My Economics Textbook (part one)…

…or “now I know why this country is infested with libertarians”.

My textbook for my Microeconomics class arrived the other day, and I’ve been leafing through it, reading bits and pieces of it. I have no opinion about the various models presented in there, not being an economist (d’uh), but some of the phrases in it, some of the opinions, and some of the “real-life examples” for economic principles etc. are disturbingly bad. If this is what most college-educated Americans know of economics (and it’s very possible, since the textbook claims to be the most commonly used one), I’m no longer surprised so many of them are libertarians.

Some of it may well be a problem with it being a beginner’s class, and thus full of stuff that’s so simplified, it’s almost wrong. It happens. However, when half the explanations seem to include an invisible “assume a spherical cow population of cheap, expendable, emotionless robots”, the simplifications actually end up being potentially dangerously wrong.

Can’t get even past the preface explaining the changes since the last edition, before we get to this awesome paragraph (emphasis mine):

This chapter addresses the question of whether the world is becoming overpopulated and rapidly running out of resources. It covers topics such as declining fertility rates, the optimal rate of resource extraction, resource substitution, resource resource sustainability, oil prices, and alternative energy sources. An understanding of the basic economic principles of natural resource economics will be critical to future voters and leaders. This micro treatment of natural resource and energy topics is particularly timely since many students are regularly exposed to alarmist views on these subjects

ooooh, “alarmists”, what a wonderful start. Ok then, let’s go to Chapter 15: Natural Resource and Energy Economics. First, we get a fairly decent (as far as I can tell) assessment of demographic development, with the minor smearing-by-omission of Malthus, whose assessment of the dangers of populations was quite right for a world in which two things didn’t exist: female emancipation and reliable birth control. The book only says that he was wrong. Also, a strange paragraph about how women had to have many children just so at least two could survive to adulthood, and that “parents – initially unaware that such a revolutionary change in death rates has taken place – for a while kept having six or more children”. Something tells me that wasn’t nearly as planned and premeditated as it sounds. Like I said, “assume robots”…

Then we go to resource usage: all these doomsayers were wrong because in fact the supply of resources has been increasing. True enough, so far, since we haven’t run out of anything significant yet. And what will happen when we do run out? Well, population growth will stop and reverse, and resource use has also leveled off (Forgetting to mention that many have leveled off waaaaay above sustainable levels while some don’t HAVE sustainable levels at all, and that some have leveled off ONLY on a per-capita basis was a pure accident, right?), and therefore we can conclude that future technology will prevent demand for resources exhausting their overall supply (wut? that would require the ability to increase efficiency to the point where you can create something out of nothing, or replacing it with an equivalent. just what is equivalent to iron? oil (for fuel AND plastics AND medicine)? potable water?!). Oh, and “even if we were to run out of oil, alternatives would quickly become available”. IF we run out of oil? Also, I’d like to know their definition of “quickly”. New stuff only comes quickly to those with money, and these new resources wouldn’t be cheap, merely relatively cheaper than the now extremely expensive oil. Oh, and we’re not going to run out of energy because of “clean coal” and fuel made from turkey guts. Really. And lastly, overexploitation is caused by “incomplete property rights” (because no one ever over-extracts their own resources and companies ALWAYS carefully plan years and even decades ahead instead of worrying primarily about increasing next quarter profits. Just ask the Enron Guys). This is exemplified by the tiresome example of successful vs. unsuccessful wildlife preservation: State-run programs always have massive problems with poachers. Programs that have the local population as “owners” of the wildlife, i.e. in control of the tourism (they run it, they profit from it, etc.) give the population more incentive to protect the animals and not kill them. This is phrased as a “public property vs private property” thing, when in all the programs I’m familiar with the “property” is communal, at the village-level. If it were in fact private, I suspect it would just cause the same situation as with Medieval European”private hunting reserves”: the owner has incentive to protect the forest and the wildlife, but everyone else doesn’t.

At the end of the chapter, there’s a little essay called “Is Economic Growth Bad for the Environment?”. They argue that it isn’t, because rich countries have higher EPI scores. They even have a nice chart that indeed shows a very strong correlation between EPI scores and GDP per person. Which of course tells us fuck-all about economic growth, and conveniently ignores the fact that most extraction and manufacturing, the source of most resource use and pollution, has been outsourced out of these rich countries into the poor countries. And a certain economist whom I won’t name even suggested exporting waste. Plus, even scoring the highest on EPI doesn’t mean it’s enough, if “highest” still means using too many resources, spewing too much CO2 into the atmosphere, degrading arable land, unsustainable use of water, etc.

