Monday, June 1, 2009 - 13:35
We don't need to aggrandize statistics to show how much of a change markets need to combat climate change. I always joke that the one important thing that I learned when gaining my degree in economics was that nothing is for certain: models are imperfect and, most of the time, straight up misleading. I am reading Entering a New World. This is undoubtedly insignificant in the big picture of the publication (which by the way is awesome and has great info), but there was something that got under my skin. There is a brief excerpt where the author uses China as a model for why the existing economic model will fail miserably in moving toward the kind of responsible consumption we want.
I think there is no doubt that the global economy must be restructured to combat global warming and climate change. However, it bothers me when we (environmentalists) make this point -- that sometimes we use misleading economic reasoning. Once again, we don't need to over-exaggerate to make our point: that change needs to happen so we drastically slow down fossil fuel consumption, avoid deforestation, and begin to use more renewable and clean sources of energy.
First the article states that if China's economy continues to grow at a level of 8 percent (down from 10 percent), by 2030, this growth will raise the Chinese income per person to equal that of the United States' current rate. This premise is used to create the rest of the conclusions set out in its model. Why are we assuming that the Chinese market is going to continue to grow at such a fast pace for the next 21 years? Although the percent annual growth rate was at 10 percent, to assume that it will maintain an 8 percent increase over 20 years is kind of ludicrous. This kind of analogy would be similar to me stating “Look, we are in a recession. If change in unemployment continues at a rate lower than it is now, after 20 years of continuous layoffs, barely anyone will have a job.” This kind of reasoning is great for making a point, but it's incredibly easy for those who are against change to poke holes at it and continue to not take the situation seriously.
The article also continues its analogies by assuming that the Chinese consumer will spend his or her income the same way an American does, and if this were to happen, China would consume twice as much paper as currently is being produced and would additionally consume 98 million barrels of oil a day (based on the assumption that China will increase the amount of automobiles it uses to 1.1 billion cars). While I appreciate the point being made -- i.e.: that we need to change the way we consume and that the market cannot continue the way it is right now -- this point can be made without completely ignoring supply side economics.
First off, the Chinese do not have and will not have the same spending habits as those in the United States. The two countries just have much too different consumption habits, and 20 years is not enough time for them to be so similar. Second, it's almost infeasible that the Chinese would increase their usage of automobiles at the rate that the author is suggesting. That would be like looking at the growth of dot-coms when there was a boom and then saying well, if the dot-coms continue growing at the rate they are now for the next 20 years, then everyone will be filthy rich! I don't have the research on it, but I think a more convincing and realistic perspective in making a point about increased consumption would be to isolate Chinese fossil fuel consumption outside of that used by automobiles. I would be interested to see how much impact China would have even if their consumption plateaued. Even that would be enough to scare me and make the point that we need to change our ways of consumption.
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