I Want Sustainability (which is why I support free markets)

by Don Boudreaux on April 26, 2011

in Complexity & Emergence, Curious Task, Environment, Myths and Fallacies

I recall hearing Bill Clinton, I believe during the 1992 presidential campaign, promise to rein in “wasteful spending.”  Of course.  Everyone – even the most glossy-eyed Keynesian-socialist-welfare-statist ‘Progressive’ – wants to rein in spending that is wasteful.

Politicians (of all parties and persuasions), pundits, ordinary men and women in their everyday conversations, slip too easily into platitudes and into the habit of using words that smuggle in conclusions wrapped in blankets of presumptions.  As a result, conversation is made more difficult.

No word currently in vogue among Very Smart and Oh-So-Concerned People smuggles in more mistaken presumptions wrapped in a sentiment that no one in his or her right mind can disagree with than “sustainability.”

Who wants the earth and the economy to be on an unsustainable path?  A few sociopaths, perhaps.  But only a few.

David Friedman has been having some good and educational fun with “sustainability” advocates, as EconLog’s David Henderson highlights.  Check out also these links to several useful exposés of the ‘sustainability’ confusion.

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{ 37 comments }

Kurlos April 26, 2011 at 9:57 am

And don’t forget “Smart” growth. Anyone oppose being “smart”? (Perhaps those of us against apartheid growth boundaries, but nevermind.)

http://www.nationalcenter.org/NewSegregation.pdf

Ryan Vann April 26, 2011 at 10:17 am

What about diversity? In fact, I think your viscious attack against sustainability is inherently racists and an affront to the divinity of diversity; how do you live with yourself?

muirgeo April 26, 2011 at 10:20 am

I think it’s a good point. Free markets are very inefficient. If we had efficient markets with greater shared prosperity sustainability would quickly become an issue.

Randy April 26, 2011 at 11:03 am

Free markets are extremely efficient – and extremely effective. They just don’t work to satisfy your every whim. Guess it sucks to be you.

Sam Grove April 26, 2011 at 11:25 am

I advise anyone to refrain from diving into muirgeo’s intellectual pool; a broken neck is almost a certain result.

Martin Brock April 26, 2011 at 12:50 pm

Muirgeo is smarter than a thousand entrepreneurs competing to add value to resources in a capital market. After all, half or more of the entrepreneurs ultimately do not attract enough free consumers in the marketplace, so their entrepreneurial ventures fail, and their employment of the resources was wasteful.

If Muirgeo and his committee of the best and the brightest omnisciently organize all of these resources from their ivory tower in the District of Columbia, we can avoid this problem. Consumers may line up at licensed retailers for whatever’s left of whatever the committee decides to produce. No consumer choice. No entrepreneurial failure. Everyone has a job. Problem solved.

Seth April 26, 2011 at 12:43 pm

It might help other readers if you provided your definition of ‘efficient’.

Ken April 26, 2011 at 1:05 pm

muirgeo,

If you define inefficient as doing more with less and efficient as doing less with more, then markets are incredibly inefficient and bureaucrats are incredibly efficient.

However, if you understand english and are honest about what words mean, then of course markets are very efficient and bureaucrats are very inefficient.

“If we had efficient markets with greater shared prosperity sustainability would quickly become an issue.”

I guess that whole living longer, getting better health care, eating more, living in better housing really isn’t shared is it? I mean today’s homeless only receive better medical treatment that the president of just 50 years ago.

Most houses have AC, lights, a washer and drier, a TV, a microwave, stove, a refrigerator, phone, etc. Almost everyone owns a computer of some sort, which the market made sure costs thousands of times less today than just thirty years ago. Anyone who can come up with a couple hundred dollars can travel from LA to New York in a few hours.

Not sure how you can imply prosperity isn’t shared due to efficient markets. It’s like you don’t know what you’re talking about.

Regards,
Ken

Shangwen April 26, 2011 at 11:21 am

The inefficiency of any public spending is directly proportional to its popularity and resistance to elimination. There are many special constituencies out keeping their hands warm before a nice, slow fire of taxpayer money.

Sam Grove April 26, 2011 at 11:24 am

Political discourse requires the occasional upwelling of appealing platitudes to cover the reality that what government is doing is the opposite, thus when politicians steer the nation into unsustainable paths, the signpost must say “sustainable path”.

This is why it is safer to assume that politicians are engaging in rhetorical fraud than to give them the benefit of the doubt.

Oh, yeah, YASAFI earns it again.

JohnK April 26, 2011 at 11:41 am

Will someone pass the inorganic vegetables please?

Martin Brock April 26, 2011 at 12:09 pm

… sustainability requires us to keep population growth up …

A shrinking population is not unsustainable, unless it shrinks all the way to zero. If every human being chooses not to procreate, I don’t have a problem with it myself, but voluntary human extinction hardly seems likely anytime soon.

An aging and then shrinking population does pose “economic problems”, by which I mean political and financial problems. Many financing patterns essentially assume a growing population. At least, the patterns assume productivity growing faster than population shrinks. The Social Security system, with its “trust fund”, is an obvious example of this pattern, but it’s hardly the only example.

