a certain product or lifestyle. Normally the footprints will show how much land is attributed to fossil fuel energy consumption, so if you are not at ease with this you can subtract that.

13

How to measure environmental impact (just for Redmond)

A principal problem in environmental protection is how to rate completely different forms of environmental impacts against each other.

For example: In comparison to cotton bags the plastic bags at the supermarket check-out require…

Still this does not mean that it is not nice to know how much energy hides behind a certain product or lifestyle. Normally the footprints will show how much land is attributed to fossil fuel energy consumption, so if you are not at ease with this you can subtract that.

Hello Nadjeschda

Thank you for the exhaustive description of the concept of ecological footprint - I was already familiar with it.

What I am saying, is that ecological footprint does not matter, and for that matter it does not exist.

The calculation of an “ecological footprint” is a quasi-religious excercise based on half-truths, unproven assumptions, fuzzy logic and a great deal of subjective opinion.

It is like weighing the “sinfullness” of various acts

In that same way that purchasing carbon offsets is like purchasing indulgences from the church

The Green movement has been attempting to create a new religion based on worship of the earth, and a hatred of humanity.

It truly is a secular cult it has the worst aspects of a religion, but none of the life affirming qualities of traditional religions.

The concept of ecological footprint serves to have us buy into all of their cherished myths - death of species, peak oil, global warming, etc. etc.

To have us focused on the minutia of every object around us, to teach us about how wasteful we all are, and why we should “use less”.

As my friend Ray havey puts it:

Environmentalism has so thoroughly permeated world culture that the saving-the-planet rhetoric is accepted even by those who don’t really regard themselves as dyed-in-the-skein environmentalists. It is taught as holy writ in public schools, and it’s espoused by poets, priests, and politicians alike.

This monstrous ideology would, given the first opportunity, destroy humankind, a fact of which the leaders of this movement make no secret.

It is therefore of great importance to expose this ideology for what it actually is: a neo-Marxist philosophy that masquerades as something benevolent and life-affirming, but which in reality explicitly calls for humans to be subordinated to nature, via an elite bureau of centralized planners who, as you would suspect, are the ones that get to decide for the rest of us how we must live.

And who better than an elite bureau of centralized planners to decide the “Ecological Footprint” of every object we create.

Think of the teeming number of government employees and mountains of paper that each organisation would have to fill out in order to properly calculate the “ecological footprint” of various products.

I am sure they could start banning certain objects as well if it did not measure up to a certain “standard”

I’ll address you first point later on tonight…

14

If you own 4 5 bedroom houses (not unlikely for the very wealthy) and have a tv in every room (also not unlikely), how many tv’s is that?

15

If you want people to follow you then lead by example and live like the average person in Bangledesh does while at the same time doing 1 to 3 above.

Great post Bogart - I agree with 100% of it.

16

cap and trade as indulgences. what a great analogy

17

I will begin with an important distinction „relative poverty’ compared to „absolute poverty“. Historically seen the term relative poverty has gained ever more acceptance. An increase in relative poverty means that the income and living standards of poor people might be rising absolutely but falling or remaining constant relative and in comparison to the richer parts of population. This term is obviously designed to keep us in constant panic while things in reality are going rather well. Worst of all the concept of relative poverty is in ecological terms more than just nonsense: it is outright dangerous.

You need to read this piece by Kel Kelly

Who Are The Poor?

When we hear of the poor, we envision a massive group of people without food and shelter. In reality, most of the poor in capitalistic countries such as the United States are not in such a state. Data from a recent census reveals that of the official “poor”:[1]

  • 76 percent have air conditioning.
  • 66 percent have more than two rooms of living space per person.
  • 97 percent own at least one color television.
  • 62 percent have either cable or satellite television.
  • Almost 75 percent of households own a car (30 percent own two or more).
  • 73 percent own microwave ovens.
  • More than 50 percent have stereos.
  • 33 percent have automatic dishwashers.
  • 99 percent have refrigerators.
  • Virtually none lack running water or flushing toilets.
  • 46 percent own their own home, the average of which is a three bedroom house with 1.5 baths, that has a carport and porch or patio, and the average value of which is 70 percent of the median American home.

If we observe our presumably poorest citizens on our public transportation systems we see that they have cell phones, adequate clothing, personal audio devices, and are generally clean and free of disease and deformities. They also have the comfort of using a heated and air-conditioned transportation car that has carpet and flat-panel televisions for their amusement (paid for primarily by the wealthy, of course).

If you were to compare these American poor to the poor in Bolivia, Honduras, Cambodia, or India (or even to many of the poor in Mexico, Romania, Thailand, and Russia), you would see a stark difference. The poor in these countries often literally live in open-air huts with large leaves for roofs and stacked bricks that serve as a shared stove for multiple families. For the poor of the third-world countries, there is, for the most part, no money, no exchange of goods — just basic survival by subsistence farming or by hunting or fishing for food. To these people, American street sweepers and factory workers live a life of luxury.

The difference between the “wealthy poor” in capitalist countries and the “deprived and desolate poor” in noncapitalist countries is no coincidence. The freedom that exists in capitalistic countries results in more invested capital per worker. This means that workers can produce far more wealth for themselves and for the rest of society. In noncapitalist countries today (and in the days before capitalism first appeared) poverty really means that no work is available; there is no means by which to improve one’s state of being, or even to maintain it.

