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Michael Perelman deconstructs market solutionsTranscript here
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Michael Perelman interviewed on "Against the Grain"
Sasha Lilly: And you're listening to "Against the Grain" on KPFA, 94.1 FM, KFCF in California's central valley and online at KPFA.org. I'm Sasha Lilley with C. S. Soong
. The world's environment is in crisis. A report released just last week by over 1300 scientists alleges that over two-thirds of our planet's resources have already been used up. While there's some fringe controversy about issues like global warming, most experts agree that something must be done. Since economic choices seem to be closely linked to the destruction of our many precious ecosystems, one might ask "What do mainstream economists understand about the environment and the issue of resource scarcity?" Can we rely on them to fashion a solution to the growing ecological crisis?
Radical thinker Michael Perelman has written a book about this topic and his conclusions are not optimistic. The book is titled The Perverse Economy: The Impacts of Markets on People and the Environment and is published by Palgrave. Michael is professor of economics at Cal State Chico, and the author of many books including Steal this Idea: Intellectual Property Rights and Corporate Confiscation of Creativity and Pathology of the US Economy Revisited.
When CS spoke recently on tape with Michael Perelman, he began by asking Michael if resource scarcity is a central focus and concern of orthodox economics.
Michael Perelman: An orthodox economist would say yes, but they filter resource scarcity through the price system, and this creates a distortion. I like to think about helium as an example. During the 1920's the military got very interested in helium because it was perceived to be an important military resource for dirigibles. So in the 1920's it began a program to collect helium under a federal monopoly. Helium is all around us in the air, but it's very difficult to collect. You can't just take tweezers and pick out the helium molecules. The only place in the world where helium is concentrated is in natural gas supplies, particularly concentrated in Texas. So the military creates this monopoly, and after awhile builds up a big reservoir of helium. Now, two things are happening. There are private companies that think they could do it, and the right wing talks about helium... For example, Christopher Cox calls it the poster child of government waste. And the fact is that the United States was collecting more helium than there was demand for it. The problem is this is your lifetime stock of helium unless you resort to picking the helium out of the air, which can be done but it is very expensive.
CS Tsoong: What do you mean by lifetime stock of helium?
MP: Well, it's a fixed resource, and as you use up the natural gas you use up the opportunity to collect this helium which is concentrated with the natural gas and pretty easy to sort out. So eventually the government eliminates this system, and sets up a private market. The physicists are going crazy about this, because they know that helium is used for more than just blowing up party balloons. It's very important for critically cooling certain high technologies, and it's expected that demand for high technology helium will increase in the future. At the time, and this is back in the mid- 1990's, they said that there would be shortages in less than 20 years unless private businesses develop new technologies, which they weren't doing. This is to leave helium in the hands of Enron and Texas Panhandle and various natural gas producers. One of the most influential economists in theoretical microeconomics is Tjalling Koopmans, a Dutch- trained physicist and Nobel prize winner. He also became president of the American Economics Association. He gave the Presidential Address to the American Economics Association in 1978, in which he explained that natural scientists don't understand scarcity. Only economists understand scarcity. And the reason is, you have to understand scarcity through the price system.
CS: A price system means what? A system for assigning prices to goods, to things?
MP: A market price. Physicists don't understand it, biologists don't understand it. He took it upon himself to train them.
CS: Let's go back to the question of a diminishing ñ or maybe disappearing - natural resources. How does the price system work in relation to those?
MP: Very, very poorly. What's supposed to happen according to economic theory, is that as the resource becomes more scarce, either because of increasing demand or you're running out of supplies, the price should increase. This increase in price should be signaling you to cut back on your use of the resource or develop new technologies. What we see today is that a number of people are talking about Peak Oil. We have no way of knowing when this is going to be. Yet we know about peak oil production, which refers to the maximum amount of oil that you can get out of the system. Whether this peak oil production will come in 10 years, in 15 years, we donít know. But what we do know is that to transfer our economy to a system based on renewable resources is going to be very difficult and take a lot of time. Theoretically the price system should be showing us increasing petroleum prices to give us a signal to make the transition.
CS: At least the prices are going up right now, that part of the equation seems to be in place.
MP: Not really, because if you look in terms of the inflation, prices aren't going up, that is they aren't higher than they were back in the 1970ís. This is because of price levels going up.
CS: So basically you're saying that this idea that the more scarce something is, the more expensive it will be, causing people to find substitutes ñ that it doesn't really hold up in light of the evidence.
