Innovating our way out of crisis

Marketplace Staff Nov 13, 2007
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Innovating our way out of crisis

Marketplace Staff Nov 13, 2007
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Scott Jagow: Consumer spending is the lifeblood of our economy. But it can be a poison pill for the environment, and perhaps even our own health. All those things that we make and ship and buy, will they eventually bury us? Or can we keep going like this if we innovate?

Larry Goulder has been researching that question. He’s a professor of environmental economics at Stanford. I asked him: Is our consumer economy sustainable in the long run?

Larry Goulder: I’d like to say yes or no, but I think I’d have to say maybe.

Jagow: Maybe? (Laughs) Why? Why would you say maybe?

Goulder: Well, I guess I’ll start with the pessimistic side — which is, as your series indicates, there’s a lot that we in the U.S. are doing through our consumption to deplete natural resources. All of that is very worrisome. The positive side is that if we invest sufficiently in other forms of capital, like human capital, or in man-made capital such as buildings or equipment and machines, it’s possible that that kind of investment can compensate for the loss of environmental capital.

Jagow: All right, you’re going to have to explain that one to me. I don’t understand how if we build more buildings, and we make more machines, and we invest in human capital, how that is going to save the environment.

Goulder: Well it takes know-how, and it also takes a kind of substitution. I’ll give you a couple of examples: If we invest in, say, equipment that provides for better irrigation methods, then we can produce food with less water input and thus economize on water resource use. Similarly, on the consumer level, we can invest in ways that enable consumers to substitute among products. An example would be if we developed technologies and manufacturing capacity to produce cars that require less gasoline, like hybrids or fuel-cell automobiles, then consumers can substitute for those kinds of cars and put less demands on the environment.

Jagow: How much of a leap of faith is it for us to assume that we can keep up with the innovation that will protect our resources?/p>

Goulder: Yes, what we’ve seen in recent history is that innovation has tended to keep pace with the dwindling of natural resources, so that in many countries, standards of living have been able to be maintained. As we look to the future, I should acknowledge that there’s considerable disagreement among researchers, particularly between many economists and many ecologists, as to what the prospects are for the future. Economists tend to be a lot more optimistic in terms of substitution possibilities and the potential for innovation and new knowledge to compensate for the loss of natural resources.

Jagow: Larry, after doing all this research, what about your own consumption patterns?

Goulder: Well, my daughters have encouraged me to get a bigger car, but I’ve so far held firm. My wife has encouraged me to get some outdoor heaters so we can sit out on the porch when the temperature is very cold and still be warm. And I’m vehemently opposed to that. But on the other hand, as part of my work, I spend a lot of time traveling and have a fairly big ecological footprint. I try to justify that on the grounds that this is a neccessary evil for the sake of a better good of trying to improve the environment through my work.

Jagow: Larry Goulder — he studies environmental economics at Stanford University. Thanks for joining us.

Goulder: Thank you.

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