Population - the forbidden debate

A newspaper article this morning got me thinking about the untouchable issue of population growth. It is available here. Basically, the article publicised the not so surprising fact that SE Queensland’s rate of population growth is slowing. But what it did mention was the causal relationship between the supply of housing and population growth.

If we are to believe this article then increasing the supply of housing causes population growth – it must be true if the opposite is true. We have probably heard the phrase ‘build it and they will come’. Such a saying did not gain popularity because it is irrelevant. It gained popularity because is very close to the truth. If you would like an rather academic discussion of Say’s law – the theoretical argument that supply constitutes demand, have a read here.

The main point I want to raise today is that population growth is not something we respond to, as the state government so often puts it. It is something that comes about in response to economic conditions. When there is a boom – high growth. When there is a bust – low growth. Just today I sat in a seminar on the impact of war on reproductive rates of women. And yes, the supply of men also has an impact on reproductive rates and population. Imagine how well we could plan cities, towns, and infrastructure, as well as putting away areas for conservation, if we knew which factors highly influenced peoples reproductive decisions. We could plan, knowing in advance, the flow on effects from our policies. I wonder how much discussion was had before the introduction of the baby bonus? Or even discussion of the need for such direct stimulation, if indirect means can be equally effective.

So why would I raise population growth as an issue. Because for an economist environmentalist, labour supply is an important component in determining the net environmental impact of society. The more people we have, the more man/woman hours can be put to work producing goods and consuming natural resources.

The question we need to ask ourselves is what population we would like? It seems pretty radical to think about this. It brings images of China, oppression, and a violation of peoples right to reproduce. But this need not be so. While the Chinese have targeted population growth directly, if we believe that external factors influence population growth, then all we need to do is manipulate these factors to give people incentive not to reproduce. If we want more growth – just build more houses.

Thinking about the little things

I want to take up a topic that probably not many other bloggers have dealt with – dog poo. Why is this an issue for an economist environmentalist you might ask? Because today I was chastised for letting the dog poo in the park, and it got me thinking about the inconsistency in many of our actions.

Now, I try and clean up after the dog when we walk – it seems ridiculous to leave dog poo on the footpath where it is likely to be stood on. But he doesn’t like doing his business out in the open, and generally finds a spot in a garden to do it (not a private garden, but I am trying to describe the type of area he likes). If this is the case, I leave it. And, this was the case today.

But it got me thinking about the whole dog poo in a plastic bag philosophy. I know that this type of regulation is trying to avoid poo all over the streets, but I sometimes see how ironic the situation can get. We go to get groceries and are told to refuse a bag, and then told in the next breath to get a bag for the dogs poo, which will then be trucked to some far away landfill, to wait thousands of years for the plastic bag to breakdown and be back on it’s way back through the ecosystem. And at the same time all of this is happening, we truck in poo from other animals of choice to put on the garden to help the plants grow. So after all of this, I get the feeling that no bag is a more logical choice.

Those who are very familiar with this blog would know that neither the use of poo bags, or not, will have an effect on the consumption of oil (of which the plastic is made). But is seems like an odd thing to keep people employed in the poo shipping business when a simpler alternative is available.

One further little thing I got thinking about is whether animal excrement is even a form of pollution. In some cases, we see ibis poo all over the ground and it bothers some people – the ibis are polluting our cities. But what about the poo of every other animal alive! What about koala poo? Surely koalas can’t be the perpetrators of pollution! Or would they be of they we nearby to our homes? We want nature close by, as long as it keeps to itself and we interact with it on our terms only.

Well, that’s just a small issue I’ve been thinking about today. Does anyone else think that animals can pollute? Thoughts on the poo bag conundrum?

Free will and determinism

A mighty debate has emerged in the corridors of Z block, where I have an office at QUT. As you might expect, I was the instigator of this debate. It all started innocently enough, when I proposed that we examine an article that suggests people do not know their own tastes and preferences (you can find a version of it here http://www.bos.frb.org/economic/wp/wp2005/wp0510.pdf).
If we do no know whether something is good or bad, and simply use our immediate environment for clues, where does our free will fit in? And does the concept even exist?

It is a hard thing to question the idea of free will, and that is probably because there is no agreement on a specific definition. I will try and narrow this down. The definition must certainly cover the notion that each individual is responsible for their own actions, as they are an expression of their free will. This enables us to differentiate actions as the result of personal will as opposed to the will of others. It must also entail the idea of choice. That the actions we choose to take were not set, and that we faced opportunities to exercise our free will to determine which choice to make. Free will must therefore be a necessary precondition for any personal responsibility.

