Some brief comments about the environment

Happy Friday everyone. I hope that this post finds all of you doing well.

I wanted to make a few brief comments about the environment, especially as it applies to our modern capitalist economy. Primarily the focus is on two things that dramatically affect the environment:

• The “dead end” nature of artificial chemicals and other people-made products.
• The importance of accurate pricing in capitalism.

Let’s take these in turn…

Dead End Nature of People Made Products

Unfortunately for the health and well-being of the future of our economy we need to begin to consider the long-term affect on the environment of artificially made products. To make this point a distinction needs to be made between what I am referring to as “natural” vs. “artificial” products.

Natural products are those that are manufactured by human beings but that are simple in their construction. So wooden furniture is a “natural” product because a tree is the raw material and the tree is barely modified from its original state. The nails and screws that connect the wood are also “natural” because the metal is again, barely modified from its original state. Glues, varnishes and stains used to be made from various sources that were also “natural.” Another example of a “natural” product would be cotton clothing. And yet another would be agriculture that is grown with “natural” fertilizers and pesticides.

The defining characteristic of “natural” products is that if left outside they would eventually decompose and re-contribute to the ecosystem. That is, “natural” products are within the cycle of life. Depending on the time when you look at the elements, minerals and compounds in a “natural” piece of furniture they are either the source or use of raw materials.

“Artificial” products are life cycle dead ends. Left sitting outside a broken and abandoned cell phone does not re-contribute to the ecosystem any time soon. Instead it likely stays intact for many generations and would become some future archaeologist’s prize. “Artificial” products stand outside of the cycle of life. Another example of an “artificial” product are the many manufactured chemicals, including pharmaceuticals, that are so much a part of our current lives. If we need a particular vitamin we can eat fruit or vegetables rich in that vitamin. Or we can take an artificially manufactured one that includes “artificial” ingredients such as the color or the packaging. These “artificial” products do not decompose and in their destruction become the ground of new “natural” creation.

Hopefully the important differences between “natural” and “artificial” are clear; along with the long-term ramifications. But why do I feel this is important? And more importantly, how does this relate to my second point above?

The Importance of Accurate Pricing in Capitalism

Many environmentalists feel that capitalism is a system whose natural outcome is environmental disaster. In concept, this is absolutely false about capitalism. However, in practice this is absolutely true about capitalism. Why?

The reason is that many goods in capitalism are grossly mis-priced. In a world with perfect information the long-term environmental impact of all goods and services is known ahead of time. Those impacts are priced into the goods and services to ensure that their environmental costs are included in their pricing. Super unfortunately, people do not have perfect foreknowledge.

For example, hypothetically, if it were known ahead of time back in the late 1800s that the use of fossil fuels (e.g. coal, gasoline, kerosene, etc.) would result in runaway greenhouse effects and ultimately destroy much of the ecosystem and its inhabitants within 200 years, would fossil fuels be selected as the energy to propel vehicles and other machinery? Maybe. But I guarantee that the price of those fuels would have been much higher. But because the long-term environmental impact of fossil fuels was not, and is not, perfectly known, they were, and are, mis-priced. What happens when a good is underpriced? That’s right, it is over used and over used and…over used. [Just think about underpriced mortgages, for example.]

I could list many such goods, but the problem with capitalism in practice (not theory) is that it assumes that we can perfectly price goods, not just for current consumption, but future consumption as well. But can you see what happens when much of the economy is based on “artificial” goods that are environmental dead ends?

This is not an argument to dismantle capitalism. I am a capitalist. So I fully recognize the inherent strengths of capitalism for helping to ensure that resource/economic decisions are made where the benefits of choices exceed the costs of choices. But I also am a conscious capitalist and recognize that if goods and services are not perfectly priced (especially underpriced) then it leads to drastic economic distortions. So this is an argument against “artificial” products being manufactured willy-nilly and without an apriori understanding of their relationship to the eco-system.

Jason