The sustainability of improving living standards

Australian economist John Quiggin writes on The sustainability of improving living standards in a world of climate change. He discusses responses to the Stern Review on the economics of climate change. In particular, its conclusion that stabilizing at the atmosphere at 500 ppm CO2 equivalent in 2050 would result have same size economy as would otherwise have been reached in 2048.

Stern’s optimistic view that CO2 emissions could be greatly reduced without a corresponding reduction in living standards is rejected by critics beginning from two diametrically opposed positions. Although deeply hostile to each other, the two groups find some surprising common ground.

The first group are ‘Deep Green’ pessimists who see the end of consumer capitalism as both inevitable and desirable. At least since the reports of the Club of Rome in the 1970s, members of this group have argued that continued economic growth is inherently unsustainable. …

The mirror image of Deep Green pessimism is that of the ‘Dark Brown’ pessimists who say that we should do nothing to stabilise the climate because to do so will wreck our standards of living. Dark Brown commentators from thinktanks like the Competitive Enterprise Institute warn of ruinous economic consequences even from modest first steps such as the implementation of the Kyoto Protocol. …

Both groups engage in a fair bit of wishful thinking about their position, the Greens arguing that we’ll all be happier in the long run and the Browns claiming that the environmental problems will solve themselves if we ignore them. But these opposing claims are secondary to the shared presumption that economic growth depends on increasing exploitation of the natural environment and, in particular, on the burning of fossil fuels.

Underlying both Deep Green and Dark Brown positions is a fundamental misunderstanding of the nature of economic progress and of economic activity in a modern society. The concept of economic growth is so firmly embedded in our thinking that we forget it is just a metaphor. The idea of growth implies physical expansion, and any process of physical expansion has limits. …

The public-good nature of information explains how economic progress can continue without additional resources. Most obviously, improvements in information technology allow more and faster communication which in turn allows for yet more technological improvements. There is no apparent indication of diminishing marginal returns in this field; if anything the opposite. …

Despite the claims of Dark Browns and Deep Greens, we can, if we choose, have both a stable climate and steadily improving standards of living throughout the world. But the fact that we can achieve these things does not mean we will. At this stage, failure seems all too possible, as does a half-hearted response that will imply the need for much more costly action in the future.

While I am relatively optimistic about the ability of human society to successfully adapt and mitigate climate change I am worried that:

  1. Economic growth is not being decoupled from its use of global ecosystems, and
  2. Estimates of the costs of climate change fails to consider that we are substantially reducing the ability of the biosphere to adapt to climate change, which will have unknown but likely substantial negative impacts on human wellbeing.

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