09 April 2010

Some thoughts on sustainability

(via RW) An interesting interview on sustainability with MIT's John Sterman, who notes that English lacks the antonym for "shortage," i.e., the existence of excess demand. Economists would agree, and note that this is not a problem in a system that regulates demand (i.e., via prices). The trouble comes when we do not price -- as is often the case with the environment. A lack of pricing can lead to over-consumption and trouble.

Bottom Line: We will never run out of a resource when its price rises in shortage. Are we pricing the environment correctly?

2 comments:

Mark S said...

excessive demand: greed

The Outsider said...

How about "underpricing."

"Oversupply"?

"Greed" is a bad choice because it implies a moral problem on the part of the consumers. The problem is with regulators -- who are generally economic ignoramuses. They allow the price to drop below the marginal cost.