It's the Economy, Stupid

I have long felt that the problem of global warming required an overhaul of our economic system, if not a new one entirely.  It is still possible, but recent events have lessened that need.

First I will explain why a new economic system is in order.

Consider cigarettes.  Growing tobacco requires land, labor, fuel, machinery, and chemicals among other things. The harvesting and processing of the tobacco into tobacco products requires more of these costly resources.  Then there is advertising, shipping, retail sales, etc. before it gets to the consumer.  The burden on our healthcare system presents more costs.  Yet all these costs are part of the Gross National Product (GDP).  Gross is right.  More gross is the idea that growth of our economy, i.e. growing GDP, by growing industries that are harming society is the same as "progress."

Examples of this absurdity abound. War, natural disasters, and man-made disasters create construction bursts that boost the economy. Waste management contributes to GDP, so producing more waste improves it.  Waste of any kind helps the economy, even government waste.  Improving efficiency, such as higher gasoline mileage hurts sales of fuel and thus hurts GDP.  Cutting the lifespan of products improves GDP by forcing consumers to buy products more often.  But there is more to the problem than a poor metric for policy makers to gauge the success of new legislation. 

Our economic system is built on free enterprise, an economic system in which private business operates in competition and largely free of state control.  The main, if not only driver of the system, is profits.  If a product or service does not provide an adequate return on the capital (profits), then the entrepreneur(s) will not pursue that line of business.  Nowhere in that equation suggests the greater good of society or "the commons," let alone the benefit of the planet.  Sure, some business can be had selling to a relative handful of do-gooders, but that is not enough to do the task in front of us.

Consider the situation where some people, those wishing to reduce their carbon footprint, buy less gasoline.  Sounds good.   Demand declines.  But the price of gasoline goes down as a result.  Cheaper gasoline compels others to buy more gasoline. It's a social dilemma.

The atmosphere is part of the commons, something the public owns together.  That the fossil fuel industry and industries that use fossil fuel products are harming the common atmosphere without consequences to their bottom lines is not part of our economic system.  It is built into our current economy to harm the atmosphere.

The government normally tries to hold the line in this kind of exploitation of the commons through regulations and taxes.  Is it enough this time?  The political debate could be long and nasty.

On a more encouraging note, however, is the dropping of prices of solar and wind energy, electric vehicles, and batteries.  It is possible that these prices could drop below the current prices of fossil fuels and petroleum driven vehicles.  If they do, it could take a heavy burden off the upcoming policy changes.

It would be a tasty carrot.