My debate in the corridors started because I suggested that of course free will cannot exist, because free will itself must have a cause. An idea cannot come from nowhere. And if it could, why do we pursue scientific endeavour? If one thing can come from nowhere, what is to stop many other physical occurrences coming from nowhere? This lead nicely into the idea of determinism, which put simply, says that every cause has a cause. So if free will causes my actions, then something must cause my free will. In the article we examined, this free will was caused by the suggestions of the author during his experiments.

I might take this a step further. Recent experiments have shown that decisions that might have previously bee regarded as free will, can be predicted up to 10 seconds before they are made by scanning unconscious brain activity (see http://www.physorg.com/news127395619.html). So in that period between the prediction of the choice, does the participant have free will to change their decision? I suggest not. If you have seen any of Derren Brown shows, this type of control by the subconscious seems all powerful (you can read about him here http://www.derrenbrown.co.uk/ or check youtube for some interesting videos).

So if our decisions are caused by subconscious environmental cues, and are made before we even know it, where does this leave free will and personal responsibility? How can we convict a criminal for his actions when they are determined solely by his environment (and genes of course)? To turn this conundrum around, how would we convict an alternative criminal whose free will appears from nowhere? His defence would be that my free will just appeared in my brain and made me do it – it was beyond my control. So some level of causality is required, although my brain gets tired thinking about these issues. (maybe have a read of http://plato.stanford.edu/entries/freewill/)

These are some interesting issues, and point to the heart of scientific endeavour and our understanding of humanity. What are your thoughts? How would you define free will? And do you believe every cause has a cause?

Externalities v irrationality

I would like raise an issue that has been rattling around my mind for many years now. After spending time travelling to various countries around the world, trends regarding the attitude of countries to personal and community responsibility have begun to emerge. For example, in Canada ski resorts bomb for avalanches outside the skiable terrain and search these off-piste areas at the end of each day. In Austria, unless there is a danger of avalanche on-piste it is every man for himself in other areas. You find similar things around the cities. In Vancouver I noticed people cross the street wherever and whenever suits. In Brisbane you get fined for jaywalking. I’m sure you can think of many other ways that some governments choose to protect individuals from themselves, but fail to protect individuals from the actions of others.

An economist would take the stance that role of government is to protect property rights, and in particular, to rectify the externalities that occur when one persons actions incur costs on another. In all other ways, individuals should be able to rationally choose for themselves the amount of risk they are willing to take. Let’s take Australian smoking regulations as an example. The first point of call for governments was to protect individuals from themselves by requiring warning labels on packaging. It was not until very recently that governments stepped in to protect non-smokers from smokers in many public buildings with indoor smoking laws.

Another example is the regulation of bicycle helmets (which is unique to Australia). Governments seem so keen to protect cyclists from themselves but fail to provide any road space for cyclists, nor training of the appropriate treatment of cyclist by drivers in the licence test, to protect them from the actions of others (or maybe that’s why we need helmets).

While I’m on to the cycling thing, I also seem to choke all the way to work each day from the exhaust of the motoring public. Pollution of this nature is the classic example of an externality in economics. It’s great that I have a helmet to protect me from falling, but the actions of others are costing me my lungs! Fair enough, I drive too, but since I bear a cost from ‘road pollution’ I would be happy to bear the cost of strict pollution regulation. Remember, I should be able to act in any way I choose as long as it does not impose costs on others. I have no right drive if that is the case.

I know some of you are thinking that the helmet laws and smoking laws are there to save the community incurring the health care costs, but you'll see from my health care post that such preventative actions lead to increased rather than decreased health care costs. The main message here is that root of these issues on the accepted scope of the legal term ‘duty of care’. In some countries, the government is seen to have an overly tight duty of care to the public, while in others there is much more personal duty of care.

So what is the reason for such frustrations? Simply, it offends me that an adult member of society cannot take responsibility for their own actions, while at the same time is in a position of bearing the costs of the actions of others. Also, it worries me that we are breeding a society that bears no personal responsibility, and has legal recourse to blame others. We laugh sometimes at the outcomes of court cases in the US, but don’t think we are immune from such stupidity. Imagine a society where I could governments take responsibility for individual stupidity. Where would it end? I agree that governments should make an effort to create a safe society, but they should not take responsibility away from the individual. They should protect us from others and let us take the consequences of our own actions.

Any thoughts, or interesting examples that I have missed?

An effective approach to environmental issues

Those regular readers (Dan I’m thinking of you here) might get the impression I think we should do nothing for the environment, since ‘the system’ will just take over and our actions will be rendered either useless, or at worse, counterproductive. But there are some things I believe are effective, and should be doing now.

