Thursday, 1 September 2016

Is This Going To Turn Out To Be One Of Humanity's Costliest Mistakes?

After yesterday's blog on the issue of state-subsidised green expenditure, a friend commented that he thought the end result will still be a benefit for society as a whole - if you like, the State doing something on our behalf that we wouldn’t volitionally choose, but that's beneficial for us in the long term.

There are several issues with this line of thinking - the first being that there are opportunity costs that don't get factored in to the equation (which we've covered before on this blog), and the second is that it is hard to justify much of the State-mandated expenditure that weaves and entangles itself into the fabric of society's revealed preferences.

This is particularly pertinent, given that there is going to be a diminishing marginal rate of substitution, and that if you want to play the long game (quite rightly, usually) you have to also factor in the trade off between capabilities now and future capabilities, which probably amounts to a transfer of resources from less well off to more well off people, not just in terms of money, but in terms of living standards, greener technology and the concomitant environmental improvements.

As various examples of countries becoming more prosperous show, when there is industrial progression there begins an increase in pollution and environmental degradation until after a point it levels out, and then subsequently increased ability to be more environmentally mindful plays out. This is called the environmental Kuznets curve.

To put it another way, when countries become more prosperous they pollute more, but then increased scientific and technological potential enables them to cut down on their environmental externalities. Take Bob. Bob lives in London in the early part of the 19th century, and grows up as the industrial revolution is taking shape. He sees an industry dominated by coal, oil and gas, and a capital city full of smog and dirt.

If you put Bob in a time machine and showed him modern day London he'd be astounded at how comparably clean and unpolluted it is, and the ease with which he can breathe in air and drink clean water. Once he's got over that surprise, he'd be stunned that there weren't dozens of people dying of diseases on every street corner.

As well as markets making us greener anyway (as I explain in this blog post), when you look at relatively smog-free places like London, New York, Seoul, Berlin, Madrid, Rome and Paris, and compare them to comparably worse cities in places like China and India, there is no reason not to believe that the richer countries' major cities are simply on are on a more environmentally friendly side of the Kuznets curve at present, and that the poorer major countries are not there yet (point of note: despite huge growth, overall China and India are still poor countries).

Moreover, you only need to look into the world of nanotechnology and shape-shifting and see what scientists are already on the verge of doing to realise just how lacking in forward thinking this whole Green movement actually is. The solar revolution will transform our energy usage in ways that will make gas and oil all-but redundant, and through the ability to genetically modify plants and trees in astonishing execution times, trees will be able to mature on previously infertile land in a matter of a few years.

Lab-grown meats and vegetables will revolutionise the food industry as we wean ourselves off much of our factory farming, and the machine industry will be revolutionised as we wean ourselves off fossil fuel dependency. All the domestic issues that preoccupy the greens are on their way to being things of the past thanks to science and technology.

Another kind of grandfather paradox
You know those people who bemoan our selfish consumption of natural resources now instead of preserving it for our grandchildren a couple of generations down the line. I wonder if they've ever stopped to consider what should be a very obvious flaw in their assumption - that such an argument can, of course, apply to those grandchildren as well. If they consume those natural resources won't they be selfishly failing to preserve it for their grandchildren? And if they consume it won't those grandchildren be failing to preserve it for their own grandchildren a couple of further generations down the line?

It's obvious that this question can go on ad infinitum, because when it comes to any of the world's limited resources, every bit of consumption at any point in time is consumption that someone born either in the wrong place or the wrong time cannot have. If preservation and sustainability were the only goals then this would lead to the absurd conclusion that no one should be consuming any present day resources because they would always be robbing somebody else of it.

Even if we ignore the fact that future generations will be richer and more prosperous than us (a fact we shouldn't actually ignore because it is one of the most important considerations in discussions like this) most resources of value are best consumed at a time which maximises the optimal market value of those resources. Consuming coal, paper or oil at a time when those resources are most beneficial to humans is obviously far wiser than consuming them at a time when they are no longer of much use to us.

And what about pollution?
Pollution is one of those things that always appears in green articles as being bad. It should be obvious that this kind of narrative is both presumptuous and silly. Take a factory that emits sulfer oxides in the air. Obviously sulfe oxide emissions affect the pollution levels, but that's not the same as saying that they are bad. Technically breathing pollutes the environment, but no one sensible suggests we should stop breathing.

