02 September 2010

Is "Sustainable Growth" an oxymoron?

WEH sent this opinion:

In economics you can certainly put “growth” and “development” in the same sentence. However, growth and development have recently acquired a partner term: sustainability.

"Sustainability" is about as fuzzy defined as the term “fair” (more on "fair"). Sustainable and sustainability sure seem like political words and not so much economics. Even BP was called sustainable.

A couple items come to mind:
  1. growth first and development coming second seems to be the regular route,

  2. occasionally you see growth and development together,

  3. rare is development put first and growth comes second.
Growth can run a muck and development gets side tracked and sometimes growth can occur and no development occurs. However, it really boils down to having the money first (growth) so you can finance the development.

Enter sustainable and sustainability. Its not long term growth or long term development, rather its “sustainable” or “sustainability”. Sustainable and sustainability being based on the notion of some centrally planned management makes the subject at hand sustainable.

The terms sustainable and sustainability seem to morph (political) into the base subjects of growth and development. That is, sustainable and sustainability suddenly trump growth and development. Or, alternatively, sustainable and sustainability becomes the study and growth and development become the sub-topics.

The use of the terms sustainable and sustainability, as overarching terms to explain the organization of a current economic system’s growth and development characteristics, although “fuzzy” in its meaning and deployment, appears to come with the implicit assumption of nonviable and/or sectors within an economic system are not viable. The implicit assumption is that viability/sustainability is only possible with central planned management.

However, is viability/sustainability better explained by Schumpeter's "creative destruction"? That it's not so much viability or sustainability as it is: what comes next. That what is viable/sustainable today gets replaced by a more viable item/idea/model/firm, etc. Were oil lamps viable? Was Woolworth viable? Were stagecoaches viable?

Where does this implicit assumption, of nonviable or unsustainable without centrally planned management, come from? What makes those using the term “sustainable” also rely on central planning to make the item/subject “sustainable”? Likely it comes from the failure to see free people making free decisions in a free market place. Free people making free decisions, generally based on self interest, looks like chaos to the casual outside observer. However, the chaos is really efficiency when organized around an economy based on price. Price allows the self interested decisions to exchange at price when all parties believe that exchange should occur as all parties see a benefit. The seeming chaos of the free market makes the casual outside observer nervous. Chaos needs managed. That chaos needs organized and planned. However, the chaos is really self interested decisions that become highly organized around “price”.

Hence the main features of “sustainable” is the replacement of the free market phenomena of growth and development with the centrally planned management of growth and development. That, for instance, a resource can not be sustainable without central planning or else the resource becomes unsustainable very quickly. That the price of the resource will sky rocket and the supply will run out quickly with out central planning. Of course the question then arises that exactly who has the “special knowledge” to centrally plan? That some special knowledge exists that can replace the zillions of self interest-self directed mundane knowledge decisions occurring in the market each day?

Moreover, the idea that special knowledge exists, that can create central planning, that reduces price and extends supply makes no sense given the following:
  1. sustainable gets used in a way that means the low hanging fruit of a particular resource has been plucked and hence the remaining resource gets more difficult to find and more expensive to produce.

  2. however, for example, oil that was easily accessible in the 1930's-1950's,

  3. extraction costs of the low hanging fruit was actually more expensive, in real terms, then the current extraction costs today when deposits are no longer considered low hanging fruit (cost per unit has fallen even though deposit are more difficult to extract than 1930-1950). Meanwhile supply has expanded at lower real costs,

  4. the same is true with natural gas, coal, and many other resources. Technology, driving Schumpeter's "creative destruction", has outpaced more difficult extractions situations and real costs of extraction have fallen. Viability and sustainability increased at a lower real cost yet no centrally planned management system was deployed.
If people demand and value an item it will be supplied. That the current particular supply may well end up experiencing Schumpeter's creative destruction. That costs will be driven down. That supply will cost less and less until the supply is replaced by a more viable supply through market forces. That is, peat bogs, wood burning, oil lamps, and candles were all viable but where eventually replaced or reduced as other items became viable and available at which time the replacement supply became demanded for its value.

6 comments:

  1. Why did you clutter up your excellent blog with this incoherent drivel? Oh, right, you're off at Burning Man, doing drugs and having casual sex with strangers. ;-) Maybe this entry was written there, while in an altered state.

    Just for starters, who (besides the author) says that "sustainable" implies "centrally planned?" I don't see the connection.

    People who have difficulty understanding what "sustainable" means often seem to be blinded by ideology.

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  2. The term sustainable has ben co-opted by all sorts of characters, but at least around my neck of the woods the people who glom onto this term are reactionaries who reject most technologies (except computers and iPods) and revere ancient methods of farming that clearly were not sustainable, as the historical record demonstrates abundantly.

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  3. @Kurtz - Misuse of a word by one group does not justify its misuse by others who should know better. And ideological bias is not a good basis for rational discussions.

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  4. JWT emails: "Development first is not rare. It is quite common. There are dozens of examples in So. Calif. alone. The entire new product/service business involves development first and growth later."

    DW emails: "Smart growth, sustainable growth are new terms that have been coopted by developers to justify more growth, traffic and pollution. They started off meaning something good, but were twisted and warped by the developer and their shills to mean business as usual with a green tint."

    BB emails: "I appreciated WEH's disposition on "sustainability," as I have trying to resolve the fuzziness and inconsistencies in both English and Chinese for over twenty years."

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  5. DW adds: "When you say "free people making free decisions, usually based on self interest", I think of all the free corporations making decisions to pollute the air and cause huge traffic problems by their sprawl development project, which they're free to do because society picks up most of the environmental and economic costs their activities spawn. That's not freedom, it's taxpayers subsidizing stupid decisions by developers because we don't make they account for an pay all the externality costs associated with their profit making activities."

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  6. JW emails: "Excellent. You are right on target.

    The gut reaction to these memes is fascinating. The most powerful memes seem to rely on gut reactions and defy rational analysis. “Fair” is an excellent example of a fuzzy word that means many things to different people, but for which almost everyone has a gut reaction to support the word, whatever the speaker’s or writer’s actual intent. I have come across the term “animal brain” in my reading recently. Someday I hope explore the connection between certain classes of memes and gut reactions at length. I hope that exposing the animal brain reaction to certain words will contribute to reducing their power and the damage they can do."

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