China, a country where 4 per cent of the population are still living in poverty (following the rather rigorous definition of the World Bank), is about to spend billions of dollars to enable a few Chinese astronauts a flight to the Moon by 2025. There is hardly a tangible benefit to be found in this project – except some kind of international prestige. Meanwhile, the resources (we are talking here about much more than just money, e.g. time, skills etc.) required for its successful carrying out might well be sensibly invested in development projects that would yield a high social return. China’s Moon project seeems to be a particular variation of the positional goods problem described by Fred Hirsch in 1976 – on the national rather than individual level. And it seems to be even more profound than the difficulty originally identified by Hirsch. Continue reading
In this post I am going to give a summary of the third part of Climate Economics: The State of the Art by Frank Ackerman and Elizabeth Stanton of the Stockholm Environment Institute, concerning recent research in the economics of mitigation and adaptation. Part 1, with a discussion of newest results from the climate science, can be found here. Part 2, summarizing the report’s findings about the economics of climate change, here. Continue reading
In this post I am going to give a summary of the second part of Climate Economics: The State of the Art by Frank Ackerman and Elizabeth Stanton of the Stockholm Environment Institute, which deals with recent advances in the economics of climate change. Part 1, with a discussion of newest results from the climate science, can be found here. A summary of the above report’s overview of research in the economics of mitigation and adaptation will follow. Continue reading
When a typical conventional economist wants to show somebody (e.g., her students) that all the talk about the “alleged impossibility of infinite economic growth” is rubbish, it is very probable that she take the 1972 Club of Rome’s report “Limits to Growth” as her starting point. This modeling work about the limits population and resource scarcity pose to economic growth, done by a group of young PhD’s, made extrapolations of historical trends of population growth and natural resource extraction to conclude that “sustainable” economic growth is not possible and that it is likely to seize during the 21st century due to these constraints. So, the economist’s arguments goes, as you can see, population growth has slowed, we do not seem to run out of natural resources – and, if you look at the widespread Cobb-Douglas production function, you will see that this wouldn’t matter either. Ergo, infinite economic growth is possible, and Meadows et al. (the authors of “Limits to Growth”) are naive doomsayers. However, this line of argumentation is a) “too easy”, and b) wrong. Continue reading
Perhaps the most controversially debated issue in climate negotiation is the question of burden sharing. According to the 1992 UNFCCC, the challenge of tackling anthropogenic climate change requires “common but differentiated responsibilities and respective capabilities”. This by itself is politically and ethically hardly a controversy. But, as always, the devil lies in details. What does this important principle exactly mean? How are we to define “responsibility” and “capability”? And what does follow? Many approaches have been proposed. A fairly appealing one is called the Greenhouse Development Rights and was proposed by Paul Baer, Tom Athanasiou and Sivan Kartha. Continue reading
A frequent demand by NGOs that deal with developing countries’ affairs is that rich countries (i.e., mainly the European Union, the US, Canada and Japan) increase the levels of their ODA (=official development assistance). In fact, developed countries commited (40 years ago) to raise their ODA to a level of 0,7% of their respective GDPs. So far, only a handful met this obligation. Meanwhile, there are many arguing that ODA is doomed to failure, so it is a wastage of time and money to engage in development assistance at all. I think that the problem is rather more complex. It is not just about whether and how much to invest in ODA – the matter is, actually, how we do it. And there are many problematic issues in this area. Continue reading
One of the most important concepts in what came to be called ecological economics is the distinction between “growth” and “development” – a feature absent in mainstream economics. In traditional economic thinking both “growth” (a quantitative measure) and “development” (a qualitative one) are thrown together and merged into “economic growth”, mostly understood as growth in the gross domestic product (GDP). This generalization is highly problematic and has tremendous influence on sustainability. At the same time, it is so deeply anchored in standard economic thinking that it would take a lot of effort to change this failure. Continue reading
A few years ago this headline (and similar ones in other media) made round:
China overtakes U.S. in greenhouse gas emissions [source]
For years the United States, the only industrialized country that refused to ratify the Kyoto Protocol, was blamed for being the global “climate offender” no. 1. This changed around 2006, when China became the world’s biggest greenhouse gas emitter. Though the U.S. remain a scapegoat, they are not alone any more. Although still a developing (i.e., industrializing) country, China is now emitting almost 20% of all anthropogenic greenhouse gases. The Chinese are considered the new “worst climate offender”. But this picture is terribly oversimplified. Continue reading
We can do two things to push the biophysical limits to growth further back: increase resource efficiency (do more with less) and replace finite resources with renewable energy and materials – in other words, we need to tap the potentially infinite sources of prosperity.
These are words by Ralf Fücks, the president of the German Heinrich Böll Foundation, derived from a recent commentary in Die Zeit, translated into English for the TripleCrisis blog. Though I generally agree with the author, there are some parts of his argumentation that I am rather skeptical about. One of them is a common error made by people calling for a transition to a “green” economy: the argument that replacing non-renewable with renewable resources will solve the problem. Continue reading
Anthropogenic climate change is a scientific fact. It may be regarded as the greatest challenge humanity has ever imposed over itself. Yet, it is an extremely complex challenge. It has, of course, a scientific component – without the advances in science, especially in climatology (but also, e.g., physics and geology), we probably wouldn’t be aware of the problem we face. Furthermore, as Kristen Sheeran rightly notes,
[m]any will argue that, at its core, the climate crisis is about ethics, rights, and responsibilities.
