The point of having an economy

By Tim Worstall | Published: 2:00 AM Oct 20 2020

By Tim Worstall

There are times when it is necessary to go all the way back to our starting point in order to evaluate a claim. Sometimes, the base truths get obscured by the complexity we add to our thinking and so we need to stop a moment, think back to the root idea, and judge according to principles, not just as the latest version of received ideas.

So it is with sustainability. Yes, obviously, we don’t want to consume now to the gross detriment of the people who come after us. Those who will be here in the future are our children and descendants and it’s very human indeed to want better for them, not worse. So, as a basic concept sustainable production and consumption is obvious. This does though get confused in our modern discussions.

For example, we are told that making a t-shirt uses water. OK, so, and? It’s just that this is given to us as a statement, as if we’ll all then agree that this is a bad idea - the use of water. Yet, as we all know water doesn’t get destroyed. It arrives for free from the skies and we have an eons extant recycling system for it, oceans, evaporation, and clouds being the major constituents of it. Anyone in Bangladesh can go stand on a riverbank in the monsoon and see billions of tonnes of water off to join that recycling system too. That we use a bit of it before it gets so recycled is not obviously a problem.

Sure, there are times and places when we’ve a shortage but not to the point that a general restriction upon the consumption of water needs to be put in place. The same is clearly true of cotton - look it grows in the fields! - and so on. These are all renewable commodities, that is, even as we do face limits on how much we can have at any one time.

However, sustainability has now taken on a further hue. Which is that we should just reduce our consumption just because we should reduce our consumption. Nusrat Zahan tells us in this newspaper that “consumption of clothes is fuelled more by the desire to satisfy their emotional and egotistical desire” and I agree entirely, that is so. None of us needs to have more than two outfits, each being plain and simple. Our need is merely to cover nakedness to beat the elements, health care, meaning that we need to have one to wear while the other is washed.

But that’s not the point, not the point at all. Our whole enterprise in having an economy at all is that we human beings gain more of what we desire rather than being able to have only what we need. We can live, and many of our forebears did, on little but rice and the occasional piece of fish. We can - many of our forebears did - live in a rough hut. Life is entirely possible with no more clothing than a couple of cotton shirts, and didn’t our forebears lust for more than that?

Our whole enterprise is to observe that while human needs are rather small - no one actually needs education for example, nor a holiday, or travel, movies or even coffee - human desires are infinite. The resources available to sate those desires are limited at any one time, scarce in the jargon. Economic advance is the learning and application to life of methods of sating more desires out of the limits that nature places upon us. And yes, many of those desires are no more than emotion or ego derived.

But that’s the entire point of the game itself. It’s also how an economist defines getting richer. If people have more of what they want, then they’re richer. Money is only used so that we can keep count, the economist isn’t even insisting that those desires have to be personal nor even material. If clear blue skies with the birdies tweeting is what you want, you gain more clear blue skies and birdies, then you’re richer by the value you yourself apply to having the better environment.

Knowing that the Sundarbans still have tigers is something of value to many - that’s being richer, knowing that he’s still burning bright out there in the forest. Given the direct benefit to be derived from the big cats being out there we cannot describe this as anything other than an emotional desire now, can we? 

That economic production sates the desires of human emotions and egos isn’t some failure of the system nor an error to be corrected, it’s the very point of the exercise in the first place. This is as true of the third and 30th t-shirt in the cupboard as it is anything else that any one of us desires. Having more of what we want makes us richer, the economy exists simply and only to produce more of that rich panoply of the things we do want. To complain about it doing so does seem to be rather missing the aim of the enterprise itself.

Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.

By Tim Worstall | Published: 2:00 AM Oct 20 2020

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