MP: It doesn't. If you could immediately switch to an alternative energy source very quickly, then maybe this price-scarcity relation would hold. But you don't see these price increases coming until it's too late. My favorite example is the passenger pigeon. The passenger pigeon was so numerous that in parts of the country flocks would fly over and they would block the sunlight; there'd be no light because the flocks would be so dense. And people would go out, hunters would go out with big wagons and shoot at random, and then pick up a wagonload of pigeons, take them to the nearest city, sell them and they were considered to be a good substitute for chicken. So the price of passenger pigeon and the price of chicken were pretty much in line. As the pigeon becomes more and more scarce, there's no increase in price, and as the pigeon becomes almost extinct there's no increase in price. It's just a straight line, so there's no substitution.
CS: If market prices, according to standard economic theory, do not then, in fact, forestall natural resource depletion or species extinction by making these commodities more expensive, what about this argument about 'if one resource runs out, like petroleum, it can always be replaced by another resource', and on and on... So we don't have to worry about the failure or complete absence of one resource.
MP: That is absolutely correct. When economics talks about scarcity it talks about scarcity in general. The problem is that sometimes good substitutes don't exist.
CS: For example...
MP: ...Water.
CS: No substitutes for water.
MP: Not in your body. All living organisms depend upon water, and they obviously depend on water of a certain purity. The same amount of water exists today that has always existed, but not in a form that you and I can drink. More and more of it is polluted. It is also possible that the oceans are rising, which would mean that freshwater resources are becoming diminished. Now, theoretically, you can get enough water by desalinating the ocean. This is very expensive and it also leads to another problem. The process takes energy. Resources like petroleum are used to heat up the water, distill it, and turn it into water good for drinking and for agriculture. So by using petroleum you are running into another scarcity, that of petroleum, of energy sources. So, no matter where you turn, you're creating more and more scarcities. So the economist's perspective assumes that you have this generalized scarcity, which, you don't have to worry, then, about any particular scarcity, whether it be petroleum, whether it be water, whether it be housing because there's always a substitute.
CS: We're speaking with Michael Perelman, he's a Professor of Economics at California State University, Chico. We're talking about his book The Perverse Economy: The Impact of Markets on People and the Environment published recently by Palgrave Press. And although you certainly have a beef, Michael, with orthodox or mainstream economists, you note that not all such economists have ignored the vital issue of natural resource depletion. There's a guy named William Stanley Jevons, who lived in the 19th century, who wrote a book about coal and the limits to economic growth. What did Jevons argue in that book?
MP: Jevons argued that England was running out of coal, and that the scarcity of coal would be a serious problem and that England would be paying a price unless they figured out something else. This made Jevons a subject of ridicule by economists of the late 19th century because society was able to shift from coal to petroleum, natural gas, and nuclear power. It made the idea of scarcity seem ridiculous. A few economists have taken scarcity seriously, but they were marginalized. One of the problems I wanted to discuss is the concept of discounting. I really would like to take a minute and talk about what discounting is.
CS: Let's talk about it.
MP: If I offered you a trip to Paris next week it's worth much more to you than a trip to Paris ten years from now; so you discount it.
CS: In other words, that trip is worth more to me now than in the future because I might not be around ñ the future is uncertain -- is that what you're saying?"
MP: It's not just the uncertainty. Even if you're guaranteed to be living ten years from now, and you're guaranteed that you get the trip and Paris is still there and Paris is still nice, you would still be willing to pay much more for it now. People are impatient; we don't like to have to wait for things. That's what road rage is often about, 'I want to get there quickly'. This impatience expresses itself in discounting.
CS: Got it. So higher prices for something now as opposed for something in the future.
MP: That's right. The inverse is that something in the future is worth less. So when we do discounting, that is when the Government goes out and says 'should we take this resource out, waft out the future. They discount. Now, if you were to discount at the rate that corporations do, say, 10 to 20 percent per year, the world 100 years from now would be virtually worthless because the value falls very, very rapidly with a high discount rate. So in this way the economy doesn't disregards the future. Psychologists find that discounting is a fairly good reflection of the way people think about things in the near future. I remember when my daughter was very young, and she would be acting tired, I would say to her 'Jessica it's time to go to bed,' she would often respond 'Dad, you just ruined my life.' Going to bed 15 minutes earlier was extremely serious! There's something called hyperbolic discounting, which means, when you ask a person, I Would you pay 50 cents tonight to wait in line, to save a few minutes?î people say yes when they have that kind of money. But you ask them a question, ìWould you think it would be worth nothing to have the world end in 100 years?î most people would take a much longer perspective. Discounting is supposed to be a reasonable way of doing things -- and this is what Koopmans was saying about helium -- is because the economy is supposed to represent preferences. If these are our preferences, that's what value should represent, and the market should represent our values. But when you're dealing with resources, a fixed stock of irreplaceable resources, you can only run it down, you can't build it back up. Then this kind of thinking becomes destructive. And at present, there is no way that I can see of building a bridge to allow, say, the ecologist's understanding of resource scarcity in the future with the understanding of the economist for whom this discounting is second nature.
