Arnold Kling  

Capitalism as a Benevolent System

Comment of the Week, 2003-04-3... Social Security Tax Cut?...

Critics of capitalism see it as a cruel system that fosters injustice and exploitation. An alternative view is offered by many economists, particularly those of the Austrian School. George Reisman, for example, speaks of what he calls twelve insights into the benevolent nature of capitalism. For example,

A continuing increase in the supply of economically useable, accessible natural resources is possible as man converts a larger fraction of the virtual infinity that is nature into economic goods and wealth, on the foundation both of growing knowledge of nature and growing physical power over it.

For Discussion. Many environmentalists take a different view of the relationship between economic activity and natural resources. What economic principles are ignored by environmentalists, and vice-versa?

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CATEGORIES: Austrian Economics

COMMENTS (8 to date)
Ian writes:

There are a couple I can think of, and I will probably state them inarticulately.

One would be the idea that capitalism isn't a zero-sum game. What is earned or created by one doesn't necessarily limit what another can have or do. The consumption of resources, while not joint in supply or non-rival in consumption, does not restrict those resources from replenishing. And I don't mean necessarily the very long term replenishment such as oil. After the wreck of the Exxon-Valdez, there were projections that the area would be a wasteland for over 20 years (yes, these were the outlier projections, but it shows the range that I think some are given to believing). In actuality, the area did a great deal to "clean itself up" after only 4. This isn't resource conumption per se, but when we consider that old-growth logging has declined but not stopped due to demand (largely based on price of such woods) and loggers have begun a 10-1 replanting ratio for areas cut down, the bleak notion that every resource used today is a withdrawl from a finite pool available for tomorrow's generations is undermined.

Another big concept (or set of concepts) I think environmentalists often overlook is the notion of returns to scale in an industry. The rate of pollution for modern industry is tiny compared to the pollution created by the steel mills, hog farms, rail yards, etc. at the turn of the century. But we had to go through that period for innovation to occur and for more efficient technology to be created. By attempting to get in the way of progress, such as allowing for the building of new nuclear plants, the door is shut on technological improvements that would all but eliminate environmental concerns in the future.

I will say this for the environmental movement, consciously or not, they seem to have a firm grip on supply and demand. Through constant effort to stigmatize some industries (like fur coats), they're raised the effective price of some goods so high that demand has dramatically dropped off.

David Thomson writes:

“What economic principles are ignored by environmentalists, and vice-versa?”

This question is missing a most important adjective. Let’s try it again:

“What economic principles are ignored by the radical environmentalists, and vice versa?”

Am I being a nitpick? Nope, we simply cannot allow the Liberal extremists to monopolize the legitimate term, environmentalist. Am I saying that we must complicate our language with repetitious adjectives? The answer is unfortunately an unambiguous yes. We must always distinguish between those who are doing their best to balance off the needs of human beings with our world’s ecosystem---and the stark raving lunatics who advocate for a return to the Stone Age.

“By attempting to get in the way of progress, such as allowing for the building of new nuclear plants, the door is shut on technological improvements that would all but eliminate environmental concerns in the future.”

Moreover, the radical environmentalists don’t give a damn! We should never credit them with good intentions. Once again: their ultimate goal is to bring back the Stone Age. And no, I’m not even slightly guilty of engaging in hyperbole.

Micha Ghertner writes:

"Nope, we simply cannot allow the Liberal extremists to monopolize the legitimate term, environmentalist."

How ironic, considering we have already allowed leftists to monopolize the legitimate term ' liberal', as your post clearly demonstrates.

"Moreover, the radical environmentalists don’t give a damn! We should never credit them with good intentions. Once again: their ultimate goal is to bring back the Stone Age."

But aren't they trying to "bring back the Stone Age" _because_ they believe this regression would be a good thing, and therefore we can credit them with good intentions? It's difficult for me to come up with very many examples of people acting _without_ good intentions.

Ward writes:

It is not just environmentalists but all those who fail to understand the unique role of entreprenuership that supplies things few people besides the entreprenuers knew there was demand for. Maybe there should be a school of Austrian Environmentalism that studies innovative ways to clean up or maintain the environment.

Lynne Kiesling writes:

In response to Ward's comment ... one organization that does provide insights into "Austrian entrepreneurship" applied to environmentalism is PERC:

David Thomson writes:

“How ironic, considering we have already allowed leftists to monopolize the legitimate term ' liberal', as your post clearly demonstrates.”

Life is not always fair. Language is an intrinsically nebulous activity. The Leftists have regrettably captured the term Liberal in the minds of most people. It matters not a whit that originally it meant something entirely different. Alas, I am also old enough to remember when describing someone as gay did not connote homosexual activity.

We are compelled to employ the adjective, radical, or something similar each and every time when we speak about environmentalists---whether we like it or not. If we fail to do so, we inadvertently make it easier for the extremists to do their damage. The price tag of muddying up our rhetoric must be paid.

"Moreover, the radical environmentalists don’t give a damn! We should never credit them with good intentions. Once again: their ultimate goal is to bring back the Stone Age."

And yes, we should not, objectively speaking, credit the radical environmentalists with good intentions. These nihilists truly contend that human beings should not dominate the earth. We are essentially, in their way of looking at things, no better than dogs or even cock roaches. Am I exaggerating? Nope, you merely need to push their buttons a little before they blurt out the truth.