Since the assumption likely is false in this century, economists will be reconsidering it earnestly soon. Hopefully, nominal “libertarians” will be on the right side of this reconsideration. If we’re only cheerleaders for established propriety entitling oldsters to many rents imposed on the young, including but certainly not limited to the Social Security system, we’re on the wrong side of history, and history will overwhelm us, as it should.

In other words, we must be true libertarians rather than proprietarians. If we aren’t, I’m not one of us, and I’ll drop the “libertarian” label in favor of “mutualism” or something else.

Property is theft, and property is freedom. It took me a while to reconcile the apparent contradictions in these two Proudhonian statements, but I eventually succeeded. Some things, like Treasury securities, that we call “property” are theft. Other things we call “property” promote individual liberty, like an individual’s forcible right to the fruits of his own labor. These two things obviously conflict, but we commonly use the same word for both. Ideological libertarians should lead a trend away from this contradictory usage.

Ryan Vann April 26, 2011 at 1:59 pm

As a youngster, I appreciate the tone of this post. Unfortunately, I believe too many of my peers have been brainwashed into believing there is some virtue in being conned, and won’t acknowledge the history that precipitated the future. At which point, we will just try to extract rents from the young.

Good insight on Proudhon, by the way; I’ll have to revisit him with that perspective in mind.

Ken April 26, 2011 at 12:40 pm

Seems to me (on the surface, anyway) that sound money would promote sustainability. Productivity-induced deflation should tend to reward prudent consumption rather than driving consumption willy-nilly, as the inflation tax tends to do.

Martin Brock April 26, 2011 at 1:03 pm

Productivity growth does not imply deflation in a free monetary system. In a free system, producers would not choose to borrow an appreciating currency. Assuming an appreciating currency as productivity grows simply assumes that producers have no other choice of a currency.

Essentially, this assumption presumes a rentier’s culture, in which most capital is owned by a small class of people and little is for sale outside of this class, because owners are always more interested in renting or in selling within the class.

The “capital market” characterizing a rentier’s culture is not free. It is the antithesis of a free market. The classical liberals understood this fact, because they were historically closer to feudalism than we are. When we forget the fact, we cease to be classical liberals (libertarians) and revert to the classical conservatives (proprietarians) that the classical liberals opposed.

Ken April 26, 2011 at 1:46 pm

To the extent that I understand you*, it appears you’re talking about competing private currencies. No argument there, but a precondition of competing private currencies, human nature being what it is, is a stateless society, isn’t it? (No particular problem with that notion, either, though it won’t come overnight.)

I mainly figured with my comment to tweak the “sustainatarians,” and maybe learn something while I was at it.

*I confess I have not (yet) much studied monetary issues, beyond figuring out the obvious: fiat money always ends up where it’s about to end up again.

Martin Brock April 26, 2011 at 3:16 pm

States (including the United States) have tolerated competing currencies in the past, and private currencies already exist in the U.S., though none has taken off very much. Liberty Dollar is only one example. The Feds didn’t stop the LD because it’s a private currency. They stopped it because it claimed parity with Federal Reserve Notes. The charge was counterfeiting.

There is no law against competing currencies. Several exist in the U.S., including some sponsored by municipal governments. A state government may not make any of these currencies a legal tender, but that’s not a problem. I don’t want anything made a legal tender.

Ryan Vann April 26, 2011 at 2:08 pm

“In a free system, producers would not choose to borrow an appreciating currency”

How do you figure? This seems a tenous assertion at best, and I see it a lot in Economics. Who doesn’t want to make returns nominated in a currency which would have appreciated?

Sam Grove April 26, 2011 at 2:48 pm

Borrowers prefer an inflating currency as the cost of the loan is thereby reduced.

Ryan Vann April 26, 2011 at 3:16 pm

That is a compelling argument for a consumer, but not for a producer. Producers make decision based on projected expected returns. The rate of appreciation essentially means higher returns, cancellign out the increased cost of borrowing.

vikingvista April 28, 2011 at 1:02 am

An inflating currency doesn’t help the borrower or the lender. If inflation were predictable, then it would be perfectly accounted for in the loan. But inflation instead just adds another level of uncertainty. That means the lender must charge higher interest, not just to cover for inflation, but to cover for the uncertainty. That also means the lender’s risk is higher, and his customer base is lower.

The ONLY ones who consistently benefit from inflation, are the counterfeiters and those they buy from.

Martin Brock April 26, 2011 at 3:07 pm

You might choose to lend an appreciating currency, but I wouldn’t choose to borrow it from you. You’d like to receive more valuable units of currency than you lent, but I wouldn’t like to return more valuable units, so if I have a choice, the transaction doesn’t occur. The question is: why wouldn’t I have a choice?

Proudhon pondered this question, and he tried to create a currency linked to labor rather than gold, because labor is not so easily concentrated among a few statutory authorities. He failed at least in part because of state interference, but he possibly failed most because the necessary accounting challenged his technological means.

