Monday, February 22, 2010

It Is Not Too Late If We Act Now

It is not very often that we get credible ecological news that is not full of bad news and projections. Well, I am glad to say that the following is a recent study that actually suggests that humans have not lost the race yet. Yes we are on our way towards catastrophic outcomes but we are not there yet and interestingly enough we can avoid the worst outcome if we are smart enough to change our ways and work meaningfully towards redemption.
The Stockholm Resilience Center, at Stockholm University is self described as a center of Research for Governance of Social-Ecological Systems. The Centre released a few months ago a major study undertaken by 28 world renown scientists in which they have established a new area in planetary management. Their first study describes nine planetary boundaries (listed at the bottom of this entry) that they believe humanity must not cross . The study goes on to say that human activity has thus far resulted in breaching three of these boundaries (the stared ones)but not the other six.
We are currently living in the geologic era known as the Holocene which started around 10,000 years ago. As we all know, it was during the Holocene that agriculture was developed, civilization prospered and industrialization became the norm. But unfortunately we are entering the Anthropocene, a new geological age in which human activities have grown as to form a major threat to the health of the earth.
Will we have the wisdom to adopt the right policies and change our behavior so as to avoid catastrophy? Yes we still can do that but time is quickly running out.
The nine Planetary Boundaries:
1 Strategic ozone layer
2 Biodiversity
3 Chemical Dispersion
4 Climate Change ***
5 Ocean Acidification ***
6 Freshwater consumption & the global hydrological cycle
7 Land System Change
8 Nitrogen & Phosphorus inputs to the biosphere & ocean ***
9 Atmospheric aerosol loading
*** Transgressed boundary.

Sunday, February 14, 2010

Carbon Tax

Sovereign debt , as a potentially crippling fiscal problem world wide, has risen to the forefront over the past few months. Whether it is the US, Europe, Japan or many other developed and developing countries the sovereign debt watch is on.

The major metrics of a pending sovereign debt crisis that have been in vogue for decades used to be applied only to developing countries. Unfortunately this is no longer the case. The Herculian efforts by governments all over the world; the developed in particular; to avoid a repeat of the debilitating depression of the 1930's has forced these countries to increase substantially their fiscal stimulus programs. In a sense the monetary and fiscal policies adopted by the officials of all of these countries have been very successful. A worst case scenario has been avoided.

But as economics has always taught us, There Ain't No Such Thing AS A Free Lunch; TANSTAAFL. Yes we avoided a deep recession and the top officials can pat themselves on the back for this. But maybe not. Is the cure at least as expensive or maybe even more so than the ailment that it saved us from? That is , currently, the $64,000 question or maybe I should say the $64 billion question?:-)

Often, our efforts at prescribing remedies are counter productive because of what is inherent in problem solving. We always seem to target the symptom rather than the disease. As a result we inevitably move from one crisis to the next as a result of the law of unintended consequences.

In our efforts to save the system and to prevent a major economic depression we proceeded to throw money at the problem in order to generate more final demand and thus put more people to work. What we did not stop to consider is the major question of how are we going to pay back all of these funds that we have borrowed? It seems that we did what we always do, shift the burden onto the future generations. The debt will not come due for some decades ,right? Wrong.Well informed individuals know that more debt implies more taxes in the future and so they take corrective by refusing to own the highly risky debt. Once we find out that the debt service is too large and that we cannot keep on rolling the debt unto the future then we will have no choice but to become deadbeats. That is where we are at the moment. The question is which country is going to go under first? Would it be Greece or would it be one of the other PIIGS? How about the UK, or evn Japan or the US? If any of these countries default would they set up a contagion that will devastate all the current international financial sytem as we know it?

Believe it or not there is a potential mechanism that if adopted could go a long way towards addressing the real cause of this issue and not only the surface phenomenon. The solution that I am about to propose is not new, actually,N.G Mankiw wrote about it in 2007.

"The scientists tell us that world temperatures are rising because humans are emitting carbon into the atmosphere. Basic economics tells us that when you tax something, you normally get less of it. So if we want to reduce global emissions of carbon, we need a global carbon tax. ...

The idea of using taxes to fix problems, rather than merely raise government revenue, has a long history. The British economist Arthur Pigou advocated such corrective taxes to deal with pollution in the early 20th century. In his honor, economics textbooks now call them “Pigovian taxes.”...some taxes align private incentives with social costs and move us toward better outcomes."

I would love to see a carbon tax levied not only in the major industrial countries but all over the globe with all the proceeds dedicated to lowering the sovereign debt. Such a tax could be a first step towards internalizing the negative externalities of all the production inthe world economy. If that leads to less and more efficient production then all of us will be winners.

Saturday, February 06, 2010

Is Population Growth problematic?

The following pie charts show the results of a recent public survey conducted in the US. As you can see a large proportion thought that Population Growth is a serious problem currently but that proportion grew substantially when people were asked about their view of the future.
What do you think?

Tuesday, February 02, 2010

Government and Fertility.

One does not need to be a Neo Malthusian to recognize that there comes a point when human population growth becomes highly undesirable to say the lease. If the projected 10 billion humans by 2050 are not enough then what is? Is it another doubling to 20 billion or maybe a further doubling still to 40 billion?

Most, and possibly all, of those that have looked into this issue and investigated the potential limits seriously have concluded that we are already beyond any metric of sustainability. This only means that we have overshoot the carrying capacity of the ecosystem and as a result we have to take measures that will reverse our current course.

But what is it that needs to be done if we are to reduce fertility substantially? Surely we cannot stand by as idle spectators and hope that the humans will decide to change their behaviour drastically just because that is good for the ecosystem? Had this been the case then they would have done so a long time ago. So what we are left with is the absolute certainty that human population must stop growing and preferably even start to decline.

If it is deemed to be too risky to count on a voluntary change in behaviour then the only other alternative to reduce the rate of fertility would be a direct and sustained government policy aimed at achieving lower fertility rates. There are a number of actions that the government can adopt that will act to internalize the negative externality of high fertility such as taxes, social expenditures and even outright strict limits on the number of successful pregnancies per female.

What do you think does the government have the right to interfere or should it just stand by and watch?