If a factory is turning a profit, it is creating value in society (because consumers prefer spending on the products to keeping their money), so the right question to ask is whether the pollution the factory emits has costs that outweigh the benefits of the consumer surplus the factory affords to society in total production (not to mention the jobs it creates too) or whether the benefits of the factory outweigh the cost of the pollution.

How can we tell which it is? Well, if the negative spillover effects of the pollution are less than the cost of preventing it, the pollution produces more gains than losses. If the negative spillover effects of the pollution are more than the cost of preventing it, the pollution should be dealt with. The point is, sometimes pollution confers net gains on society - actually, my instinct is it usually does. So not only is it the case that a 'pollution is always bad and needs eradicating' narrative is presumptuous and silly, I'm afraid there are many people who don't even think to consider to ask about costs and benefits at all.

It's one level of foolishness to get the cost-benefit analysis wrong and come out on the side of discontinuing some pollution that is conferring net benefits on society. It's quite another to not even acknowledge the need for a cost-benefit analysis at all. What's worrying is that such people, the Greens and people voting for them, make up a fairly significant proportion of our young students, if the voting polls are anything to go by.

The final big issue
The most serious difficulty with the green phenomena though is that for the most part it is going to be looked upon by future generations as being an intellectual solecism of short-sightedness on our human journey, because all the energy, time, and financial resources that went in to it will go on to have been largely unnecessary alongside the much more efficient and empirically relevant scientific progression humans are making and will continue to make.

At the end of the day it is going to be something else that sees us through the climate change issues, and it's not the ever-expanding business that's largely dependent on junk economics, government levies and crony capitalist special interest groups that are going to provide the antidotes.

Lest we forget as well that the numbers are not exactly chicken feed: the climate change industry is apparently worth over $1.5 trillion. That's $4 billion a day spent on things like carbon trading, carbon consulting, carbon sequestration, biofuels and wind turbines on a problem that's going to turn out to have been hardly a problem at all.

It's an industry about the same size as the world's entire online shopping industry, but the big difference between the online shopping industry and the climate change industry is that in the case of the former the money you spend is on precisely the goods and services you want - whereas in the case of the latter you get involuntary expenses priced into your Pigouvian taxes, your energy and fuel bills, the government subsidies and the department expenditure in the shape of environment, minerals and waste teams present in every local council.

On top of that you get a multitude of recycling bins, environmentalist consultation, PR companies, and all the pseudo-philosophical outpourings from the likes of George Monbiot, Naomi Klein, Elizabeth Kolbert, Al Gore, Noam Chomsky and Al Franken who gather in their trail an army of activist acolytes burning banknotes outside HSBC and erecting their tents outside St Paul's cathedral, with thousands of others now joining them in spreading falsehoods like "capitalism is ruining the planet" and "we are all doomed if we don't stop it".

Although the climate change agenda is not without traces of good - when taken as a whole it is almost certainly going to end up being one of the costliest mistakes human beings ever became embroiled in.

None of the great human qualities and ideas - language, art, literature, morality, religion, philosophy - explain the progression-explosion from successful survival machines to thriving humans with the advancements of today. What caused the upward surge at the end of the hockey stick was the increased ability to trade, to mass populate, all of which underpinned by our ability to mass communicate - to share ideas, knowledge and innovations in trial and error fashion. It was the evolutionary equivalent of the recombination of genes that occurs in sex, where natural selection favours survivability.

It seems a nigh-on certainty to me that solar energy is the future. In recent years the price of solar power has dropped significantly, as the cost of manufacturing, the cost of installation and the electricity prices derived from it have become cheaper. The solar costs for consumers will soon be more affordable than costs derived from fossil fuels.

Not only is solar going to be the most prominent of all our energy sources - but given that the sun has enough provision to drive our Solar System for another 5 billion years, I can conceive of a time when the vast majority of our energy resources will be derived from photovoltaic cells converted into electricity. By far the country with the most prodigiously profitable solar industry is going to be China, probably followed by Japan and the United States, plus as the technology becomes more sophisticated and marketable it will spread more prominently throughout the globe

Just about any problem the world faces - climate change, war, illness, famine, terrorism, poverty, dictatorship, maybe even most crime and political malfeasance - can be eliminated or diminished by the continual trial and error of idea-sharing.