For starters, my previous blogs have made clear that without physical constraints resource consumption will continue at the maximum pace allowable by current technology. My ‘solution’ is to apply artificial physical constraints in some way before the true limits of the national or global resources are reached. The effect of such limits will be identical to when true physical limits will be reached – resource prices will rise and labour productivity will wane unless technology proceeds at a pace that more than offsets these price rises. I would expect that a general drop in production, which would appear as an economic recession, but I would also expect changing preferences of society resulting in new consumption habits, and also technology change to ease this burden on the well-being of society. This approach is an example of total supply side constraint, which is the only truly effective way to reduce resource consumption. Demand side constraints we have already seen to be next to useless in decreasing resource consumption (and associated land disturbance, pollution and other environmental woes).

This artificial limit could simply be achieved through traditional conservation – which means ‘fencing off’ some land areas we agree are untouchable. These areas will continue to provide society with those ecosystem services we take for granted but generally overlook since they fall outside the scope of any formal institution. Filtration of air and purification of water through the water cycle does not fall within national borders, nor is ownership of these services likely to exist, but they do have tremendous value to humanity. We should ensure a minimum level of supply of these services to society by taking some land out of the formal economic system, to be designated to the informal supply of ecological services.

In my version of this ‘solution’ (The inverted comma’s are to show that the solution is not without it’s own problems. The social unrest when incomes are going down and resource rich land is lying untouched nearby is one of them) it is not simply a matter of taking some land already untouched an saying this now protected, which has traditionally been the approach with national parks. I would suggest a more integrated approach that at it’s core rests on planning controls. Such controls can govern the extend to which land in employed within existing developed areas, and can actually be used to force rejuvenation of ecologically important areas such as wetlands.

This approach I believe will build robustness into our society in the face of future environmental problems. It will ensure that even if our formal economy suffers as a result resource scarcity, that the quality of life of the people will remain high due to continued supply of a high quality environment. Further, it will ensure space is available for future agricultural opportunities in a world of a new climate.

Even if the economic optimists are right, and resource shortages never pose a serious problem, implementing this type of approach still benefits society greatly by improving environmental conditions at home. And of course in the remaining economic realm of the land, our formal economy can function as it pleases with very little controls.

What do you think of this approach?

Recycling part 2

It appears that a little clarification of the effect of recycling is required. First, consumption of the raw resource MAY decrease – but consumption of other resources is likely to increase. This is probably the most important point in the recycling discussion. We can target a particular resource to recycle for what ever reason (it better be a good one), but this necessarily involves the sacrifice of an increased consumption of other resources.

Now to the issues raised by my lovely friends.

The first interesting point raised (thanks Angie) is that we are not recycling goods themselves, simply the packaging or vessel that delivers the good. How can these two things be separated in a physical sense? Without the vessel, the newspaper to deliver the news, or the bottle to deliver the drink, there is no news or drink – since we cannot consume these things without their complementary packaging. Even with the Internet, consuming news requires computing power and a global communications network for the delivery. You can take this to the extreme – cars deliver travel, computers deliver communications and entertainment, food delivers nutrition, clothes deliver warmth and so on. Quite simply, the physical goods we consume to deliver these human desires are the ‘best’ ways we can do it. This type of logic is an extension of Becker’s theory of the household, developed in the 1970’s to explain the way we organise ourselves to maximise the services that generate satisfaction rather than goods themselves (by the way, he won a Nobel prize for his work, and if you want to read some more about it start here).

Moving on.

The graph below shows world aluminium production since 1976, including primary and recycled aluminium, and confirms many of the key principles I espouse. To begin, it appears that the quantity of recycled aluminium is not the major cause of changes in the quantity of primary aluminium production. The fluctuations in the primary production line (pink) are not correlated at all with the recycled production (yellow) line. If we look at the trend between 1983 and 2000, we see that both the quantity of recycled AND the quantity of primary aluminium production is rising.

But of course, you may like to argue that primary production would have risen faster without recycling – and I would argue that recycling actually enabled primary production to be higher than it otherwise would have been. Because time series evidence of one commodity cannot provide evidence either way, we need to resort to some kind of theoretical argument.

The comment was made (again, thanks Angie) that a new equilibrium quantity of new and recycled materials will emerge – this is definitely true. I am not saying that this new equilibrium quantity of new glass is always higher (but it can be). But this new equilibrium almost always mean the total consumption of both new and recycled material be higher than before, and the price of goods made from these materials will be lower. The aluminium graph supports this stance. Total production is higher (and rising very steeply) but unlike this graph, primary production does not need to continue to rise, and this ‘extra’ material can all be sourced by recycling.