The system that Proudhon imagined is very possible today, and with some marginalist refinements, it also seems very practical.

Ryan Vann April 26, 2011 at 3:17 pm

If I thought I could turn that borrowed money into future (appreciated) income streams, I would defintiely borrow it. Why is this so difficult to grasp?

Martin Brock April 26, 2011 at 3:23 pm

I would borrow an appreciating currency if I could exchange it for valuable capital, if my return on the capital exceeded my cost of borrowing, given no other alternative.

But why would I have no alternative? Why could I not borrow another currency that doesn’t appreciate and exchange this other currency for valuable capital?

vikingvista April 28, 2011 at 1:05 am

“Why is this so difficult to grasp?”

It isn’t. And you are right. Arbitrage isn’t the end of borrowing in any currency. Prices adjust, and predicable appreciations and depreciations are accounted for.

Dan Moore April 26, 2011 at 12:52 pm

Don,

All that waste, improper medicare payments, fraud, theft, abuse, and whatnot, has the same multiplier effect as all other govenment spending. Why wouldn’t it? (The multiplier’s drivin’ higher the economy’s health!) I’m afriad the recovery is in much to fragile a state to start reigning in waste; now is just not the right time. To suggest otherwise is dangerous and reckless. You just don’t care about all of those who have lost their jobs, do you?

Dan

Ryan Vann April 26, 2011 at 2:10 pm

You forgot to mention that the multiplier is estimated at at least 2.

muirgeo April 26, 2011 at 4:06 pm

True free markets are SO effecient that they exsist NO WHERE in the real world.

Once one gets this truth into there consciousness then the discussion becomes the mature real world reality based adult discussion of how to design and plan and arrange society so that it’s markets and OTHER aspects effeciently provide the needs of the people in that society.

DaveyNC April 26, 2011 at 5:42 pm

I wonder, where might I find a free market? Well, you are using a computer when you write here, aren’t you? No government regulated that into existence nor decided who would get one and who wouldn’t nor were tax breaks created in order for the personal computer to gain widespread acceptance.

Once the market for personal computers was established 30+ years ago, market forces kicked in in a massive way. First desktops, then more powerful desktops; portable computers then laptops then netbooks then tablets and we now carry in our shirt pockets (love my Android phone!) more computing power than existed in the entire world 50 years ago and it costs just a few hundred dollars and doesn’t have to be housed in a building.

If that is not an efficient market, I don’t know what is. Unleash those forces on health care, energy, sustainability and any other area that you can think of and we will gain benefits far faster than any centrally-planned, patronage-riddled system that you can come up with. They may not be the benefits that you, in your enlightenment, would grant to us, but we would undoubtedly be better off.

Sam Grove April 26, 2011 at 7:02 pm

Your vision is so constrained. Who killed it?

People interfere with free markets because they are meritocratic, and many people don’t want fair, they want advantage.

JohnK April 26, 2011 at 7:27 pm

“True free markets are SO effecient that they exsist NO WHERE in the real world.”

That is correct.

Free markets reward efficiency.

They reward efficiency so well that those who are inefficient (like yourself) do not reap the same rewards.

Since the efficient are vastly outnumbered by the likes of you, idiots like yourself band together, call yourself government, and then start telling the experts how to do their job.

Because free markets are so efficient, and because there are more idiots than efficient people, truly free markets do not exist because idiots like yourself destroy them out of jealousy and envy.

Stone Glasgow April 26, 2011 at 10:38 pm

Pure free markets don’t really exist, because in order to have peace the nation needs big man with a gun to defend it, and he offers monopolies on the production of goods and services that make those businesses “not-free.”

Martin Brock April 27, 2011 at 10:08 am

No ideal exists in the real world. None of your idealistic designs, plans and arrangements exist in the real world either, but you apply your “realism” argument only to other ideals, so that’s not a problem for you.

vikingvista April 28, 2011 at 1:08 am

“True free markets are SO effecient that they exsist NO WHERE in the real world.”

You could just as well say unfree markets “exsist NO WHERE in the real world.”

There are both free and unfree trades in any large population.

Stone Glasgow April 26, 2011 at 10:42 pm

The green movement uses the language of religious fundamentalism. “Sustainability” is a religion, and this becomes obvious if you have ever read an article about “sustainable organic” farming, and could not help but imagine the words were replaced with “Jewish,” and “kosher.”

Dave April 27, 2011 at 3:45 pm

The podcast was great. Its nice to hear someone giving an eloquent defense against the “Sustainable” movement. These are the types of talks that would go a long way towards improving the public discourse on a topic where people tend to speak from their hearts instead of thinking through issues.

Ryan Vann April 28, 2011 at 2:08 pm

“It isn’t. And you are right. Arbitrage isn’t the end of borrowing in any currency. Prices adjust, and predicable appreciations and depreciations are accounted for.”

Pretty much, so long as the stochastics aren’t completely unpredictable, inflation and deflation aren’t the bogeymen everyone insists on making them.

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