The Environment and Economics

Dear Carl,

       You say that continued economic growth is an “unproven assumption,” and if that assumption proves false, we’ll wish we had conserved more.
       Sure. But it’s also an “unproven assumption” that the earth will not be destroyed by an asteroid in 10 years–and if that assumption proves false, we’ll wish we had consumed everything we’ve got while we had the chance.
       Nevertheless, as you acknowledge toward the end of your letter, we have to make policy in light of the best available forecasts, even when they incorporate unproven assumptions. The best forecasts are that no asteroid is en route to destroy us, and that economic growth is now a permanent feature of the human condition.
       For 200 years, per capita real income has grown at between 1 percent and 2 percent per year. For the most part, the growth rate has increased over time. Worldwide, real (i.e., inflation-adjusted) per capita income has grown by a factor of 10 since 1800; in the United States, the factor is more like 20. (That’s a fourfold increase in the 19th century, compounded by an increase of fivefold or sixfold in the 20th.)
       Even those remarkable numbers grossly understate the extent to which we are better off than our ancestors, both because we have more leisure time and because the quality of goods has improved. Regarding the latter, I’ll wager that Henry VIII would have traded half his kingdom for modern plumbing, a lifetime supply of penicillin, and access to the Internet.
       Every indication is that economic growth–not just in per capita income but also in leisure and the quality of goods–continues to accelerate and will continue to accelerate. Growth is driven by technological progress, and technological progress feeds on itself as each new idea makes subsequent new ideas easier to come by.
       You are worried that mean per capita income could increase dramatically without any rise in median income. That is indeed a mathematical possibility. It is also completely at odds with all historical experience.
       You say that as we’ve increased our wealth, we’ve valued wild places and wild experiences more highly, relative to other goods. If true, that’s a good pro-conservation argument. Your observations about how much we now spend for a clean environment are suggestive, but not conclusive. I’d welcome more evidence in either direction.
       Finally, you’ve emphasized that our major point of agreement is that forests and other natural resources are likely to be priced incorrectly, leading to inefficient levels of exploitation. I hope, then, that you’ll join me in campaigning for market mechanisms to make prices more accurate. I propose that we start by jointly circulating a petition demanding the sale of the national parks. Would you care to write the first draft?