To round off the “economics and environment” issue, in another chapter, they have this to say about Climate Change:

Economists also stress that the market mechanism, through its system of prices and profits and losses, will make appropriate adjustments based on new climatic realities. Air-conditioner sales may rise; snow shovel sales may fall. Some agricultural lands probably will be deserted; others farther north will be cultivated. The maple syrup industry in New England may shift to Canada. Nevertheless, the transition costs – the costs associated with making economic adjustments – of global warming will undoubtedly be very high unless some actions are taken to reduce greenouse gases. But industrial economies are built on carbon-based energy sources, so the costs of reducing such gases are also quite high. The relevant question from the economic perspective becomes: Will it be less costly for society to reduce greenhouse-gas emissions or simply to try to mitigate their effects?

First off, what lands further north? The soil-less Canadian Shield? The permafrost currently sinking into the ocean? And this would of course happen at the cost of the forests that are currently covering these areas, but without new forests sprouting up in the abandoned deserts (see Iraq and Egypt for what happens when agricultural lands stop being agricultural).

And secondly, “cheap, expendable, emotionless robots” again. I know this is an economics textbook, not an ethics textbook, but you can’t tell me that there’s even a question about which solution would be better: entire countries are scheduled to become uninhabitable, and I’m having a hard time believing such massive disruptions to settlement patterns(nevermind massive death for a moment; apparently human life, especially brown human life, is cheap) could be cheaper than CO2 emission reduction.

This concludes the environmental part of the rant. Since the post is already pretty long, I’ll stop here, and write the rest tomorrow (I really really will, promise. It’s already partially written anyway).

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20 comments on “My Economics Textbook (part one)…

  1. Martin says:

    Economics. Yuck. If I ever need to be put to sleep without an anaesthetic, I might borrow that book of yours !

  2. David Marjanović says:

    Martin, have you tried Lenin’s collected works? That’s what I used when my sister once couldn’t fall asleep. They worked most satisfactorily.

    Jadehawk, your description spirals into madness. Scary madness. Never mind the pathological lack of empathy! Fuel from turkey guts — WTF, it takes more energy to raise a fucking turkey than you can ever get by burning it! And growing the food for the turkey requires 10 times that energy again!! Demented fuckwits!!!

    To change the topic, I wonder what such global topics as overpopulation and global warming are even doing in a microeconomics textbook? ~:-| I thought microeconomics is economics at the level of individual corporations, and even macroeconomics is only at the level of countries?

    BTW, just to pick on one of your examples, are we really going to run out of iron ore soon? (Even when not counting stuff like basalt — 8 % iron — as iron ores.)

    I’ll stop here, and write the rest tomorrow (I really really will, promise. It’s already partially written anyway).

    ^_^

  3. 'Tis Himself says:

    What is that textbook and who are the authors?

    If I was using that book to teach a basic economics course I’d be doing a lot of “this is extremely simplified” and “yes, but” and “this is an ideological statement rather than an economic statement.”

    The relevant question from the economic perspective becomes: Will it be less costly for society to reduce greenhouse-gas emissions or simply to try to mitigate their effects?

    No, the relevant economic question is: How will industrial societies be able to convert from a cheap fossil fuel basis to some other form of energy production at low economic and social costs?

  4. David Marjanović says:

    10 times that energy again

    Uh, that’s probably nonsense. The sun does shine for free. Good to know I’m capable of incoherent rage.

    Oil-into-potatoes agriculture, however, still isn’t sustainable. To use turkey guts instead of petroleum would probably amount to building a perpetuum mobile.

  5. David Marjanović says:

    Now I wonder what European economics textbooks are like, given the near-total lack of libertarians over here. I’ve never seen one.

    If the professor agrees with that book too much, I wish you the courage and presence of mind to speak up in class…

  6. Jadehawk says:

    I wonder what such global topics as overpopulation and global warming are even doing in a microeconomics textbook?

    it’s not a microeconomics textbook, it’s a general economics textbook covering both micro and macroeconomics; it just means I’ll only be using half the book for the class itself.

    What is that textbook and who are the authors?

    it’s this book

  7. Jadehawk says:

    oh, and no, I don’t think we’ll be in danger of running out of iron anytime soon, it’s just the first massively used metal that came to mind.

    OTOH, lithium might be a problem, IIRC.

  8. llewelly says:

    Then we go to resource usage: all these doomsayers were wrong because in fact the supply of resources has been increasing.

