-- R.G. Menzies
LIBERTARIAN/CONSERVATIVE DIGEST AND COMMENTARY FROM AN ACADEMIC PSYCHOLOGIST in Brisbane, Australia. My academic publications are widely read
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A public service broadcaster propagates some strange economics
On the ABC "Green" site, unsurprisingly. The writer obviously has some grasp of economics but makes some elementary blunders. Take the first sentence in the excerpt below: If that were true, why are forests and stands of trees bought and sold?
And take the last paragraph reproduced below, the claim that burning down cities would benefit the GNP. It is an old fallacy. The writer has obviously never read Bastiat. In summary, the available economic energies (labour etc.) would not change. It would produce much the same in sum with or without a conflagration. Instead of building new houses (say), it would have to rebuild old ones. There would be no necessary impact on GNP at all -- but there would of course be a great loss of assets. See also here for a another refutation of this old fallacy
I suspect that the writer just liked the idea of burning down houses. Greenie forest management policies frequently accomplish just that -- via their opposition to bushfire prevention
A tree growing in a forest has no standing in economics. As far as conventional economics is concerned, it has no "economic" role. Of course, it provides a vital role in the earth's life support system, but this is of interest to scientists and not economists.
As soon as the tree is cut down, it acquires status in economics. Its significance grows as the tree is broken up into smaller components, such as paper or match sticks. The more it is destroyed, the more important it becomes to economic calculations.
Gross National Product (GNP)
Economic and political life revolves around the GNP or Gross National Product. GNP is the measure of financial transactions within a country's economy - the total flow of goods and services produced by the economy over a specified time (usually a year) - and it is derived from calculating the total income of a country's residents, whether the incomes come from production in that country or from production abroad. There is also a calculation of the Gross Domestic Product (GDP) but this distinction is not very important for the main argument here: the inadequacy of conventional economics to take the environment into account.
The GNP is simply a measure of financial transactions; it makes no value judgment on whether the transactions were socially useful or what impact there may have been on the environment.
Crime and car accidents increase the GNP because of the increased work for police, ambulances and prisons. A reduction in crime reduces the GNP. Similarly, a good way to increase Australian GNP would be to burn down Sydney and Melbourne each year. GNP would grow because of the extra work for fire brigades, undertakers, architects, builders, and plumbers. There would be little to show for all this annual effort - but there would be a higher GNP.
By JR on Friday, March 25, 2011
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