Undercover Economist

April 3, 2010 1:53 am

Wanted: less exploitative ways to do more with less

The innovative reuse of waste materials is a good thing. But what do you do if in turn it squanders human potential?

On a visit to India last year, I bought some shampoo from a roadside kiosk in Kolkata. This was largely unremarkable, although like any shopping trip further afield than Dublin, it brought a frisson of excitement.

I noticed that the sachet of shampoo – enough for one wash for the raven-haired beauty on the packet, or four washes for your balding columnist – was tucked into a tiny paper bag, just big enough to store two packets of cigarettes. The bag itself was fashioned out of a quarter page of the local newspaper, fastened with a couple of dabs of glue. In its own quiet way, it was a splendidly efficient use of natural resources.

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The little newspaper bag reminded me of a previous trip to India, during which I shared a brief journey with a West Coast environmental consultant named Jib Ellison. Ellison was about to give a short talk at the TEDIndia conference, about how his daughter had discovered in a bazaar in Namibia a beautifully ornate box that was crafted from a plastic Coke bottle. Ellison found the innovative reuse of waste materials inspiring. I half agreed with him.

Not being wasteful of scarce resources is, of course, a good thing. But one of the world’s most scarce resources is human time. In London, where I live, human time is expensive and raw materials comparatively cheap. We do not, therefore, make bags out of newspaper – or even wrap fish and chips in it any longer.

Namibian labour is cheap, and as for the newspaper bag that still adorns my desk, I can’t help imagining the child with deft fingers who might have stuck the thing together. We cannot allow ourselves to forget that the conservation of natural resources embodied in the newspaper bag or the Coca-Cola box is at the same time a squandering of human potential.

The late Julian Simon, scourge of the more hysterical breed of environmentalist, was fond of pointing to the fact that commodity prices have been on a long downward trend for many decades, while the price of human labour keeps rising. In 1980, Simon famously took a $1,000 bet with Paul Ehrlich, a particularly enthusiastic prophet of environmental doom, that five commodity metals of Ehrlich’s choice would fall in price over any medium-term time horizon that Ehrlich named. Ehrlich picked his five metals, chose a 10-year horizon, and lost. (In Ehrlich’s defence, he would have won the bet if the wager had been agreed more recently. And in Simon’s defence, Ehrlich made far more dramatic claims than that commodity prices would be trending upwards: Wired magazine quotes him as offering even money that England would not exist by the year 2000. If only he’d named the former East Germany instead.)

Simon made a convincing case that there is little evidence in the historical record that resources are becoming scarcer. But of course, as we are always reminded, past performance is no guarantee of future performance. Strong world economic growth – remember it? – helped push commodity prices up over the past decade. Maybe today’s highs are the start of true resource scarcity. Or perhaps, as Ehrlich discovered to his cost, they are the precursor to a supply expansion, demand contraction and another price collapse. I’m not offering any wagers either way.

Meeting Ellison and his Coca-Cola box, I tried to imagine how our economy would change if we mimicked resource scarcity by raising taxes on the use of commodities and the emission of carbon dioxide, and cut taxes on labour. I suspect we could come up with some wonderful ways to do more with less – without handing glue pots and newspapers to the local children.

Tim Harford’s latest book is ‘Dear Undercover Economist’ (Little, Brown)

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