    For many resources, this claim is egregiously false. For starters, the supply of all mineral resources is effectively fixed; there is no fucking nucleosynthesis going on in the Earth’s crust, and fossil fuels are made at a rate so slow that it is irrelevant. Furthermore – many renewable resources are declining in supply; there are far fewer forests today than 50 years ago, and many formerly common fishes are now rare.
    The fact that the authors of a fucking economics textbook are allowed to pretend that the rate a resource can be exploited is the only aspect of supply that matters illustrates that large sectors of economics of developed into a dangerously misleading mythology.

    True enough, so far, since we haven’t run out of anything significant yet.

    One fact often not admitted about many extinct animals, including the passenger pigeon and the dodo, is that they were food sources. Cod was a food source for millions of people for centuries; it played a fundamental role in the history of Europe and North America, and people all over the North Atlantic relied on it. Now nearly all of the cod fisheries of the North Atlantic are defuct, and there’s no evidence they will recover.
    And now I will move on to fossil fuels. Since global warming threatens the lives of hundreds of millions, trillions of dollars of infrastructure, and most of the world’s arable land, fossil fuel use is effectively limited by the amount of excess CO2 in the atmosphere. And that amount is presently enough to give us at least 1 meter of sea level rise with the next century, and at least 6 meters total sea level rise. By any reasonable estimation, we are effectively out of fossil fuels NOW. If the “economists” who wrote your “textbook” do not think that is significant, they are guilty of gross stupidity.

  9. 'Tis Himself says:

    A longish economic lecture follows:

    Some agronomists claim we now use 30% of the net primary product of land-based photosynthesis. Our long-range carrying capacity has been estimated to be 25% so we are overshot and becoming more so every year. We have been liquidating our natural capital as if it were disposable income, and the nearing depletion of certain capital stocks, like oil, coal, wood, metals, fresh water, fish and soil. This makes continued economic expansion difficult.

    Continuous expansion is a fundamental tenet of capitalism and most other forms of economics. However if resource input becomes lessened then output must also lessen. No matter how efficient throughput is, you cannot have output greater than input.

    Man-made capital and natural capital are not substitutable. Certain economists, like those idiots at the von Mises and Cato Institutes, say they are substitutable. But you cannot substitute more sawmills for fewer forests. If you’re building a house you can juggle the number of power saws and carpenters which means they are substitutable but you can’t build it with half the lumber regardless of how many saws or carpenters you have.

    The means of production is one simple definition of capital. This includes everything used for production. Most capital can be owned and transferred to other owners. These capitals can be divided into renewable and nonrenewable, marketed and not-markets. But not all capital has these qualities For instance human capital is what people accumulate through education and work experience. It cannot be inherited and can only be rented, not bought or sold.

    Substitution should not be confused with efficiency. Capital is a quantity of input and efficiency is the ratio of input to output. No matter how efficiently capital is used, it can’t make something out of nothing.

    Most economists use what’s called the “empty world” paradigm. The change to a “full world” paradigm will be long, difficult, and expensive in all kinds of capital.

  10. Jadehawk says:

    For many resources, this claim is egregiously false. For starters, the supply of all mineral resources is effectively fixed;

    I’m pretty sure that meant resources ready and available for further processing, as in: we’ve been digging more of the shit up etc.

    And thanks for the lecture, ‘Tis :-)

  11. llewelly says:

    David Marjanović | January 11, 2011:

    BTW, just to pick on one of your examples, are we really going to run out of iron ore soon?

    I’m not a geologist, but I get the impression there is a lot of iron relative to the rates at which it is being used. The same cannot be said for many other important minerals, such as tantalum, copper, gold, silver, and barium. Also – if there was a global move toward heavy use of nuclear power (that is, using nuclear power as heavily as France does now), the uranium 235 would be used up in a few decades at most. This is significant because the usage of nuclear power needs to be increased (it supplies far more power than fossil fuels for a given amount of CO2 produced, and is, despite radioactive waste, much less polluting than coal or oil), and France is the only nation that has a significant number of nuclear reactors that operate well with substantial amounts of plutonium-239 in their fuel. (Plutonium-239 is made from uranium 238, which is about 99 times as abundant as uranium 235.)
    But the real problem is the belief that supply has increased. Yes, there is a lot of iron in the earth’s crust, but the amount of iron there has not changed significantly in billions of years, nor is it likely to, barring the impact of an object that would make the K-T rock look like a dust grain. Things like iron, tungsten, tantalum, copper, gold, silver, and so forth are created by nucleosynthesis, and don’t fall from the sky in appreciable amounts. Thinking that supply of these elements has increased requires the kind of crazy exhibited by the electric universe advocate that drove a 98 page thread on Bad Science not too long ago. (No, I don’t recall him claiming nucleosynthesis was taking place in the earth’s crust at significant rates, but he did have some weird beliefs about nucleosynthesis.)
    From what Jadehawk has said, the “textbook” in question advocates growth with a percentage rate. That is exponential growth. Said exponential growth will use up resources at exponential rates. Since some of these resources are finite (including all minerals), and others renew at finite rates, exponential growth can gobble up these resources very fast.

