David R. Henderson  

Robert Solow on Sustainability

Housing Policy... Choose Your Metaphor...

In the comments on my post on sustainability, commenter Bill referenced a talk by Bob Solow in 1991. It's quintessential Solow. The talk has his trademark sense of humor and his trademark clarity.

A few of his points:
1. Like David Friedman, he emphasizes that we don't know much about what the future will bring.
2. He argues that we fail to weight heavily enough the desires of those in the future. For him a 5 to 6 percent interest rate is prima facie evidence of that. But when I consider that the next generation is likely to be better off than we are, I don't see it.
3. He points out that governments tend to discount the future even more than the private market does. This undercuts his argument that the market doesn't do a sufficient job of taking account of future generations: sufficient compared to what?
4. He thinks that population growth in poor countries is the "largest single danger to sustainability in the world economy." There's not a lot of Julian Simon-like thinking in Solow.

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COMMENTS (4 to date)
Bill writes:

I've argued that if there is one thing that we can determine is unsustainable, it is a central monetary authority. If Solow thinks a natural rate of interest of 5-6% doesn't discount deep enough, what of the monetary authority that suppresses that rate?

In theory, they should be pushing rates both below and above the natural rate, but in practice, that doesn't seem to happen.

It's an interesting contrast with a government that overly discounts the future, but that relies on a central bank which seemingly pushes growth with no consideration of sustainability.

Bill W writes:

(NOT the same Bill as author of 2:34 pm post)

David, my reaction to Solow was similar to yours. However, my reason for recommending it stands, e.g., Solow's points on resource substitution, uncertainty of preferences of future generations and of future technologies, etc.

Solow's quip, "The less you know about sustainability, the better you like it" reminded me of an experience I had in graduate school during the 70s. In a course in Resource/Environmental Economics, we read the literature on resource conservation. Like sustainability, conservation was (and still is) the subject of many platitudes. At one point, one of the authors wrote, "Everybody is in favor of conservation, no matter what it means."

stickman writes:

@Bill W

Precisely. I left a comment[*] on David Friedman's original post just this morning, which ended something like:

Given how amorphous the standard definitions of "sustainable" are, couldn't we just paraphrase Potter Steward's famous aphorism on pornography: We may not be able to define what sustainability is, but we'll recognise it when we see it.

[*] Unfortunately, I see the comment has not been published yet. Perhaps I was too late to the party?

Chris T writes:

One major issue with 'sustainability' analysis using whatever definition is its tendency to only focus on one aspect of a much larger system. A component of a system may appear unsustainable on its own, but is critical to the continuation of the system as a whole and also dependent on it.

ie: Energy is absolutely critical to the function and growth of the economy, but any given resource is ultimately finite. Getting more requires advances in science and technology, which in turn requires a growing economic base to draw from. Artificially restricting energy to zero growth (by preventing its expansion in the face of rising demand) will inevitably force society to steadily increase the resources devoted to using or maintaining existing supplies with the resultant crippling of economic growth and therefore scientific advancement. Once it becomes clear new resources are needed, the knowledge, infrastructure, and production capacity to develop them do not exist and a downward spiral begins.

Care must be taken that making an 'unsustainable' practice 'sustainable' doesn't result in the wider system becoming unsustainable!

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