Posts Tagged ‘friedman’

Sustainability and some final thoughts

Saturday, August 27th, 2011

In the end, politics, economics and perhaps even environmentalism are practical matters dressed up as intellectual theory, following on from my previous blog on the theory behind sustainability.

Economics is good at analysing what happens at the point when things of value are exchanged, but is not much good at anything else.  Real economics cannot tell you how to sustain you or your family.  For example, were you have a budget of £100 to spend on your weekly shop, it cannot tell you what is the best way to spend that money on in terms of your health, or taste or what you have in your cupboards or what takes your fancy as you walk around the store.  It cannot tell you why you prefer one brand over another or why we buy olive oil from one country of origin over another, because none of us really make rational decisions based on utility, however neat a theory.  In fact, many of our decisions are decidedly irrational – for example, it is cheaper and quite easy to cook meals from scratch yet we buy, for example, fish pie or pancakes ready-made rather than make them ourselves.  A rational economist might say that we do this because we can use our labour or time more effectively elsewhere, but how many actually do redeploy that small amount of money or time rationally to optimise their wage earning potential – very few, methinks.

For me, I think the best way to think about sustainability is to think of families rather than economics, or at least money economics.  To keep a family going into the future, you first need to have children, which is rarely an economic decision, because under most cost-benefit analyses there is no rational economic justification in having children, but our desire to continue and sustain our genes into the future simply overrides and ignores any financial considerations.  Then you need to consider how you equip your children to sustain themselves in the future and the key things are to give them the capabilities to navigate their way through their own futures, with all its ups and downs, twists and turns.  So we educate them formally to enable them to open up their minds and get employment, and informally we teach them a moral code of what is good and bad and that hard work, honesty, fairness and good manners will get them pretty much anything they desire in time, or at least laziness, dishonesty, unfairness and bad manners will not get you far in life.  We might try and give them some seed capital to buy a home, but they may not get much financial support until they themselves have had a family and we can bequeath them something after death.  Finally, throughout all of this we nurture and love them as best we can.  And so it is in real life with economic sustainability, we must focus on the means of giving people the capabilities to navigate future generations through future uncertainties rather than get bogged down with numbers, which are but meaningless figures on a page or spreadsheet – one can create almost any set of numbers or scenarios that you desire to justify any position you want but to what useful end.

But while Governments, quangoes and international bodies like the World Bank or the United Nations can help with this in certain areas, they are not the best placed to act as custodians of economic sustainability.  Firstly, they have no long term perspective as their terms of office are short and their times of influence are probably even shorter.  Secondly, Governments are remarkably bad custodians of peoples’ money, even as they need that money as it is their lifeblood.  They tax and spend with impunity because they are dealing with other peoples’ money rather than their own.  Milton Friedman perhaps explained this best as he wrote in his book “Free To Choose” – “There are four ways in which you can spend money.  You can spend your own money on yourself.  When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.  Then you can spend your own money on somebody else. For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.   And that’s government.  And that’s close to 40% of our national income.”

These capacities of Government to tax and spend are the root of their power and without this ability to take and then distribute with seeming largesse, Governments are nothing.  Hence, sustainability becomes another self-justification for why Governments must tax and spend, even though individuals and private collectives may be better at optimising humankind’s response to sustainability.  This takes the environment out of sustainability and it simply becomes a matter of power and control over capital.  For me, economics and environmentalism are different ways of looking at resource allocation, where money has been hugely successful at getting people to organise themselves to do things they do not want to do for a cash reward and also to exploit the natural capital resources (but note per my previous blog that money does not buy happinness or well-being beyond $10,000, while people will do charity and community projects for little or no finacial reward).  Conversely, environmentalism explains that there are limits to the natural capital available and we must all be mindful of this.  They are different, but overlap where the externalities from the economy degrade nature and where natural capital is available for exploitation.  However, they are not the same thing and do not overlap at all times.  Hence, they are different ways of looking at the world we live in, and we must be careful in merging them together.

So we must keep sustainability away from economists, Governments and politicians and per Ostrom focus on personal and community selflessness over selfishness, and look to our children and future generations rather than just the here and now.  Similarly, I would argue money is economics, and that money and sustainability do not mix.  However, I expect politicians, economists and everyone to argue that they all mix perfectly happily together, so the future will be a great and wonderful place.