But, why is there economics of climate change? Do we need it? And if yes, what for? Continue reading
Jeffrey Sachs belongs to the economists who have influenced my thinking deeply. So I was very positively surprised when I read his new article, “Need Versus Greed”, yesterday.
Sachs is one of the most distinguished development economists, Director of the Earth Institute at Columbia University and Special Adviser to United Nations Secretary-General on the Millennium Development Goals. His last book, “Common Wealth”, is a highly interesting contribution to development economics. Nonetheless, I always thought of him as a good, but still “mainstream” economist who considers economic growth the solution of all problems (why I don’t share this opinion, you can read here). With the article named above he proved me wrong.
Our planet will not physically support this exponential economic growth if we let greed take the upper hand. Even today, the weight of the world economy is already crushing nature, rapidly depleting the supplies of fossil-fuel energy resources that nature created over millions of years, while the resulting climate change has led to massive instabilities in terms of rainfall, temperature, and extreme storms.
It sounds just like what I would expect from the economics of development. And the whole article is perhaps not a new “discovery of America”, but certainly a piece worth reading.
Here you can find my updated standpoint toward genetically engineered crops.
In the European Union, every discussion about the admission of new GMO (genetically modified organisms) equals a battle between the EU’s or member states’ bureaucracies and various environmental groups and organizations. The most invoked arguments of the opponents of GMO (in agriculture – I will limit myself to this particular – highly controversial – area) consider the environmental and health aspects of genetically modified organisms, especially when they come into the food chain. No-one really knows what the long-term impact of these artificial creatures on human beings and the natural environment may be.
This is an important argument. But there also are strong socio-economic arguments against GMO. In what follows I will shortly present some of these aspects and emphasize their importance. Continue reading
As I already once have mentioned, a great challenge for the development aid efforts is to create incentives for the pharmaceutical corporations to research on medicines that are really needed. Unfortunately, most of the pharmaceutical products developed are cosmetics. According to the WHO, only less than 1% of what is being developed are medicines against tropical diseases. But there are millions of people in the developing world dying and suffering from AIDS, tuberculosis, malaria etc. Either there are no new, potent medicines against these diseases, or, if there are (as in the case of AIDS), they are too costly due to patent rights.
But there are initiatives with the aim to change that. One of them is the Health Impact Fund project. Continue reading
As you can see in the picture in the right (for source, click on it), food grain prices in international markets has been spiking in the end of 2010 – again, after they already did in 2008, the year of “hunger revolts” in the developing world. It is clear that something must be done to prevent another crisis. Today I would like to shortly comment an article by Pascal Lamy, Director-General of the WTO, on that subject. Continue reading
In the mainstream economic thought there is hardly any place for constructive criticism of free trade. But, while the idea of free trade is not wrong in itself, it has become a dogma – no matter what it looks like in reality, in the eyes of many free trade is of unquestionable benefit. It was not always so. John Maynard Keynes once made a highly interesting remark that, regrettably, seems almost forgotten:
I sympathize therefore, with those who would minimize, rather than those who would maximize, economic entanglement between nations. Ideas, knowledge, art, hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible; and, above all, let finance be primarily national. Continue reading
Two days ago I attended a workshop on economic ethics. It was a rather interesting one. But one thing has stricken me: when telling us students “the wonderful story” of growth, our professor showed us this simulation. His only explanation on why the African countries have such a low life expectancy and per capita income compared with the rest of the world: civil wars. It was said only “by the way”, but nevertheless: it was a terrible oversimplification. Continue reading
The world finds itself in the middle of a environmental crisis – some even claim, at the brink of a catastrophe. One of the main causes of the global warming has been the abuse of natural resources – primarily of the nonrenewables petroleum, coal, natural gas (but also of renewable resources such as timber). It is not so that extraction of nonrenewable resources is bad in itself – but by doing so in a heavily unsustainable way we have caused an accelerating climate change and other severe environmental problems. There are many ideas what to do against it – a central one is the so called “energy revolution”, a switch from fossil energy sources (i.e., petroleum, coal, gas) to renewable ones. But: for the latter to function we need storage options. And here a new problem seems approaching. Continue reading
On September 29, 2010 a group of development economists primarily from Latin America signed the 10 Theses on New Developmentalism. It was a Keynesian and structuralist reaction after the failure of the Washington Consensus (the neoliberal development dogma) as well as the unfolding of the global financial crisis. Here are the theses in short (I compressed them – some highlighting also is mine -, for a detailed listing see the link above): Continue reading
What does the measure called “gross national product” express? This is not as easy a question as it sounds. Indeed, there is much confusion about what GNP (or GDP, in this context it doesn’t really make a difference) means – especially what its growth means. I shall argue here that how we usually interpret (growth in) GNP is not only wrong, but also bad for us. Continue reading