CS: So, this discussion about the discount rate suggests to me that the market economy needs to be short term in its approach, it needs to focus on the short term, and of course we've all heard this idea of the short term profits over long term sustainability. Talk more about what that means in relation to the environment and the preservation of the environment.
MP: Obviously it means that you don't put much weight on future damages. You don't put much weight on the lost capacity to continue in the future. So if you're using up your sources of fossil fuel, if you're using up and contaminating your existing water supply, if these problems aren't going to show up for 10, 20, 30 years, they're not anything to be taken very seriously, unless, of course, it's the Social Security system, which is done for expediency.
CS: And what's the relationship between technological development and this kind of short term planning? What's the relationship between these factors and wages -- which, of course, everybody is concerned about?
MP: Here, conventional economics has something to say, but they rarely say it. Conventional economics is very quick to say 'if you raise the price of something, you will ration it more, that is you'll treat it more carefully. If we have better technology then, one of the best ways of getting it is to increase certain prices to force business to ration whatever you're trying to put the price increase on. So if you increase the price of labor, or if you increase the price of natural resources, that price increase will immediately push business to try to develop new technology.
There has not been a great increase in the rate of technological growth in the United States. For example, the output per hour, not per worker per year, in the United States lags behind many of the European countries. Part of the reason for that is that the cost of wages is less. Similarly what we see is that the Japanese, because they had higher fuel prices, developed the hybrid car, so that now as fuel prices are starting to bite in the United States there's an interest in hybrid cars. But the United States has to rent that technology, we have to contract with the Japanese to allow them to use that technology. So, in a sense we're shooting ourselves in the foot by not trying to make resources more expensive, which will force companies and businesses to go out and find better ways of doing things. When certain types of expenses, for example, getting rid of toxic materials, if it's done legally, it is relatively expensive. When those expenses started to be put on businesses, many businesses discovered that their profits went up. They made savings because of the increased costs and those savings more than compensated for the increased costs.
Before the energy crisis, I remember two little things. One: if you went to the frozen foods section of a supermarket before the 1973 energy crisis, you would have an open counter so that, in effect, the frozen foods system was acting as an air conditioner for the entire store. Second: Dow Chemical Company had a running electric sidewalk going through their entire corporate headquarters, and nobody every bothered to turn it off until the energy crises when people said 'gee, we have to look at energy seriously.
CS: Are we talking about heated sidewalks?
MP: Heated sidewalks. And they never turned it off! And although Michigan has long winters, the expense of running a heated sidewalk over the summer was a net loss so the increase in the energy cost actually created a savings. Some corporate executives, for instance the head of Dow Chemical, have written books saying 'Boy, if we move to more environmentally reasonable policies, we can actually save money.
CS: I want to get eventually to what the alternatives would lead to greater preservation and conservation of the environment. Let's talk about something you bring up in your book, The Perverse Economy ñ the distinction between economies that are productive and those that are extractive. Explain the difference and why this difference matters to you.
MP: Well, an economy that is basically extractive is running down the resources, itís using non-renewable resources and it's unsustainable. It can work, it can be very, very profitable in the short run because you're not paying any costs of trying to make things run better. But itís unsustainable. If we have a productive economy you try to do things better with what you have in a way that can be, somehow, sustainable. All this is relatively common sense and doesn't really amount to much. What I tried to do in the book was to create a context in which you could see the destructiveness of the extractive system that we're living under today and the dangers that it's causing. Everyday, you pick up the paper and you read about a new extinct species and you read about what happens when the mangroves are destroyed, causing the tsunami to wreak so much more damage. We're seeing all sorts of signs of this. Global warming may be the most intractable that we're facing now, but these things are going to be starting to cause some great costs. The extractive nature of the price system made us blind to its costs.
CS: And these phenomena have an impact on the commons, on shared things like air and water, and water is something you're very interested in and concerned about in your book The Perverse Economy. There is one very influential take on the market called the tragedy of the commons. This idea was put forth by Garrett Hardin. Before we talk about your problem with Hardin's argument, what is the tragedy of the commons?