  12. llewelly says:

    Jadehawk | January 11, 2011 :

    I’m pretty sure that meant resources ready and available for further processing, as in: we’ve been digging more of the shit up etc.

    And that is precisely why it is so dreadfully wrong-headed; it is impossible to dig up and process more than is in the ground. The amount that is readily available for further processing is not the supply, it is a function of how quickly the resource is being exploited; when that value increases, we are running out faster; the concept those folk call “supply” is in fact the antithesis of supply; their terminology re-labels down as up. (I’m sure you’re aware of this at some level, but I feel driven to say it anyway.) And that is why I built my words on a rejection of their terminology.

  13. llewelly says:

    ‘Tis Himself | January 11, 2011 :

    No, the relevant economic question is: How will industrial societies be able to convert from a cheap fossil fuel basis to some other form of energy production at low economic and social costs?

    I know linked this on pharyngula somewhere, but Joe Romm recently updated his plan.
    And while I suspect ‘Tis has seen this, I urge others to read: Real adaptation is as politically tough as real mitigation, but much more expensive and not as effective in reducing future misery.

  14. David Marjanović says:

    Thanks, everyone.

    Turns out the same three authors have written this macroeconomics textbook. <headdesk>

    Can’t find the link, but I’ve read about lithium. I remember it as rather scary…

  15. johannes says:

    Now I wonder what European economics textbooks are like, given the near-total lack of libertarians over here. I’ve never seen one.

    You can see them – all two* of them ;-D – at Jürgen Elsässer’s rallyes and lectures, of all things. Given the fact that libertarianism and Else’s brand of National Bolshevism have very little in common ideologically – except, perhaps, a cult of Nitzschean supermen and the sociopathic behaviour associated with this – those are strange bedfellows indeed. Wingnuts of all political strains unite, you have nothing to loose but your straightjackets!

    *Andre F Lichtschlag and Oliver Janich

  16. David Marjanović says:

    I meant I’ve never seen a European economics textbook.

    I’ve encountered a Finnish (!) libertarian somewhere online, probably on Pharyngula.

  17. johannes says:

    I’ve encountered a Finnish (!) libertarian somewhere online, probably on Pharyngula.

    Finland’s Swedish People’s Party (SFP) is quite libertarian (at least by Scandinavian standards), and while most of its adherents are members of Finland’s Swedish minority, some ethnic Finns support this party too – voting SFP has some snob value among urban upper middle class Finns.

  18. johannes says:

    Before someone gets me wrong: Libertarianism isn’t a monolithic bloc, and there is a huge distance between a mainstream political party like the SFP and the likes of Ayn Rand.

  19. Samantha Vimes says:

    Wow. I thought I was head–>desking over my Political Science textbook (which basically takes the stance that if the majority believes incorrect things, the only legitimate approach to government is to govern as if the falsehoods were true).

  20. David Marjanović says:

    Martin, have you tried Lenin’s collected works?

    I forgot to add that anything any Marxist ever wrote seems to be somewhere on the Internet in full length. Probably at marxists.org.

    if the majority believes incorrect things, the only legitimate approach to government is to govern as if the falsehoods were true

    That’s experimentally testable, and the experiment has been done. Laddies and gentlewomen, I present the EU-wide information campaign about the €. Sometime in 2000 or 2001, anyway close to the deadline (the € was introduced as cash in the first couple of countries on January 1st, 2002), it finally dawned upon the Eurocrats that most people had widely diverging, confused and contradictory ideas about what the € was going to be and what consequences its introduction was going to have. They decided to act, we were bombarded with information from all directions for months, and it worked: there was no chaos and no panic in January 2002.

    Teaching people really is an option for governments; it’s not just wishful thinking on my bleeding-heart-liberal part.

    When was your textbook written, and when was it used to teach you?

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