Thursday, 14 December 2017

Whenever People Say 'Unsustainable'

There are many words in the field of economics, economic history and their associated political/philosophical discourse that make my "rant-alarm" go off. And by rant-alarm, I mean the irresistable urge to argue, to expose this person's mistaken thinking and/or ridicule his/her insane ideas (which, by the way, almost always happen to end with "and the state should tax/regulate/ban/invade...") Some prime example here are climate change, rationality, resources, 'neoclassical' economics (or neoliberal anything, my God!) investment – and more recently housing bubbles and bitcoin.

One of my favourite inspirational quotes comes from Paul Romer – with whom I otherwise hardly ever agree  discussing what it means to be an economist and what we're expected to do:
In a first-pass analysis, it seems reasonable to assume that all economists have the same preferences. We all take satisfaction from the professionalism of doing our job well. Doing the job well means disagreeing openly when someone makes an assertion that seems wrong. ('The Trouble With Macroeconomics', p. 20)
Clearly, I take the last part to heart, sometimes almost religiously: disagree openly when someone says something incorrect or stupid. That, my dear Sir, I can gladly do. So, here's another one of those stupid words whose meaning is clouded in value judgment and guilt-by-association: Unsustainable. We hear it in relation to financial markets all the time, that some company's earnings or stock prices are unsustainable; that resource-use of some kind is unsustainable; that human consumption, production, travelling, food-intake, baby-rearing activities are unsustainable.

Normally people mean one of two things, and they're both irrelevant, uninformative or plainly wrong:
  1. that there is some physical, natural or economic limit to the growth or current development and so this activity eventually has to stop. 
  2. that the costs of continuing doing this despicable behaviour, or approaching the limit is higher than what the speaker would want it to be.
For the first: certain processes might very well be bounded in one way or another (amount of oil physically in the ground, population we can produce food for, happiness index, number of planes we can fit in the skies), but is frankly almost always irrelevant. There are two major confusions here. The first and most commonly-occuring confusion is believing that we aim to do whatever we're doing for all eternity. If you think about it, the indignant objection of unsustainability is quite meaningless: everything we do at any given moment is in a sense "unsustainable"; if I keep typing on my computer I will eventually starve; if on a workout I keep lifting weights or running endlessly, I will collapse; if I keep eating this chocolate cake of mine, I will be sick. But who cares? Everyone whose ever engaged in those activities understand that there's an end to it, that we're only doing this for a certain period and that extrapolating snapshots of reality is quite silly; I do not intend to continue this activity until the brink of whatever physical boundary there might be. Until I approach some "safe" distance to that brink, I'll happily indulge in my chocolate cake, lift my weights or type away at my keyboard.

The other confusion is to believe that economic systems cannot change and that humans cannot adopt. I don't care (and neither should you) that there is a physically scarce amount of oil in the ground, since I understand that price systems and the incentives they create effectively ration their use according to urgenly-felt needs  and encourage substitutes when those are needed (the 'when' is crucial here, not before). I don't care that you think some company's stock has risen too quickly: others don't, and their belief in the future earnings of the company will  or will not  be vindicated in the future. I don't care that the maximum number of humans our current food systems can support is 10-11 billion, since I understand that we have more land and capital goods engaged elsewhere in the economy, so that if we wanted to ramp up food production for a few billion more people we could (and food prices would guide us there, should we need to).

As for the second thing people mean when they talk about (un)sustainability, it is the age-old trap of value-judgment, confusing is with ought, what we in economics call conflating positive statements with normative statements. By saying that something is unsustainable these people want to convey that this is immoral, shouldn't continue (because ultimately the process is bounded, see point above) and that they dislike the cost involved

So what? I dislike the cost you're putting me through listening to such nonsense – that doesn't make it unsustainable, dangerous or worthy of everyone else's attention. By crying 'unsustainable' these people manage to discredit the activity through guilt-by-association while upholding the charade of academic rigour or intellectual seriousness. "Unsustainable" CO2 emissions are not awful and life-threatening simply because you love coral reefs or the idea of nature in its exact current state. No, "unsustainable" housing prices are not a problem over and beyond those who bought at high prices (with borrowed money...) when there are properly-working supply responses. No, Bitcoin is not a bubble if you think it will replace gold & art as a storage of value or major currencies as medium of exchange.

The bottom-line mistake that people uttering the word 'Unsustainable' make is the following: believing that the world is static. That the few (or many) data points we have observed must necessarily continue linearly into the future. That human society and economic processes are not dynamic systems capable of (read: constantly) changing. 

Be a smart person, and don't fall into these traps. 

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