MP: Hardin says that you had a system in which everybody in the village would be able to graze as many animals as they want until the problem developed of overgrazing, which would cause environmental catastrophe. The market was the solution because it ration grazing. Then, you could have a sustainable economy. This particular article became very, very popular. Environmentalists, free-marketeers, virtually everybody applauded what Garrett Hardin was saying because everybody read into it a story that they wanted. There was a little problem, and that was the history that this story was supposed to reflect was made up, it had no basis in fact. Hardin had read one article that wasn't very solid and that was the basis of this whole thing. And the other problem was that, in reality, villages were pretty good in working out shared, collective ways of using the resource, and the village would get together and they would decide how much could be done, and these were environmental arrangements that were actually pretty solid. It wasn't based on the market, but the market doesn't do a very good job of rationing despite what Garrett Hardin says.
CS: We're speaking with Michael Perelman on ìAgainst the Grainî today on KPFA 94.1 FM and kpfa.org KPFA.org. He's professor of economics at California State University at Chico. His other books include Steal this Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity and Pathology of the US Economy Revisited. We're talking today about his book The Perverse Economy: The Impact of Markets on People and the Environment. My name is CS Tsoong and we'll take a short music break and we'll be back with Michael Perelman, stay with us.
. "[Music Break]
"And you are listening to "Against the Grain"on KPFA 94.1 FM, KFCF in California's central valley and online at KPFA.org On our companion website againstthegrain.org you'll find a link to Michael Perelman's latest book The Perverse Economy: The Impact of Markets on People and the Environment that was published by Palgrave Press in 2003. Michael is the author of various books on the theme of political economy. Sasha Lilley, my co-producer, is at the controls and my name is C. S. Soong.
"Michael, you go into the question of government subsidies, and since water seems to be a big concern of yours you talk about the government subsidizing water so that it costs very little for farmers, for example in California. What impact do government subsidies have on the environment? Is this something we ought to put a stop to?
MP: Not necessarily. It ought to be done rationally, rather than just through influence. These water subsidies are an inducement to wastefulness, that is, as long as water is very, very cheap you'll see irrigation methods which are relatively wasteful of water and you'll see crops being grown that shouldn't be irrigated. Crops, for example, in California, that are using scarce water that could be grown just as easily elsewhere by rain-fed agricultural systems. Cotton is a good example. There are poor farmers all around the world who would love to be able to sell cotton, but subsidized US cotton is subsidized twice; it's subsidized first with the water and then further subsidized with the subsidies directly to the farmer. These subsidies mean that the US is able to under-price third world farmers who then go bankrupt, and then with the resulting instability you get all sorts of problems. On the other hand, looking at what governments can do in terms of organizing the economy, you get a different sort of picture. And here I tend to think about what happened during the war; governments, more or less, do away with the market and they try to go into direct control to make the economy achieve one particular purpose, namely to defeat the enemy, to survive the war, whatever. So during war, during emergencies, that is when you had the earthquake in San Francisco, if I were to set up a stand and sell bottled water for ten dollars a bottle I wouldn't be hailed as a great entrepreneur, I would be hailed as a terrible person who is taking advantage of people's tragedy. So when these serious events occur, we throw out the market anyway, we look and say, How can we organize this to make it more rational? And if you then go back and you look you see how wars actually work, it's very destructive, but at the same time they give a clue as to how you could organize an economy and create a more rational way of life.
CS: Give us an example. What did the British Government do, during World War I, to that nation's economy?
MP: One of the things that happens during war is that you have to make sure that your people are healthy, you also have to make sure that morale is strong. So, during World War I Britain, more or less, began a welfare state, and that welfare state persisted until Margaret Thatcher began to dismantle it. It was a major success in terms of what it did for Britain during the War. You had family allowances, you created national insurance and all sorts of social measures that made British society a better place. And in fact, one study that I've seen suggested that one of the reasons that the Germans lost World War I was that they did a worse job than France or England in making the people feel good about their society. There was a greater feeling of exploitation, and that cost the Germans greatly. In the United States, for example, we got the school lunch program. Why? Because Louis Hershey, who was then director of the Selective Service Commission, realized that too many of the young tenant farmer boys that he was drafting were incapable of meeting the physical demands of the Army. So the school lunch, in this country, with the pressure of war, people start looking at results rather than just looking at quotations on the stock market, or profit balance sheets from corporations.
CS: How would planning work and what would be the merits of planning versus a market economy in peacetime? And maybe that's actually a difficult thing to imagine in this country, but peacetime when you don't have, for example as in wartime, a common purpose, a sense of solidarity, mutual support. You're saying planning in peacetime is a better way to operate the economy in terms of the environment as well?
