The visible hand in economics

Will sustainability make us better off?

Posted on: December 3, 2008

An important question raised by the writers in NewScientist’s feature is whether we will be less happy living sustainably. This is the part of the series I felt was weakest. The general consensus amongst them is that we will actually be happier if we live sustainably because we will live healthier lifestyles. David Suzuki claims that ‘we would go out and walk around because there would be shops, musicians and people out on the street that we’d want to meet’. Kate Soper thinks we’d ‘…enjoy healthier modes of transport such as walking, cycling and boating’.

The authors appear to be projecting their own lifestyle preferences onto others here. It is this element of the environmental rhetoric that bothers me most: the idea that we would all be happier people if only we were more like them because they know what’s best for us better than we do. That thinking is reflected in NZ in the Greens affinity for direct regulation.

Economists like to think about these things in terms of revealed preferences. If people really wanted to get out and walk, bike and boat everywhere they could. If they wanted to work part-time so they had more opportunities to get out on the streets, dance and meet people they could. If they currently don’t then it’s unlikely that they’ll do that in future. If they currently choose to drive around in an air-conditioned SUV and exercise in a gym then it’s probably because they’d rather do that. When the price of an SUV skyrockets with the price of carbon then they’ll be worse off.

What’s so difficult about acknowledging that achieving a sustainable planet will force us to do things that we’d prefer not to and close off options? By reducing our enjoyable consumption today we allow future generations to also enjoy the planet, rather than condemning them to pay for our current excesses. That’s a more realistic pitch than the pretense that we’ll all be better off, and it conveniently grabs even more of the moral high ground!

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6 Responses to "Will sustainability make us better off?"

“if people wanted to…” is where your argument is weak. Sure, it’s possible to work part time, if you don’t mind being poor. Part time work is often at the employers pleasure, sacrificing a lot of quality of life too. It’s possible to use public transport and not own a car, if you don’t mind living in the inner suburbs of a big city. And so on. So what you’re seeing is revealed preferences within a biased framework.

Personally I would like to work part time, but in 20 years of looking have not found an acceptable compromise between high-paying opportunities and part time ones. Even being self-employed I found that my “spare” time was spent running the business. So instead I work contracts and have a few months of time off every now and then.

How do economists see the “if you do X I can’t do Y” dilemma? Take transport: if too many people drive instead of cycling, the roads become significantly more dangerous for cyclists, resulting in even fewer cyclists (they’re dead or “choose” to drive instead). I’m living in Melbourne and cycling here is common and relatively well supported, but it’s not Copenhagen by any means. Compared to Wellington there are brilliant cycle paths and lanes, and the motorists expect cyclists and react well to them, for the most part. But there’s still the issue that a motorist who doesn’t is a huge danger to cyclists, and the socioeconomic system supports that behaviour (kill a cyclist while driving and sending an sms … lose your licence for three whole years!)

There are definitely trade-offs that you have to make to get things that you want, but your choices show whether you’re willing to make those trade-offs. Certainly, if a sustainable society changed the nature of the trade-offs, that would change the decisions people made. Our choices now don’t reveal what we might do when the options change, as you point out.

What are the chances that a sustainable society will result in much more attractive part-time jobs? I can’t claim expertise in the area, but I dont’ see why the drive to be a more productive company and exploit your workers’ specific investment in your company will go down.

Will sustainable living make outdoor exercise suddenly more attractive to those who live in urban areas? I don’t see why sustainability will necessarily result in much nicer urban outdoor environments that will entice people out of the gym.

To make current choices a bad indicator of future decisions we really need to be able to point to ways in which the costs and benefits from the choices will change. I’m probably hindered by a lack of specific knowledge, but I haven’t yet been told why we might become a friendlier, more outdoorsy people. Until then, I don’t have a better indicator of people’s preferences than their current decisions.

There’s an odd kink in the economists’ “revealed preferences” story. “Leisure” is counted as normal good in the standard labor supply model. But in the the calculation of GDP, disposable time counts for zero. Government policy is geared to increasing GDP because economic growth brings higher tax revenues without raising tax rates. Thus it enables the party in power. to do politically popular things (spending on new programs) without doing a politically unpopular thing — raising tax rates. The preferences revealed by current consumption patterns are dramatically skewed.

Now if you want to pretend that your “lifestyle” is unaffected by a pervasive government policy bias, that’s your business. It is, after all, hard to imagine what things would be like if they were different. But don’t go projecting that onto other people with this “revealed preferences” mumbo jumbo unless you’re prepared to explain why a steeply-tilted playing field doesn’t matter.

“Will sustainable living make outdoor exercise suddenly more attractive to those who live in urban areas?”

Would you rather be outdoors next to the swoosh of a major motorway, breathing the delightful scent of oil consumption or would you prefer to be engulfed by the silence of a tree-lined avenue endangered by cyclists and pedestrians zooming at you? The revealed preferences of most people suggest the latter. Look at the difference in house prices between those next to major motorways and next to similar-capacity railway lines. Or the pedestrian traffic (that drives retail rentals) between shops next to major roads and those in pedestrian-only areas.

So, if in a sustainable world there was more rail transport and fewer major roads, house prices overall would presumably increase (or at least even out) as the areas subject to the motorway penalty decreased.

Of course, some parts of GDP would no doubt shrink, not least the gym market. People who walk and cycle to work, school and shops (or use PT to extend their walk/cycle range) will need to spend less time at the gym. But more on food and clothing to support their walking and cycling.

Sandwichman:

I’m not sure that government policy is driven by a desire to increase tax revenues. Do you have a shred of evidence to support that claim?

Furthermore, preferences do not exist in a vacuum. We may all want to earn vast amounts of money and live in luxury while working little, but that’s just not possible and tells us nothing about the choices that people will make. Looking at choices in the context in which they will continue to be made is far more informative. So, even if there was a ’tilted playing field’ I’d rather see what people did on it than try to learn about behaviour by asking them about their hopes and dreams.

moz:

I’d like to think that’s what will actually happen. Although I still can’t understand how many people choose to go to the gym, rather than a park, today.

You left out the key part: DRIVE to the gym.

One of my horror stories in Wellington was when the lifts at a gym in Courtenay Place (near my work) were out of action for a week. Patronage dropped about 50% according to one gym worker I talked to. Apparently walking up the stairs to get to the gym was… too much exercise?

In Melbun I’ve discovered that off-road cycleways are something I get used to more quickly than I expected. Specifically, when I have to ride on busy roads the stench of motor traffic bothers me more than I remember it bothering me in the past. That’s after less than six months of a 10km commute being 90% off road and the rest relatively low-stench.

So selfishly I now want off-road cycle ways everywhere🙂

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