Arnold Kling

Limits to Growth

Arnold Kling, Great Questions of Economics
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Economists dream of bringing the underdeveloped world up to the living standards of the United States. Ecologists warn that this is a nightmare. In Scientific American, Edward O. Wilson carries on an imaginary dialog with an economist. Wilson writes,

the average amount of productive land and shallow sea appropriated by each person in bits and pieces from around the world for food, water, housing, energy, transportation, commerce, and waste absorption--is about one hectare (2.5 acres) in developing nations but about 9.6 hectares (24 acres) in the U.S. The footprint for the total human population is 2.1 hectares (5.2 acres). For every person in the world to reach present U.S. levels of consumption with existing technology would require four more planet Earths.

Wilson focuses on two resources. One resource is fresh water. As an economist, I expect that if fresh water is scarce, then its price will rise. This in turn will lead to conservation and to technologies that increase supply. If water suddenly became more scarce, then this would be good news for eastern Canadians and bad news for southern Californians. But markets should be able to sort it out.

The other resource is the atmosphere. Wilson is among those who believes that atmospheric pollution is a grave issue. If that view is correct, then we have a problem, because atmospheric pollution is a classic case of an externality. Left alone, the market will produce more pollution than is optimal.

Discussion Question. Do you think that markets will take care of the problem of fresh water? Are the necessary property rights and pricing mechanisms in place? In what ways might they be inadequate?

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