MP: Yes. I mean, there's no question about it. Running a power plant is going to be affecting people hundreds, perhaps even thousands, of miles away. A few years ago Michio Koku talked about the mercury that Midwestern coal plants are depositing in Vermont, because when you burn the coal you get the mercury moving all around. This doesn't work with the price system, I mean, how are you going to put a price on that mercury when it's affecting all sorts of people throughout the whole ecosystem in different ways? And you and I are breathing in smog from that brown cloud that hangs over much of Asia, dust and pollutants coming from coal plants in China are coming in and polluting us right now. And, of course, we're putting our own pollution over to Asia. The price system just can't manage because you're having separate, individual agents making decisions and it's impossible to have a price system that can coordinate all of the different costs because you can't put prices on these things.
You ask, how would you organize a different system? When World War II came, nobody asked How would you organize a system? They just went ahead and did it. And you know what? If you draw a line of productivity over time, you see a huge spike over World War II despite the fact that the supposedly most productive workers were being siphoned off into the military. And yet productivity went up because people were feeling a sense of solidarity, a sense of purpose that they don't normally feel. Almost a century ago, William James gave his lecture about the moral equivalent of war, and what he was saying was war, so far, has been the only force that can discipline the whole community, and somehow, it's going to be very important for us to figure out a way to create something comparable. We didn't hear much about the moral equivalent of war until we got to the second oil shock, and then in 1977 Jimmy Carter picked up the theme and started by saying 'Now, I want to have an unpleasant talk with you about a problem unprecedented in our history,' and he goes on and talks about the oil crisis, and mentioned, in fact, the moral equivalent of war. But he didn't explain how people could do things together, and it just sounded like something that was going to be an imposition and that would take away the standard of living. Carter, who at that time was quite popular, saw his popularity plummet and it never recovered. Today when people talk about Jimmy Carter, they don't talk about the Jimmy Carter before the speech, they talk about the Jimmy Carter after the speech who was sort of an insignificant figure that seemed to be able to accomplish nothing. I can't give you a formula, CS, and say 'Here's my blueprint, this is the way to do it,' but it's something that would have to really involve all sorts of people at every level of life, it couldn't be just top down, which is the way Carter's moral equivalent of war sounded. Like, 'Here are these regulations...' He didn't say it that way but it came across... Not, How you could be involved in this, How you could be part of it, How you could feel good about being a part of this solution. Socialism, social planning, something like that, I think, is going to be necessary for survival, not just your ideology, you're a Socialist, and you'd prefer that... Our very survival is going to require a very different type of planning than we have seen before.
CS: Advocates of a market economy might point, and actually you point this way as well, to a couple of interesting examples. One is the automobile giant Henry Ford, who was apparently very conscious of waste creation and saw recycling, and in a very diligent way, as in his economic interest. There's also the British Ecological Society formed in 1913, which was actively worried about the ecological condition of the colonies, and wondered what kind of management of environmental issues and needs could be used there. Can't we just say, Well look, there are some good examples out there within the current system, let's just hope more actors within the market economy take up the banner, realize the necessity, and make their own voluntary efforts?
MP: Here's the problem with that: In many cases you do get very positive things, I mentioned before about Dow Chemical President ***** [41:11], who said 'Yeah, we got more profit out of this,' just what Henry Ford did. Henry Ford, when he ordered a box of roller bearings from Timco Roller Bearings he would make sure that the box was of a particular dimension and that it would be made out of a particular type of wood, and he would disassemble the boxes and those would be the floorboards in his cars. I mean, that's wonderful! But this was something he could do with Timco Roller Bearing and make serious savings which were commendable. But, here's the problem, and we get back to the network effect, when you're dealing with the complexity of the environment, one individual corporate executive, or engineer isn't going to be able to take in the whole. You need somebody that understands... That's some way, not some person, because no person could understand it all, but you need a network that can understand, take into account, this complexity of the entire system, and just leaving individuals do one part would almost be like if we're going to build a house, CS, and I tell you 'You go build the front wall, and I'll go build the back wall, and someone else...,' and we don't have a blueprint that we're working off of. The house probably wouldn't fit together. And the environment is a much more complicated blueprint than you'd get in a individual house. That's the problem that I see.
CS: That's the voice of Michael Perelman, he's a professor of economics at California State University at Chico, he joins us today on ìAgainst the Grain.î My name is CS Tsoong, and on our companion website Againstthegrain.org you will find a link to his book The Perverse Economy: The Impact of Markets on People and the Environment. And he's the author of a number of books on the theme of a political economy. Let's get back to this question of a planned economy versus a market economy, and you point in your book to a debate between two Austrians, a market champion named Ludwig von Mises (I'm probably mispronouncing that) and a socialist, Otto Neurath. And this debate was on whether planning could be as efficient as the market. You referred a little bit to productivity; what was that debate like and what should we learn from it?
