I’m not sure environmentalists understand what the word “consumption” means to economists.

Feb 25 JDN 2458175

Several times now I’ve heard environmentalists repeat variants of this line: “Capitalist economies depend on consumption; therefore capitalism is incompatible with environmental sustainability.”

A recent example comes from this article on QZ arguing that “conscious consumerism” isn’t viable for protecting the environment:

In short, consumption is the backbone of the American economy—which means individual conscious consumerism is basically bound to fail. “70% of GDP in the US is based on household consumption. So all the systems, the market, the institutions, everything is calibrated to maximize consumption,” Brown told me in a later interview. “The whole marketing industry and advertising invents new needs we didn’t know we had.”

Consumption. You keep using that word… I do not think it means what you think it means.

To be clear, let me say that I basically agree that “conscious consumerism” isn’t good enough. There are a few big things you can do to reduce your carbon footprint, like moving to California (or better yet, Scandinavia), becoming vegetarian, driving a hybrid car (or not driving at all), and not flying on airplanes. Aside from that, your consumer choices are not going to have a large impact. There is a huge amount of greenwashing that goes on—products that present themselves as eco-friendly which really aren’t. And these things by themselves are not enough. A 2012 study by the European Roundtable on Sustainable Consumption and Production found little or no difference in long-run carbon footprint between people who claim to be “green consumers” and people who don’t.

Moreover, there is a strong positive correlation between a country’s GDP and its carbon footprint. The list of countries with the highest carbon emissions looks a lot like the list of countries with the highest GDP.

But there is still substantial variation in the ratio of GDP to carbon emissions. Scandinavia does extremely well, at over $5,000 per ton (as does France, thanks to nuclear energy), while most European countries make about $3,000 per ton, the US is at about $2,000 per ton, and the very most carbon-intensive economies like China, the UAE, and South Africa only make about $1,000 per ton. China produces more carbon emissions per capita than Denmark despite having only one-third the standard of living (at purchasing power parity). Emissions also vary a great deal by states within the US; California’s per-capita emissions are comparable to France’s, while Wyoming’s are worse than the UAE’s.

This brings me to my main point, which is that economists don’t mean the same thing by the word “consumption” that environmentalists do. The environmentalist meaning might be closer to common usage: When something is consumed, we think of it as being destroyed, despoiled, degraded. (It’s even an archaic euphemism for tuberculosis.) So I can see why you would think that if our economy is 70% “consumption” that must make capitalism terrible for the environment: An economy that is 70% destruction, despoliation, and degradation does sound pretty bad.

But when economists use the word “consumption”, what we actually mean is private household expenditure. Our economy is 70% “consumption” in the sense that 70% of the dollars spent in GDP are spent by private individuals as opposed to corporations or the government. Of the $19.7 trillion of US GDP, $13.6 trillion was personal consumption expenditures. That’s actually 69%, but it’s okay to round up to 70%. The rest is made up of $3.4 trillion in government spending, $3.3 trillion in private investment, and a loss of $0.6 trillion from our trade deficit.

There’s no particular connection between private household expenditure and destruction, despoliation, or degradation. In fact, the most destructive form of GDP is obviously military spending, which is not counted as “consumption” in the National Income and Product Accounts but rather as “government expenditure”. Military spending is almost pure waste from an ecological perspective; it consumes mind-boggling amounts of fossil fuels in addition to causing death and destruction. The US military produces almost as much total carbon emissions as the entire country of Denmark.

In fact, the vast majority of private household expenditure in highly-developed countries is in the form of services—over $9.2 trillion in the US. The top four categories for expenditure on services in the US are housing/utilities, healthcare, finance, and food service. I can at least see how housing and utilities would be related to ecological impact—concrete and steel are very carbon-intensive, as is electricity if you’re not using nuclear or renewables. But healthcare, finance, and food service? When environmentalists point to the fact that 70% of our economy is consumption as evidence of the fundamental unsustainability of capitalism, this amounts to asserting that the reason we can’t prevent global warming is that there are so many nurses, accountants, and waiters.

Of course, most people don’t quite grasp what economists mean when we use the word “consumption”, so it makes for a nice talking point for environmentalists. You can conjure images of degradation and destruction while citing the respected authority of the National Income and Product Accounts. If you were already left-wing otherwise (as most environmentalists are), you can make it seem as though the problem is capitalism itself, the very structure of an economy built upon “consuming” the Earth.