Of course there are limits to recycling as well. Not all of this can be sourced from recycling. Many of the goods made from aluminium have quite long lifetimes (think construction materials, car and bike frames and so on), and will not be available to recycle for many years. Thus if we reach this limit, either new production will begin to increase more rapidly, or substitute resources will be found (with their own associated environmental problems).

One point I have tried to make clear is that resources saved are not spared, but only spared from one use to be employed in others. Unless there is some limit (and a physical one will do) the consumption of raw materials will continue to expand. I will save a thorough exposition for another time, but read ‘Jevons paradox and the myth of resource efficiency improvements’ by Polimeni, Mayumi, Giampietro and Alcott, or ‘Why conservation fails’ by Herbert Inhaber.

Many people find this idea hard to grasp. I would like to step through a couple of thought exercises to get this message across. First think back to the movie ‘The Gods must be crazy’. If you don’t know the one, a glass bottle falls from a plane onto the head (if I remember correctly) of an African tribal man. This bottle is found to be quite useful for starting fire, crushing seeds an many other applications, and causes hilarious disruption to the tribe. But the message here is that by reusing the bottle, it enabled the tribe to be more productive, and consume more nuts, berries, and other resources. Without the bottle, their resource consumption would have been lower than what it is with the bottle!

Alternatively you could think of a subsistence farming family in Cambodia. Imagine they have a large harvest and trade some food from a large can of kerosene for their lamps. When it is all used, instead of throwing away the can, they use it to store water for their trip to the local river. So now, because of this reuse of the can, they need to take less trips for their daily water, and have more time to work the land, thus enabling them to produce more, have more surplus, and trade for more kerosene – and the cycle goes on. It is our very innovative and productive uses for materials that cause as increase in consumption of them.

Another comment on the previous post is that a reduction in costs from recycling will not necessarily result in a reduced price of goods, but may be taken as profit. But what then will happen with the profits – they will inevitably be spent on some kind of consumption. This is the rebound effect, and it the reason I believe that recycling will generally lead to increased consumption of other resources. For example, even if recycling resulted in a reduced consumption of a single material/resource, because as a society we are not spending less on that material, we will be spend more on others.

Another thought experiment is probably helpful. Think of two households. One household sees kids in the other household using brand new paper for colouring, and offers some used (on one side) paper for the kids thinking that it will ‘save’ paper. The trade/gift takes place. Now the kids are colouring the back of old tax returns (or something). But has this decreased consumption of paper, or resources as a whole? Each household has the same income as ever, and therefore the ability to consume goods. The money saved by using old paper for the kids colouring is simply going to be spent elsewhere. Not necessarily on paper of course, but on some resource – maybe fuel for the car for a trip to the coast?

This type of flow on effect is why I believe the message that recycling cannot reduce resource consumption in total is so important. When one resource becomes very expensive as natural limits are reached, it stimulates substitution of that resource with another. When many of these limits are reached, total production may begin to fall unless we can use the limited quantity of inputs more efficiently. But if recycling encourages more resource consumption in total, we are simply accelerating our approach to these limits.

What about a ban on recycling then? Would this be more effective? It would drive up the prices of some raw materials, subsequently driving up the price of final consumer goods, which means we would consume less of them. But of course this price rise would encourage substitution towards other cheaper materials. If we banned glass recycling, for example, we might see more plastic bottles and cans.

Maybe we should not get too carried away with our passionate environmental stance until we get to the bottom of things.

Recycling not such a great solution

It would be hard to find an environmentalist who does not see recycling as a way to reduce resource consumption, and subsequently improve our natural environment. But there is no clear evidence that the emergence of recycling has reduced resource consumption. In fact, there is a solid theoretical argument that recycling has limited impacts on decreasing consumption of the targeted resource, and is likely to increase consumption of other resources. This alone should not be controversial to economists, but the real question is why we continue to perpetuate the myth. Let’s start digging to the bottom of this mystery.

I’m not really sure how to explain this succinctly, but I will give it a go. It is best to have in mind throughout this explanation a particular material – think glass, paper or aluminium. There are two cases to consider – one in which recycling is subsidised by the government, and one where it begins via market forces.