MP: Well, the debate had to do with the questions that you're raising, so it's a very nice segue. Neurath was a very, very brilliant poleman, [word?] he was the person who figured out the signs that you used without words to tell you where you go and what to do, he was very, very interested in planning, he was a socialist, and he looked at the mobilization of war, and he thought that the planning could be extended to peacetime. And von Mises was probably the most important market theorist of a particular brand of economics called Austrian economics. Many of the listeners have probably heard of the name von Hayek, and von Hayek was a disciple of von Mises. And Mises was saying that you could not have planning because you had to have some sort of measurement for planning, so how could you compare whether you should use a waterfall to produce electricity or whether you should do coal mining? So what sort of measure are you going to have? And the measure, of course, that von Mises proposed was money and market prices. But, in the end, von Mises and none of his disciples really mentioned, that is they let it pass, that he conceded that there are all sorts of things that the market does not take into account, that they're outside of the sphere of money computations.
CS: Such as?
MP: To use the example of beauty, health. But, we would use everything that economists would label as externalities. Externalities are a strange, economic-speak for things that fall outside of the market when you and I have a transaction.
CS: Such as when something we do pollutes the environment and it has health effects on people?
MP: Exactly. And so these fall outside of the market system. Then, of course, of you're going to try to correct these you'd have to have some sort of planning, or something like what a planner would use in making the calculations. Now, Neurath's description of planning was relatively crude; it was all expert-type, top-down, but the debate was very interesting because it led to all sorts of other debates that were influential in economics in which von Mises claimed to have proven that the Soviet economy could not work, and many people took him at his word on that.
CS: We have just a few minutes left, do you have any examples, Michael, of nations that have planned economies, or something approaching it, that you want to point to and say that 'Here is where it's working, and look at the environmental impact,' and maybe we should say the less harmful environmental impact of the policies of this particular government or nation. Is there something, is there a beacon we can point to here?
MP: No. What there are little lights that you can see, but I don't think that you can see a beacon. Because we've never really had a planned economy that could work at peace, without fear of external threat. So that doesn't give us a fair measure of what a planned economy can do. When you see what China did, in terms of feeding its people with a very limited land base under socialism, that was extraordinary! That is you have something like a quarter of the world's population on a landmass that is very infertile, in which most of the agricultural base is either right along the coast or its a type of farming that's artificially created, that is whether it's hacking the mountains but not having the mountains so you leave them bare and the mud slides down like we see with logging, but where you terrace the mountains and you can produce this crop and water will drip down from one terrace down to another... I mean, these are magnificent achievements! Now they weren't all built under socialism, some of them had begun thousands of years ago, but they're marvelous achievements that weren't made by markets. Cuba, in its organic gardening, is very impressive. It was cut off from Soviet tractors, and petroleum, and farm chemicals, and moved into organic gardening, organic farming and seems to have made great strides in this, but we don't have a model, we don't have a blueprint. It's something we all can work on.
CS: And if you want argument for what Michael Perelman has in mind, you might want to pick up The Perverse Economy: The Impact of Markets on People and the Environment. Perelman is spelled P-E-R-E-L-M-A-N, we have a link to in on againstthegrain.org you teach economics at California State University at Chico. Michael, thanks so much for joining us on "Against the Grain."
MP: Well thank you very much it was a tremendous pleasure.
Sasha Lilly: And you're listening to "Against the Grain" on KPFA, 94.1 FM, KFCF in California's central valley and online at KPFA.org. I'm Sasha Lilley with C. S. Soong
. The world's environment is in crisis. A report released just last week by over 1300 scientists alleges that over two-thirds of our planet's resources have already been used up. While there's some fringe controversy about issues like global warming, most experts agree that something must be done. Since economic choices seem to be closely linked to the destruction of our many precious ecosystems, one might ask "What do mainstream economists understand about the environment and the issue of resource scarcity?" Can we rely on them to fashion a solution to the growing ecological crisis?
Radical thinker Michael Perelman has written a book about this topic and his conclusions are not optimistic. The book is titled The Perverse Economy: The Impacts of Markets on People and the Environment and is published by Palgrave. Michael is professor of economics at Cal State Chico, and the author of many books including Steal this Idea: Intellectual Property Rights and Corporate Confiscation of Creativity and Pathology of the US Economy Revisited.
When CS spoke recently on tape with Michael Perelman, he began by asking Michael if resource scarcity is a central focus and concern of orthodox economics.