Garry writes:

One of the biggest environmental debates in the country is about wetlands. Which support the public, commercial and recreational water needs. Ducks Unlimited for example studies show the greatest losses are due to Ag. the second urban sprawl. In the past they have been 200-400,000 thousand Acres per year and today around 100,000 per year.

However, the question of what are the cause’s of wetlands loss..?

Is asked in a limited sense. Biologists at best give incomplete answers. However if you do some research you can quickly see the Dept. of Ag.’s heavy hand of intervention in the last 70 years subsides, tariffs and price controls focusing polices to increase production arising in surpluses in many instances. The dept. of Ag. in quantity doesn’t grow a bean, plow a field or milk a cow yet employs 100,000 bureaucrats.

The intervention occurs at the same time a flight from family farms occur, foreign comparative advantages increase and tax payers average about $ 400 per family of 4 in taxes towards subsides to Ag. per year. There long term polices have had massive effects on the environment and wetlands.

A new round of this is the Ethanol mandate which will be a wetlands destroyer as crops such as corn are very water intensive. ANWR is perfect example were those opposed to ANWR offer up there solution as renewable’s such as the ethanol mandate. Which cost $1.00 to make $ 1.25 of output at best. For example:

U. S. Department of Agriculture estimates that it will take 16 million acres of corn production to produce 5 billion gallons of ethanol per year (based on 2.5 gallons per bushel and 125 bushels per acre), an area slightly larger than the State of West Virginia.

393.12 billion gallons / 677.5 million gallons per year = 580 years
580 years x 16 million acres per year = 9,280,000,000 (or 9.28 billion) acres total corn production= ANWR

A big benefactor of Ag. subsides is ADM, "ADM begins by buying the corn at subsidized prices. Then it uses the corn to make corn sweeteners, which are subsidized by the sugar program. Then it uses the remainder for the big subsidy, which is ethanol."--- Study on Corporate welfare.

In the 70’s there were about 1,500 environmental groups actually which many could be defined as conservation groups which actually pay for their own projects with member contributions. Today there are 8,000 environmental groups most with a Washington, DC address who are lobbyists looking for Gov. programs and us to pay for the project or protect there individual brand of environmentalism.

Broadly as testified by 40 economists to the US Supreme court about the EPA, Army Corp of Eng. And various other Gov. agencies do not do Cost/benefit analysis when writing enviro laws/reg. programs. So they are writing laws, regulations and providing funding for programs which they have no idea what the costs are or what the benefits, trade offs or alternative environmental effects will be.

Politically democrats receive $2 / 1 campaign spending from the largest recipient of corporate welfare the Ag. industry. Basically they have support Gov. programs which increased subsidizes to Ag over the last 70 years. Yet they also receive money from many enviro groups to create addition programs to lessen impacts in effect creating self-canceling policies.

One economist recentily said in the next 10 years use of resources by the US economy on its own via free markets will lessen the enviro impact by 17 percent. Modeling that includes the enviro laws effects improve enviro measures by 18 percent. Basically 17 verses 18 percent impact with enviro law’s. We are looking at spending billions for a small percent. The far greatest percent is achieved by economic growth and free markets.

I would say there are seven areas overlooked- Free markets, Economic Growth, Self-canceling policies, Innovation, Government first solutions, alternative impacts and lack of Cost/Benefit analysis. Also economists not biologists need to play a far greater role in this debate.

Perhaps the most pervasive issue completely ignored by environmentalists is price. Most environmental models I have seen (at least in the popular press) talk about runaway resource use, and depletion of resource A, B and C by the year X, but never mention the fact that, as resources become scarce, their price rises, and we substitute them for some other resource. Australia's CSIRO recently released an enormously complex model of Australia's ecology and resource use, which predicted depletion of just about everything, but had not a sinlge price in it. Thus it missed a key component of human behanviour.

I have tried to think of a resource that humanity has actually run out of, but am having a hard time in coming up with one. I know we have caused the extinction of quite a few species, but in most cases, that has been an unintended (if lamentable)consequence of economic activity, and not due to our use of that particular species, except the dodo. In any case, defining a resource as a single species seems a pretty narrow definition. If anyone can tell me some other resources that humanity has actually run out of, I would be grateful.

A second issue is not one of substance, but of style. There seems to be a broad agreement amongst many environmentalists (certainly the ones loopy enough to qualify membership of the 'antiglobalisation movement') that somehow capitalism has to be 'punished' for all the pollution it has caused in the past. This has even made its way into major policy decisions, such as the Kyoto Agreement. This idea of 'punishment' is ridiculous. Causing people to change behaviour by punishment might work on an individual scale (prison, for example), but it doesn't work on the scale of the entire capitalist system. If environmentalists want business to change behaviour, they need to provide carrots, not sticks. Firstly, because carrots are the only things which will work, and secondly, because using sticks immiserates all of us, and I certainly don't want to be immiserated to 'punish' the people who provide my daily bread an butter.

On the issue of radical environmentalists wishing to return us to the stone age (hence their support of punishment above), I travelled through Zimbabwe some years ago and, whilst looking at some cave paintings made by stone age people, our guide mentioned that at the time, Zimbabwe was able to support about 20,000 hunter gatherers. It now, even with the antics of Mugabe, supports 11 million people, using modern agriculture. This means, in order to return to a viable stone age, hinter gatherer population in Zimababwe, we would need to murder 99.8% of its population. When next faced with a radical environmentalist attempting to return us to the stone age, people might like to point out this salient fact, and ask which 99.8% of the world's population they intend to slaughter. Presumably, given their devotion to the cause, they would offer their own lives first?

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