Thursday, June 12, 2008


I know I have too much stuff. But this video (The Story of Stuff), forwarded by a relative, gets me really annoyed. My relative asked for an Economists opinion and here was the first part of my response:
Don’t worry, you’ve come to the right place. That piece laughable, but the real irony is how many consumer goods she probably had to use to put that video together, such as the slick new iBook, along with some fancy movie editing software, a digital camera, etc. In the first couple of minutes she makes the same argument made by Thomas Malthus (circa 1800), that we are growing too fast for our planet, technology is linear, population growth is nonlinear...blah, blah. I almost shut it off, but thought I’d better watch the whole thing. Every generation makes this argument and they are all wrong. Resources are scarce but technology and technological advancement is not, which is something these Malthusian types never seem to get. Like Garret Hardin for example, but at least he wasn't a hypocrite, he took himself out of the lifeboat.

She talks about the fact that incomes have risen but happiness has not, though that phenomenon (known as the Easterlin paradox) appears to be in jeopardy. Besides, it doesn’t even pass the smell test, can you honestly say you’d be happier living in the 50s? I’m pretty sure I wouldn’t be happier, because I would be dead.

She also talks about how we don’t pay the true cost of making things, with her $4.99 radio example. Economists refer to the things she mentions as negative externalities. The simplest example being pollution. The plant that produces the radio might pollute the air, yet they do not have to pay for their pollution, thus the cost of the radio reflects only the direct costs, and not the cost to society of the pollution externality. Eliminating externalities is easy enough, you merely have to tax the activity, thus forcing the firm to account for their pollution. This is in part why we tax gasoline, and Greg Mankiw has proposed a carbon tax to further reduce the externality. An idea embraced by Obama. Many of the things she lists that might appear to be externalities are really her own preferences masquerading as externalities. She romanticizes small communal farming, and assumes any move away from that reflects a negative externality which is not priced into the good. Hardly. It is just a preference she does not share.

She also fails to note the existence of positive externalities which would require government subsidies in order to increase output to the socially optimum level. Take cell phones. If I’m the only one that has a cell phone it is useful to me, but it would be even more useful if everyone else has one, allowing us to communicate with each other no matter where we are. So maybe the private market provides too few cell phones? Should the government then subsidize them?

She mentions Eisenhower’s CEA chair claiming the goal of the economy is to produce consumer goods. I can’t seem to find that quote anywhere, but I’m sure he meant consumer goods in the abstract sense of the term goods. That is to say both physical goods and services. So her plea for education, health care, etc are all things the CEA chair would have agreed with. Those are to an economist, part of consumer purchases. No economist I know of would ever have elevated the role of physical goods above services, or vice versa. We can all agree our life is made better off with the goods and services we consume. If it isn’t then you shouldn’t be buying it. And remember that buying “experiences” such as a family trip to Florida is part of that as well. Americans work a smaller percentage of their life than ever before in history, which means we consume more leisure than ever before. This is only possible with a more productive economy.

Her snippet on computers having only one part that changes from year to year?? WTF….that just makes the rest of the argument so much weaker since it is monumentally ignorant. Like all the goods and services we consume, new technologies are invented and used to make the products and services marginally better. At some point the increased benefits might outweigh the costs of purchasing a new unit. But it is very rare that a “new” product comes out, and is adopted by the whole market, even though there are no technological advantages (look at how bad MS Vista is flopping). You can’t fool all the people.

I feel bad for this woman, because if she took an econ class in college, the professor was horrible. She clearly has an innate interest in the functioning of the economy, yet was never introduced to a rigorous way to think about it. Instead she takes her preferences and arrogantly romanticizes poverty, and comes up with the belief that we should end consumerism? What? Yes, tell the Chinese that the last 20 years haven’t been good for them, they should go back to subsistence farming, thats a lot of fun, particularly when draught hits. Good times that starvation.

So don’t feel too bad for your kids. You are generally leaving them with a better world than you have occupied. In fact I guarantee their standard of living will be higher than yours, though it could be higher still if you sent in more money with your taxes next year to help reduce the deficit. Or just set aside more money in your 403(b).

This is not to say that there aren’t some things we should/can do. I think we can do a better job of trying to identify and correct externalities (although I will admit this is not easy and it makes my libertarians sensibilities bristle). If we do, then prices will be a very efficient allocation mechanism as they will now reflect private and public costs. I do think we could buy (ie consume) less…in fact economic growth would probably be more rapid if we consumers spent less and saved more, thus freeing up capital for corporations to invest in new technology. The beauty of it is it will provide even more stuff for us to buy in the future! So I'm only advocating consuming less now, so that we can consumer even more in the future. Though I’m quite sure that’s not the argument she is making. Remember if its family you enjoy, living longer allows you to spend more time with them, and living longer is only going to happen through better health, health care and medicine…not through buying local tomatoes.

Me, I imagine I’ll get the fill of my family…

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