Michael Perelman: An orthodox economist would say yes, but they filter resource scarcity through the price system, and this creates a distortion. I like to think about helium as an example. During the 1920's the military got very interested in helium because it was perceived to be an important military resource for dirigibles. So in the 1920's it began a program to collect helium under a federal monopoly. Helium is all around us in the air, but it's very difficult to collect. You can't just take tweezers and pick out the helium molecules. The only place in the world where helium is concentrated is in natural gas supplies, particularly concentrated in Texas. So the military creates this monopoly, and after awhile builds up a big reservoir of helium. Now, two things are happening. There are private companies that think they could do it, and the right wing talks about helium... For example, Christopher Cox calls it the poster child of government waste. And the fact is that the United States was collecting more helium than there was demand for it. The problem is this is your lifetime stock of helium unless you resort to picking the helium out of the air, which can be done but it is very expensive.
CS Tsoong: What do you mean by lifetime stock of helium?
MP: Well, it's a fixed resource, and as you use up the natural gas you use up the opportunity to collect this helium which is concentrated with the natural gas and pretty easy to sort out. So eventually the government eliminates this system, and sets up a private market. The physicists are going crazy about this, because they know that helium is used for more than just blowing up party balloons. It's very important for critically cooling certain high technologies, and it's expected that demand for high technology helium will increase in the future. At the time, and this is back in the mid- 1990's, they said that there would be shortages in less than 20 years unless private businesses develop new technologies, which they weren't doing. This is to leave helium in the hands of Enron and Texas Panhandle and various natural gas producers. One of the most influential economists in theoretical microeconomics is Tjalling Koopmans, a Dutch- trained physicist and Nobel prize winner. He also became president of the American Economics Association. He gave the Presidential Address to the American Economics Association in 1978, in which he explained that natural scientists don't understand scarcity. Only economists understand scarcity. And the reason is, you have to understand scarcity through the price system.
CS: A price system means what? A system for assigning prices to goods, to things?
MP: A market price. Physicists don't understand it, biologists don't understand it. He took it upon himself to train them.
CS: Let's go back to the question of a diminishing ñ or maybe disappearing - natural resources. How does the price system work in relation to those?
MP: Very, very poorly. What's supposed to happen according to economic theory, is that as the resource becomes more scarce, either because of increasing demand or you're running out of supplies, the price should increase. This increase in price should be signaling you to cut back on your use of the resource or develop new technologies. What we see today is that a number of people are talking about Peak Oil. We have no way of knowing when this is going to be. Yet we know about peak oil production, which refers to the maximum amount of oil that you can get out of the system. Whether this peak oil production will come in 10 years, in 15 years, we donít know. But what we do know is that to transfer our economy to a system based on renewable resources is going to be very difficult and take a lot of time. Theoretically the price system should be showing us increasing petroleum prices to give us a signal to make the transition.
CS: At least the prices are going up right now, that part of the equation seems to be in place.
MP: Not really, because if you look in terms of the inflation, prices aren't going up, that is they aren't higher than they were back in the 1970ís. This is because of price levels going up.
CS: So basically you're saying that this idea that the more scarce something is, the more expensive it will be, causing people to find substitutes ñ that it doesn't really hold up in light of the evidence.
MP: It doesn't. If you could immediately switch to an alternative energy source very quickly, then maybe this price-scarcity relation would hold. But you don't see these price increases coming until it's too late. My favorite example is the passenger pigeon. The passenger pigeon was so numerous that in parts of the country flocks would fly over and they would block the sunlight; there'd be no light because the flocks would be so dense. And people would go out, hunters would go out with big wagons and shoot at random, and then pick up a wagonload of pigeons, take them to the nearest city, sell them and they were considered to be a good substitute for chicken. So the price of passenger pigeon and the price of chicken were pretty much in line. As the pigeon becomes more and more scarce, there's no increase in price, and as the pigeon becomes almost extinct there's no increase in price. It's just a straight line, so there's no substitution.
CS: If market prices, according to standard economic theory, do not then, in fact, forestall natural resource depletion or species extinction by making these commodities more expensive, what about this argument about 'if one resource runs out, like petroleum, it can always be replaced by another resource', and on and on... So we don't have to worry about the failure or complete absence of one resource.
MP: That is absolutely correct. When economics talks about scarcity it talks about scarcity in general. The problem is that sometimes good substitutes don't exist.
CS: For example...
MP: ...Water.
CS: No substitutes for water.
MP: Not in your body. All living organisms depend upon water, and they obviously depend on water of a certain purity. The same amount of water exists today that has always existed, but not in a form that you and I can drink. More and more of it is polluted. It is also possible that the oceans are rising, which would mean that freshwater resources are becoming diminished. Now, theoretically, you can get enough water by desalinating the ocean. This is very expensive and it also leads to another problem. The process takes energy. Resources like petroleum are used to heat up the water, distill it, and turn it into water good for drinking and for agriculture. So by using petroleum you are running into another scarcity, that of petroleum, of energy sources. So, no matter where you turn, you're creating more and more scarcities. So the economist's perspective assumes that you have this generalized scarcity, which, you don't have to worry, then, about any particular scarcity, whether it be petroleum, whether it be water, whether it be housing because there's always a substitute.
