Is Earth Hour Economics right? I think it isn’t


Economists like to look callous and I am no exception. There is no better opportunity to develop an image of a cold-hearted cynical economist than Earth Hour when everybody is so enthusiastic about “saving the planet”. As an example as to why people hate economists I will try to argue that this enthusiasm is based on mistaken beliefs. My reason is science, not ethics. I think that the economics suggested by the Earth Hour event is wrong. Earth Hour Economics is bad economics.
But does the Earth Hour movement have an economics at all? I think it does, even if it is only an implicit economics. By urging us to turn off the lights Earth Hour Economics suggests that there is something wrong with economic development. City lights are good predictors of economic development. Take a look at an “Earth at night” photo and you will see it: London is bright, Pyongyang is dark (1). Earth Hour Economics suggests that London is too bright – economic development went too far.
The First Implicit Theorem of Earth Hour Economics is that economic development is bad. It is bad for the environment and, as a result, it is or will soon be bad for the people. Economic development will impoverish us in the end by ruining the environment.
Once you understand that economic development is the growth of the value people attach to those things they have this message is already blurred. If people think that a healthy environment is a good thing (and they do) they will want to have more of it as they get richer. Really, careful examinations show that richer countries tend to have better environmental qualities than poorer ones do (2).
Of course I am not saying that air pollution and other environmental damages never happen. They do happen, but, first, they are the costs we pay for the improvement in the quality of life of millions of poor people (think of China). Second, very often they are resulted form the failure of governments to create and enforce property rights and not from economic development as such. Third, economic development is made possible by improvements in technology which makes us able to find smarter and smarter ways to abate the damage we caused before. Economic development is not the enemy of the environment.
The Second Implicit Theorem of Earth Hour Economics is that economic development is limited by natural resources. As we are running out of these resources economic development will necessarily stop. This logic seems so obvious to many that I often think I am not sophisticated enough to see the point. Smart people tend to say when talking about the “limits of growth” that in a closed system growth cannot be sustained forever. I really do not understand what the “closed system” here is. Is it the Earth? Then, what about the Sun? Or is it our Solar System? Is it the whole Universe? If it is the latter I wouldn’t worry about a Judgement Day, the Universe seems to have enough resource even for aliens, not only for an “overpopulated” humanity.
Again, the “closed system” argument is, I think, irrelevant once you have a correct notion of economic development. Putting a greater value on those things we already have is economic development. People have always had silicon under their feet but until now they just haven’t been able to figure out how to make smartphones from it. The limit is not natural resource but human ingenuity.
Even the claim that we are running out of resources is questionable. Is oil less scarce today than it was one hundred years ago? The correct answer comes from a look at the price of oil as compared to the prices of other things. Do you have to work more for a litre of petrol today than you would have had to a hundred years ago? How about a litre of clean water?
The Implicit Theorems of Earth Hour Economics are false because their assumptions are false. It is assumed that people consume but do not produce; that people use resources but do not create any; that economic development is independent of people’s subjective well-being. The truth is just the opposite: people are producers, too; they create new resources by innovating and discovering new ways of using old things; and economic development is the increase of wealth, not the increase of some physical measure of it. The logic of rats in the laboratory and particles in the particle accelerators does not apply for people because people are creative.
It sounds like Hollywood but it’s true: the main source of economic development is inside people, not outside them. As the economist Julian Simon showed (3), the ultimate resource is human creativity. Creative minds need more light, not less.

Pál Czeglédi

2 Anderson, T. L. (2008). Environmental Quality. The Concise Encyclopedia of Economics. Library of Economics and Liberty.
3 Simon, J. L. (1998). The Ultimate Resource 2. Princeton, New Jersey: Princeton University Press.

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