In reality, there is enormous variation between countries in terms of their carbon efficiency, and in fact the most carbon-efficient nations are all those that have the highest degrees of political and economic freedom—which is to say, social democracies. One can debate whether social democracies like Denmark and Sweden are “truly capitalist”, but they definitely have free-market economies with large private sectors. On a global and historical scale, there’s really not that much difference between Denmark and the United States (compare to the USSR, or China, or Burkina Faso, or Medieval Japan, or Classical Rome). And if the US isn’t capitalist, who is?

My advice? Don’t talk about consumption at all. Talk about carbon emissions. Don’t ignore variation in GDP/carbon ratios: If the world copied China, we’d all have a per-capita income of $15,500 and emissions of 7.6 tons of carbon per person per year; but if the world copied Denmark, we’d all have a per-capita income of $51,000 and emissions of 6.8 tons of carbon per person per year. (Granted, even 6.8 is still too high; the targets I’ve seen say we need to be at about 3.0 by 2030. But Denmark has also been trending downward in emissions, so we could copy them on that too.) Reducing our standard of living wouldn’t save us if it meant being like China, and maintaining it wouldn’t hurt us if it meant being like Denmark.

I definitely agree that focusing on consumer choices isn’t good enough. Focus on policy. Carbon taxes, bans on unconventional extraction (e.g. offshore drilling, fracking), heavy investment in solar and nuclear energy, large reforestation projects, research into soil sequestration and ocean seeding. Demand these things from all politicians of all parties at all levels of government always. Don’t take no for an answer—because millions of people will die if we don’t stop climate change.

But I don’t think nurses, accountants, and waiters are the problem—and it doesn’t hurt for people to become vegetarian and buy hybrid cars.

What can we do to make the world a better place?

JDN 2457475

There are an awful lot of big problems in the world: war, poverty, oppression, disease, terrorism, crime… I could go on for awhile, but I think you get the idea. Solving or even mitigating these huge global problems could improve or even save the lives of millions of people.

But precisely because these problems are so big, they can also make us feel powerless. What can one person, or even a hundred people, do against problems on this scale?

The answer is quite simple: Do your share.

No one person can solve any of these problems—not even someone like Bill Gates, though he for one at least can have a significant impact on poverty and disease because he is so spectacularly mind-bogglingly rich; the Gates Foundation has a huge impact because it has as much wealth as the annual budget of the NIH.

But all of us together can have an enormous impact. This post today is about helping you see just how cheap and easy it would be to end world hunger and cure poverty-related diseases, if we simply got enough people to contribute.

The Against Malaria Foundation releases annual reports for all their regular donors. I recently got a report that my donations personally account for 1/100,000 of their total assets. That’s terrible. The global population is 7 billion people; in the First World alone it’s over 1 billion. I am the 0.01%, at least when it comes to donations to the Against Malaria Foundation.

I’ve given them only $850. Their total assets are only $80 million. They shouldn’t have $80 million—they should have $80 billion. So, please, if you do nothing else as a result of this post, go make a donation to the Against Malaria Foundation. I am entirely serious; if you think you might forget or change your mind, do it right now. Even a dollar would be worth it. If everyone in the First World gave $1, they would get 12 times as much as they currently have.

GiveWell is an excellent source for other places you should donate; they rate charities around the world for their cost-effectiveness in the only way worth doing: Lives saved per dollar donated. They don’t just naively look at what percentage goes to administrative costs; they look at how everything is being spent and how many children have their diseases cured.

Until the end of April, UNICEF is offering an astonishing five times matching funds—meaning that if you donate $10, a full $50 goes to UNICEF projects. I have really mixed feelings about donors that offer matching funds (So what you’re saying is, you won’t give if we don’t?), but when they are being offered, use them.

All those charities are focused on immediate poverty reduction; if you’re looking for somewhere to give that fights Existential Risk, I highly recommend the Union of Concerned Scientists—one of the few Existential Risk organizations that uses evidence-based projections and recognizes that nuclear weapons and climate change are the threats we need to worry about.

And let’s not be too anthropocentrist; there are a lot of other sentient beings on this planet, and Animal Charity Evaluator can help you find which charities will best improve the lives of other animals.

I’ve just listed a whole bunch of ways you can give money—and that probably is the best thing for you to give; your time is probably most efficiently used working in your own profession whatever that may be—but there are other ways you can contribute as well.

