Economics was created to give credibility to astrologers.
Economists have predicted 5 out of the last 4 recessions.
For a long time, my attitude toward economics was cold. I was very frustrated when I learned about the law of Supply and Demand. If the price falls by $20.00, how many more items will you sell? There were never any numbers or formulas given with the law of supply and demand, therefore it wasn’t real science (in my opinion). Some terms, like GDP or Unemployment Rate have strict definitions, and can be calculated, but the things you do with them are just rough ideas. The Laffer Curve has never had any scale. My attitude on economics has been changing of late though.
For me, I now think of economics as psychology of the masses. Psychology does not have numbers or formulas either, just ideas about how a person works. Economics has ideas about how a people work. What does any of this have to do with being green though?
The economic principle of the day is the law of latent demand. Television sets used to be 16″ and run at 1000 watts or more. Todays television sets are 36 to 56″, but run at 200 watts, and today’s homes also have 2-4 sets per house. We also have TiVOs, entertainment systems, computers and monitors, and Video Game systems, each of which can run at 150-200 watts. In the long run, televisions have become a lot more efficient, but the total power usage is the same.
Think of computers. They were touted as “getting your work done four times faster!” So how come we are still working 40 hours a week? Because all they really did was succeed in was giving us four times the work.
And of course when a road is crowded, it is expanded. However the expanded road immediately gets crowded out because there is a latent demand: People who wanted to use the road but couldn’t until the expansion.
People work hard to make a more energy efficient widget, but this does not necessarily cut our energy use. Human nature causes us to just buy and use more widgets. We cannot rely on improved technology to save the environment unless we make personal sacrifices.
Journal of Physics D. recently published an article about the upcoming solid state lights—those LEDs in your flashlight, key chain, or solar garden lamp that will someday be lighting your dining room and office building. What they noticed is that we humans have spent roughly 0.72% of our GDP on lighting. Whether this is efficient fluorescent bulbs, or whale oil lamps, we have forever spent the same amount on lighting. If this trend continues into the future, we will not be saving any energy going from 28 watt bulbs to 4 watt bulbs, because we will install 7 times as many lights.
This isn’t all bad news. Thanks to computers we all have a lot more work to do, but our productivity is also much greater. A Ford Model-T gets the same gas mileage as my Toyota Camry. But the Camry is far less polluting, more comfortable, more powerful, and needs far fewer repairs.
Energy efficiency is a great goal, and I whole-heartedly support all research. However, we must not look at it as a way to lower our energy footprint. The weak link here is human nature.
Future thinkers of old imagined that by the year 2000 we only need to work a few hours a week because of machines. Robots would take care of our household needs and life would be a paradise for all. That never happened. We have the technology these people never dreamed of, but instead of going to paradise we just went back to work.
Maybe this is what we need to aim for. To be Green, we may need to try for the paradise displayed at world fairs of old. Granted we may not be as productive, but so what. This is a small price to pay for increased time with friends and family.
In writing this blog post, I am constantly thinking of examples of latent demand in real life. I’ve been appreciating economics a lot more recently, as a way to improve and understand human nature. Please share your thoughts or latent demand examples in the comments.
–Dave
