Quotation of the Day…

by Don Boudreaux on September 5, 2015

in Cleaned by Capitalism, Competition, Environment, Growth, Myths and Fallacies, Property Rights, Seen and Unseen

… is from page 184 of Joe Bast’s, P.J. Hill’s, and Richard Rue’s excellent (and still relevant) 1994 book, Eco-Sanity:

The same process that fuels economic growth also fuels reductions in pollution, making the one a natural partner of the other.  This process is the gradual improvement in the efficiency of resource use: getting more use out of fewer resources, causing less pollution-causing waste.

The point is as true as it is straightforward: in private-property markets, profit-seeking business people have strong incentives to use as few inputs as possible in the production of any given amount of outputs.  The reason is that inputs are costs to profit-seeking business people.  The incentives of profit-seeking business people, therefore, prompt them not only to adopt existing means of profitably reducing input use, but also to explore for, and to create, such means.  (And note: the fewer are the government restrictions on entry into industries, the more-intense are the competitive forces at work prompting each firm to constantly be on the lookout for or to create – and to adopt – improved methods of production that use fewer and fewer inputs.)

Many people who are alert to this incentive when the input is labor miss this point when the inputs are raw materials such as water, petroleum, land, and wood.  For these people, the same business person who is hyper-keen to reduce the amounts that he or she spends on labor inputs whenever a profitable opportunity to do so presents itself (say, a newly available opportunity to shift production to an overseas factory in a country with lower-wage workers) is mysteriously uninterested in reducing the amounts that he or she spends on non-labor inputs whenever a profitable opportunity to do so presents itself (say, a newly available opportunity to power his or her factory in a more fuel-efficient manner).


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