18

The ecological impact of a nation is largely determined by it’s absolute level of wealth and consumption. For example the USA has an ecological footprint of 12 hectares per person while Bangladesh has an ecological footprint of 0,6 hectares (source: nationmaster.com).

How do they determine the number of hectares - you cannot compare apples and oranges - any type of comparison such as this is totally irrational.

Somebody who is termed relatively rich by Bangladesh measures might still consume half as much of ecological resources than someone who is termed relatively poor by American standards.

What is an “ecological resource”

Inside countries we know that you ecological footprint will rise when you spend more money.

Why do we know this? According to some “environmentalists” my ecological footprint is “lowered” whe I purchase produce that is more expensive. I.E. local produce.

If you for example buy only the most expensive fruits in the supermarket chances are high that you picked those that where flown in by airplane.

See my previous example - the cheapest fruits are the ones that come from lesser developed nations - I am guessing because the cost of labour is lower than it is in our inflated first world economies.

And there was a british study that showed that New Zealand lamb, shipped to England actually produced less CO2 than English Lamb. Due to the fact that the NZ Lamb was naturally grazed.

However the ecological footprint does not rise proportionally to income for two reasons:

  1. Richer people have higher saving rates and hence spend less on consumption.
  2. The average environmental impact of a product rises less than proportional to its price.

First point I disagree with

Second point I don’t disagree with, but again measuring the “environmental impact” of a given product is impossible.

The later point becomes obvious if you for example compare the environmental impact of a cheap bottle of whine from Chile to a 1000$ bottle of French Champaign.

What about an expensive bottle of wine from Chile, or a cheap bottle from France?

For both of this reasons income redistribution can not be done ecological neutral. To make things worse in a country with a very high ecological footprint like the USA the environmental costs of redistributive policies will be very high, too.

How is taxation measured in terms of "environmental costs"?

Now there are two ways this additional environmental costs could be distributed:

  1. If they are not reflected in the price of the product (Pigou-Thesis) than they will spread all over the world. Since the USA trades a lot with China chances are high that the Chinese population will bear large part of the costs of this especially “social” policy.

Pigouvian economics is ridiculous. Check out http://nopigouclub.blogspot.com/

  1. If environmental costs are increasingly reflected in the price of products and if environmental problems become worse than the economic costs of redistribution will increase as well. Obama probably has chosen one of the worst points in history to move forward with his ideas.

So what you are talking about is "externalities" - I would also doubt that they are Obama’s ideas.

There is evidence for point 2: Shortly before the economic crisis started natural resources like energy, metals and land where highly priced. People blamed this to speculation.

It was due to higher demand - for instance, I worked as a lighting designer in 2005, the price of our zinc castings went up, because there was increased demand for zinc. This higher demand for zinc was due to the fact that more products were demanded in the US market, of course this demand was driven by credit not savings - and eventually the housing bubble burst, lowering demand for these products, and then lowering the price of zinc.

However as an environmental scientist I am not surprised to see such price rise as compared to other products (f.e. labor). This will continue until we fix important technological problems such as where to get cheap energy from.

We get cheap energy from Coal. Problem solved

So why is the ecological efficiency in the USA so low? This is a result of Keynes and the over-stimulation of consumption. According to Keynes it is OK to dig holes and fill them afterwards to stimulate the economy. Keynes supposedly pictured heroic well-muscled workers digging holes by hand. In reality chances are high that an oversized excavator will show up with lots of gasoline in it’s tank.

Actually - that is high efficiency - to use that many people to dig a hole would take far longer, not to mention feeding them, clothing them, transporting them to and from the work site.

This gasoline could already drive the emergency generator in an African hospital. So even if you are not interested in environmental considerations, you should stay highly distrustful of such well-ment government stimulus.

Why are aFircans using emergency generators? they have plenty of coal. Of course Obama told the World bank not to lend money to build coal fired power plants.

A second reason is the over stimulation of the building sector by for example tax breaks. Buildings houses and the infrastructure around be is highly intensive in resources and energy consumption. To make concrete entire mountains have to be crashed and moved.

You are talking pigou here - you are saying that the government give breaks to certain sectors to stimulate them. Here is an answer - get rid of taxes, and tax breaks - no incentives for anything.

Thirdly due to low saving rates the American economy has difficulties to rise resources to complete the -longterm- research for cleaner technologies.

Cleaner technologies come into play when they are competitve - not before.

Governments can’t do anything about this.

Wind and solar are too expensive to be competitve, so governments take some of our tax money and give it away to solar and wind companies in the name of “creating jobs” or “reducing carbon”

ridiculous.

19

But you’re talking about ecological footprint here. (You’ll have to forgive us as ideas like Cap-and-Trade make us very suspicious of anyone talking about ecological issues.) A person who owns 5 houses and 20 cars certainly alters the ecology more in absolute terms than someone who does not.

Sorry, but what does this statement even mean-> “alters the ecology”

e·col·o·gy

/ɪˈkɒlədʒi/ Show Spelled

the branch of biology dealing with the relations and interactions between organisms and their environment, including other organisms

We need to define terms here.

I don’t see what the savings rate has to do with it, unless you mean to infer their savings are used to invest in new technologies which could, possibly, reduce ecological footprint.

Within the system of fractional reserve banking, savings are generally lent out immediately - thereby creating more consumption.

20

A rise in Energy consumption is not exactly what the environmentalist want.

That is the key statement - greens want us to be poor.

That would be the only way to reduce consumption.

They usually won’t admit that though.