Imagine that the glass industry realises that it is cheaper to source glass through recycling then from sand mining. If recycling was not an option, glass would be more expensive than what recycling enables it to be. Because glass is cheaper due to recycling, it enables the industry to produce glass products more cheaply, creating a higher demand for these products. Of course, glass is rarely a final product itself, and thinking of bottles here, cheaper glass and products will require more caps, labels, cartons and shipping. Furthermore, because of the access to recycled glass has decreased demand for new glass, the price of new glass may fall, encouraging greater consumption. In all, recycling can reduce the consumption of new resources by a much smaller amount than first thought, and can increase consumption of other resources. In fact Valerie Thomas, in the Journal of Industrial Ecology, shows that second hand goods (the equivalent of recycling) can actually increase the consumption of those goods with large second hand markets.

The second type of recycling, the subsidised variety has similar results. It artificially makes recycled materials cheaper and therefore makes the goods made from both recycled and new materials cheaper – again increasing demand for the resource in question, as well as complementary resources.

So why then, if recycling can at best result is a minor reduction in resource consumption and an increase in consumption of other resources, and at worst result in an increase in consumption of the resource in question as well as others, do we persist in advocating it as an environmental cure all?

I would suggest the reason is simply that environmentalist do not know any better. Also, if you acknowledge that recycling is not effective it leaves very few options remaining that do not involve radical social upheaval. Governments must surely know about the ineffectiveness of recycling, but perpetuate the myth as a way of appearing active on the environmental front.

The most important point to take from this is that recycling may very well be counterproductive. Shouldn’t we at least know if what we are doing is helping or harming the environment?

Is it enough that it just is?

I have always been inquisitive - the one who asks the question ‘but why?’ more times than could be answered to any satisfaction. More recently, my concern for the precarious state of our natural environment lead me to associate with many other concerned individuals and organisations. They all promoted an agenda to suit their specific problem – the old growth forests, the wild rivers, oil depletion, climate change – but forgot to first ask the question ‘but why?’ Many of the so-called solutions were ill conceived and down right counter-productive. So began my search for the root cause of environmental problems as a means to discovering the real potential environmental remedies.

Along the way there were many stumbling blocks, probably the main one being the acceptance of the difference between normative and positive analysis. What most of us see in our daily lives is normative, that is, we seek to tread a path to what should be. Positive analysis on the other hand simply describes the way things are, without prescribing the value judgment necessary to determine the ‘should be’ of normative analysis. It appeared that almost all environmentalists had their own independent versions of what ‘should be’ without first understanding ‘what is’, and therefore where subject to classic mistakes of logic.

The shear impossibility of the task of determining the ‘should be’ on a societal level lead me to a more positivist arena, where through scientific rigour, causal links in the real world could be investigated (for those interested look into Arrow's impossibility theorem).

At this point I have reached an ideological standoff. Quite simply I now believe that ‘what is’ is always exactly what ‘should be’. A Darwinian view proclaims that all causes themselves have a cause, and as such, there is a reason for the present state of the universe. But reason or cause does not imply purpose, which is truly the issue at hand. In the environmental scenarios I have witnessed, the question of purpose is never contested, and often is never even given. ‘Save the old growth forests’ is printed in a banner in my neighbourhood, but I must ask why? At the risk of getting off track, I will follow the logic of a ‘why’ inquiry into the subject of old growth forests.

“Why do you want to save the old growth forests?”
“Because they are a habitat for wild species, they are rare, and they are beautiful”

“Why do you want to save wild species, and why are these things beautiful?”
“Because they are part of the natural ecosystem”

“Why do we need to save the ecosystem?”
“Because it supports life in Earth”

“Why do we want life on Earth?”
“Because….”

And so on.

To truly ask why, you must dig until you reach a point of sum ultimate point, which is – what is the purpose of anything? And now I have come to the realisation that rather than invent some purpose for which I will believe the universe exists, I will accept that there is no point, that it just is. Unless you specify what you believe the ultimate purpose of existence may be, then you cannot advance the opinion that one thing is good, while another is bad.

To bring this discussion back into line with the environmental theme presented earlier, I would say to those in the environmental community to please ask themselves the ‘why’ question. Unless they can clearly express the ultimate purpose of the universe, then they cannot simply announce to the world that what they believe is good, and what others are doing is bad. Also, since it is impossible to determine the preferences of society as a whole, we are still left without a social benchmark upon which to measure whether the progress we make as a society is a step in the right, or the wrong direction.

For those who feel like this is all a bit bleak, that there is no purpose to the universe, be assured that this does not imply you cannot strive towards some purpose in your own lives. By accepting the universe as is, you can have the freedom to determine you own purpose. But if my view is too simple, dull and downright pessimistic I would advise you to take heart that just because there is no purpose to it, does not make the world any less an intriguing, complex and glorious place than it was. To quote Richard Dawkins – “science is the poetry of nature”, although it only seeks to explain ‘what is’ does not make it any less wonderful.