Tuesday, July 31, 2007

Don't Panic

Yesterday on NPR I heard an interview with an author (I didn't hear the name) about his new book (I didn't hear the title, either). What caught my attention was that the author implored listeners and readers to reduce the amount of resources people use. That grocery stores give away plastic bags for free should be a crime, he said. Most economists have a different view: don't panic.

For example, one should ask why do stores give away plastic bags? They certainly didn't get them for free--why give them away? The answer is pretty obvious (customers demand it) but the lesson is not. Plastic bags are clearly cheap (if they costed a dollar each, I'm sure most stores wouldn't give them away) and because they are so inexpensive the resources that made them are relatively abundent. (Plastics take very little oil to make and tend to be made out of the part of crude oil that's low quality.) If some component of plastic bags becomes more scarce, the price of bags rises and people adapt. Stores might charge people for bags, creating an incentive for customers to bring in their own cloth one (something this author suggested everyone do even though this scarcity is not yet occuring).

People have a very hard time understanding that as long as people have an incentive to innovate, we will always be able to solve new resource problems that come our way. That has been the great trend of human history. Every time doomsayers claim we've reached a limit to technology, they've always been proven wrong. The author noted that all animals when they've used up their resources start dying out. He proposed that since humans are no different more countries should start exploring a one child policy to reduce "overpopulation." But people are fundamentally different than animals. We have the capacity to create (farm, invent, etc) the resources we need for our survival. This fundamental difference insures us against ourselves. Mandating we all conserve now takes away from that capacity and diminishes the incentive (fewer inventors and less profit opportunity). The best thing you can do for the environment and the future of humanity is, in the words of a great book, Don't Panic.

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