Page 166 - Environment: The Science Behind the Stories

Should we discount the future? Third, neoclassi- Economic growth stems from two sources: (1) an
cal economics grants an event in the future less value than increase in inputs to the economy (such as greater inputs
one in the present. In economic terminology, future effects of labor and natural resources) and (2) improvements in
are discounted. Discounting is meant to reflect how human the efficiency of production due to better technologies
beings tend to grant more importance to present conditions and approaches (that is, ideas and equipment that enable
than to future conditions. Just as you might rather have an us to produce more goods with fewer inputs). This second
ice cream cone today than be promised one next month, approach—whereby we produce more with less—is often
market demand is greater for goods and services that are termed economic development.
received sooner. Economists quantify this importance by As our population and consumption rise, it is becom-
assigning discount rates when calculating costs and benefits. ing clearer that we cannot sustain growth forever using the
For example, applying a 5% annual discount rate to forestry first approach. Nonrenewable resources on Earth are finite
decisions means that a stand of trees whose timber is worth in quantity, and there are limits on the rates that we can har-
$500,000 on the market today would drop in perceived value vest renewable resources. As for the second approach, we
by 5% each year. From the perspective of today’s market, have used technological innovation to push back the limits
having the timber in 10 years would be worth only $299,368. on growth time and again. More-efficient technologies for
By this logic, the more quickly the trees are cut, the more extracting minerals, fossil fuels, and groundwater allow us
they are worth. to exploit these resources more fully with less waste. Bet-
Discounting encourages policymakers to play down the ter machinery in our factories speeds our manufacturing. We
long-term consequences of decisions. Many environmental continue to make computer chips more powerful while also
problems unfold gradually, yet discounting discourages us making them smaller (FIguRE 6.12). In these ways, we are
from addressing resource depletion, pollution buildup, and producing more goods and services while using relatively
other cumulative impacts. Instead, discounting shunts the fewer resources.
costs of dealing with such problems onto future generations. Can we conclude, then, that human ingenuity and
The choice of what discount rate to use is subjective and improvements in technology will allow us to overcome all
involves ethical judgment. This has become apparent as econ- our environmental limitations and continue economic growth
omists debate how discount rates influence our estimates of indefinitely? Answering “yes” are people sometimes referred
the costs of global climate change to society (see THE SCIENCE to as Cornucopians. (In Greek mythology, a cornucopia—
BEHIND THE STORY, pp. 166–167). literally “horn of plenty”—is a magical goat’s horn that over-
flowed with grain, fruit, and flowers.) Responding “no” are
Is all growth good? Economic growth can be defined people called Cassandras, named after the mythical princess
as an increase in an economy’s production and consumption of Troy with the gift of prophecy, whose dire predictions were
of goods and services. Neoclassical economics assumes that not believed.
economic growth is essential for maintaining social order, The Cassandra view has been articulated most famously by
because a growing economy can alleviate the discontent of a group of researchers who published a series of books includ-
the poor by creating opportunities for poor people to become ing The Limits to Growth (1972), Beyond the Limits (1992),
wealthier. A rising tide raises all boats, as the saying goes; if and Limits to Growth: The Thirty-year Update (2004). Starting
we make the overall economic pie larger, then each person’s from the premise that Earth’s natural capital is finite, and using
slice can become larger, even if some people still have much calculations of resource availability and consumption, they
smaller slices than others.
To the extent that economic growth is a means to an
end—a path to greater human well-being—it is a good thing.
However, when growth becomes an end in itself it may no
longer be the best route toward well-being. Sociologists have
coined a word for the way that consumption and material CHAPTER 6 • Ethi C s, E C ono mi C s, A nd s ustA in A bl E dE v E lopm E nt
affluence often fail to bring people contentment: affluenza.
Moreover, people in poverty may feel poorer and less happy
as the gap between rich and poor widens, even if they gain
more wealth themselves. Critics of the growth paradigm fear
that an endless pursuit of growth cannot be sustained and will
eventually destroy our economic system, because resources to
support growth are ultimately limited.

How sustainable is economic growth?

Our global economy is seven times the size it was just half a
century ago. All measures of economic activity—trade, rates
of production, amount and value of goods manufactured—are
higher than ever before. This has brought many people much FIguRE 6.12 The miniaturization of computer chips is a
greater material wealth (although not equitably, and gaps striking advance in efficiency. It allows us to store and use far
between rich and poor are wide and growing). more information with far less input of raw materials. 165

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