One simple but important change you can make, if you haven’t already, is to become vegetarian. Even aside from the horrific treatment of animals in industrial farming, you don’t have to believe that animals deserve rights to understand that meat is murder. Meat production is a larger contributor to global greenhouse gas emissions than transportation, so everyone becoming vegetarian would have a larger impact against climate change than taking literally every car and truck in the world off the road. Since the world population is less than 10 billion, meat is 18% of greenhouse emissions and the IPCC projects that climate change will kill between 10 and 100 million people over the next century, every 500 to 5000 new vegetarians saves a life.

You can move your money from a bank to a credit union, as even the worst credit unions are generally better than the best for-profit banks, and the worst for-profit banks are very, very bad. The actual transition can be fairly inconvenient, but a good credit union will provide you with all the same services, and most credit unions link their networks and have online banking, so for example I can still deposit and withdraw from my University of Michigan Credit Union account while in California.

Another thing you can do is reduce your consumption of sweatshop products in favor of products manufactured under fair labor standards. This is harder than it sounds; it can be very difficult to tell what a company’s true labor conditions are like, as the worst companies work very hard to hide them (now, if they worked half as hard to improve them… it reminds me of how many students seem willing to do twice as much work to cheat as they would to simply learn the material in the first place).

You should not simply stop buying products that say “Made in China”; in fact, this could be counterproductive. We want products to be made in China; we need products to be made in China. What we have to do is improve labor standards in China, so that products made in China are like products made in Japan or Korea—skilled workers with high-paying jobs in high-tech factories. Presumably it doesn’t bother you when something says “Made in Switzerland” or “Made in the UK”, because you know their labor standards are at least as high as our own; that’s where I’d like to get with “Made in China”.

The simplest way to do this is of course to buy Fair Trade products, particularly coffee and chocolate. But most products are not available Fair Trade (there are no Fair Trade computers, and only loose analogues for clothing and shoes).

Moreover, we must not let the perfect be the enemy of the good; companies that have done terrible things in the past may still be the best companies to support, because there are no alternatives that are any better. In order to incentivize improvement, we must buy from the least of all evils for awhile until the new competitive pressure makes non-evil corporations viable. With this in mind, the Fair Labor Association may not be wrong to endorse companies like Adidas and Apple, even though they surely have substantial room to improve. Similarly, few companies on the Ethisphere list are spotless, but they probably are genuinely better than their competitors. (Well, those that have competitors; Hasbro is on there. Name a well-known board game, and odds are it’s made by a Hasbro subsidiary: they own Parker Brothers, Milton Bradley, and Wizards of the Coast. Wikipedia has their own category, Hasbro subsidiaries. Maybe they’ve been trying to tell us something with all those versions of Monopoly?)

I’m not very happy with the current state of labor standards reporting (much less labor standards enforcement), so I don’t want to recommend any of these sources too highly. But if you are considering buying from one of three companies and only one of them is endorsed by the Fair Labor Association, it couldn’t hurt to buy from that one instead of the others.

Buying from ethical companies will generally be more expensive—but rarely prohibitively so, and this is part of how we use price signals to incentivize better behavior. For about a year, BP gasoline was clearly cheaper than other gasoline, because nobody wanted to buy from BP and they were forced to sell at a discount after the Deepwater Horizon disaster. Their profits tanked as a result. That’s the kind of outcome we want—preferably for a longer period of time.

I suppose you could also save money by buying cheaper products and then donate the difference, and in the short run this would actually be most cost-effective for global utility; but (1) nobody really does that; people who buy Fair Trade also tend to donate more, maybe just because they are more generous in general, and (2) in the long run what we actually want is more ethical businesses, not a system where businesses exploit everyone and then we rely upon private charity to compensate us for our exploitation. For similar reasons, philanthropy is a stopgap—and a much-needed one—but not a solution.

Of course, you can vote. And don’t just vote in the big name elections like President of the United States. Your personal impact may actually be larger from voting in legislatures and even local elections and ballot proposals. Certainly your probability of being a deciding vote is far larger, though this is compensated by the smaller effect of the resulting policies. Most US states have a website where you can look up any upcoming ballots you’ll be eligible to vote on, so you can plan out your decisions well in advance.

You may even want to consider running for office at the local level, though I realize this is a very large commitment. But most local officials run uncontested, which means there is no real democracy at work there at all.

Finally, you can contribute in some small way to making the world a better place simply by spreading the word, as I hope I’m doing right now.