Real production or fake production

When a consumer product is produced, it is valued at its full cost without deducting the costs of disposing of it.

December 16, 2010 22:58
3 minute read.

vegetables 311. (photo credit: ASSOCIATED PRESS)

Last week I wrote about the “anticonsumerism” movement, in the context of a report that the Environmental Protection Ministry is preparing a television campaign that will educate for “green consumerism” and among other things will encourage moderating consumption expenditures.

An astute reader wrote to ask me if such a campaign wouldn’t be likely to harm employment. After all, if people buy less, there will be fewer jobs to provide them with goods and services.

The short answer is that that is exactly the point. The long answer is that the short answer shows how far our society is from coming to terms with the movement to limit consumption.

The idea of excess consumption has a strictly economic understanding and a more far-reaching philosophical understanding.

Economic reason

The strictly economic understanding is as follows: Much of what is recorded in our national accounts as productive activity leading to consumption that increases our welfare is fake – a consequence of sloppy accounting.

When we pump oil out of a well, this is listed on our national income accounts as “production,” but in fact a large part of it is reduction in inventory because someone owned that well and now he has less oil inside.

When the oil is burned we record that as a productive use, but we do not make a deduction for the damage the burning does to the environment through air and thermal pollution.

When a consumer product is produced, it is valued at its full cost without deducting the costs that will automatically be induced in disposing of it.

To add insult to injury, we then record the expenses of waste disposal as a productive activity.

According to orthodox economic theory, the problem could be largely solved by taxes. Israel and Europe already have very high taxes on gasoline to factor in the costs of pollution and road congestion. Taxes on packaging commensurate with the costs of disposal would be another step in the right direction. All these steps would lower national income (GDP) and most likely employment as well. But that is not because they are not worthwhile; it is because the national income accounts are incorrectly measuring welfare by leaving damage to the natural environment, through pollution or using up nonrenewable resources, off the balance.

The Environmental Protection Ministry believes progress can be made by education as well. That’s why they prepared the broadcasts, but many are skeptical of the effects of jawboning.

Philosophical approach

The philosophical approach is as follows: It is not enough to pursue our existing preferences and consumption patterns in a more ecological way.

These habits are themselves a product of a “consumption ethos,” whereas what is needed now is a “conservation ethos.”

It is evident that our desired pastimes change over time and that these changes are correlated with our values and ethics. It used to be a wildly popular sport for scores of men, women, children, horses and dogs to go chasing after one tiny wretched red fox and endeavor to tear it to pieces. Today few people would consider this activity “fun.”

By the same token, many environmentalists would say it is not enough that those who engage in environmentally harmful activities are induced to bear the full economic costs of the damage done to the environment.

We should create a mind-set in which the realization of the economic damage wrought by these activities makes us stop viewing them as fun in the first place. Education and exhortation would clearly seem necessary to effect such a change.

I think both of these changes in our approach to consumption are called for. Since both help protect the environment, both fall squarely within the mandate of the Environmental Protection Ministry.

Some kind of entente will have to be reached between the forces of consumerism, which still has a important role in improving our standard of living, and the forces calling for moderating consumption and seeking ways to pursue well-being that are not at the expense of the natural environment.

Asher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).

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