CS: We're speaking with Michael Perelman, he's a Professor of Economics at California State University, Chico. We're talking about his book The Perverse Economy: The Impact of Markets on People and the Environment published recently by Palgrave Press. And although you certainly have a beef, Michael, with orthodox or mainstream economists, you note that not all such economists have ignored the vital issue of natural resource depletion. There's a guy named William Stanley Jevons, who lived in the 19th century, who wrote a book about coal and the limits to economic growth. What did Jevons argue in that book?
MP: Jevons argued that England was running out of coal, and that the scarcity of coal would be a serious problem and that England would be paying a price unless they figured out something else. This made Jevons a subject of ridicule by economists of the late 19th century because society was able to shift from coal to petroleum, natural gas, and nuclear power. It made the idea of scarcity seem ridiculous. A few economists have taken scarcity seriously, but they were marginalized. One of the problems I wanted to discuss is the concept of discounting. I really would like to take a minute and talk about what discounting is.
CS: Let's talk about it.
MP: If I offered you a trip to Paris next week it's worth much more to you than a trip to Paris ten years from now; so you discount it.
CS: In other words, that trip is worth more to me now than in the future because I might not be around ñ the future is uncertain -- is that what you're saying?"
MP: It's not just the uncertainty. Even if you're guaranteed to be living ten years from now, and you're guaranteed that you get the trip and Paris is still there and Paris is still nice, you would still be willing to pay much more for it now. People are impatient; we don't like to have to wait for things. That's what road rage is often about, 'I want to get there quickly'. This impatience expresses itself in discounting.
CS: Got it. So higher prices for something now as opposed for something in the future.
MP: That's right. The inverse is that something in the future is worth less. So when we do discounting, that is when the Government goes out and says 'should we take this resource out, waft out the future. They discount. Now, if you were to discount at the rate that corporations do, say, 10 to 20 percent per year, the world 100 years from now would be virtually worthless because the value falls very, very rapidly with a high discount rate. So in this way the economy doesn't disregards the future. Psychologists find that discounting is a fairly good reflection of the way people think about things in the near future. I remember when my daughter was very young, and she would be acting tired, I would say to her 'Jessica it's time to go to bed,' she would often respond 'Dad, you just ruined my life.' Going to bed 15 minutes earlier was extremely serious! There's something called hyperbolic discounting, which means, when you ask a person, I Would you pay 50 cents tonight to wait in line, to save a few minutes?î people say yes when they have that kind of money. But you ask them a question, ìWould you think it would be worth nothing to have the world end in 100 years?î most people would take a much longer perspective. Discounting is supposed to be a reasonable way of doing things -- and this is what Koopmans was saying about helium -- is because the economy is supposed to represent preferences. If these are our preferences, that's what value should represent, and the market should represent our values. But when you're dealing with resources, a fixed stock of irreplaceable resources, you can only run it down, you can't build it back up. Then this kind of thinking becomes destructive. And at present, there is no way that I can see of building a bridge to allow, say, the ecologist's understanding of resource scarcity in the future with the understanding of the economist for whom this discounting is second nature.
CS: So, this discussion about the discount rate suggests to me that the market economy needs to be short term in its approach, it needs to focus on the short term, and of course we've all heard this idea of the short term profits over long term sustainability. Talk more about what that means in relation to the environment and the preservation of the environment.
MP: Obviously it means that you don't put much weight on future damages. You don't put much weight on the lost capacity to continue in the future. So if you're using up your sources of fossil fuel, if you're using up and contaminating your existing water supply, if these problems aren't going to show up for 10, 20, 30 years, they're not anything to be taken very seriously, unless, of course, it's the Social Security system, which is done for expediency.
CS: And what's the relationship between technological development and this kind of short term planning? What's the relationship between these factors and wages -- which, of course, everybody is concerned about?
MP: Here, conventional economics has something to say, but they rarely say it. Conventional economics is very quick to say 'if you raise the price of something, you will ration it more, that is you'll treat it more carefully. If we have better technology then, one of the best ways of getting it is to increase certain prices to force business to ration whatever you're trying to put the price increase on. So if you increase the price of labor, or if you increase the price of natural resources, that price increase will immediately push business to try to develop new technology.
There has not been a great increase in the rate of technological growth in the United States. For example, the output per hour, not per worker per year, in the United States lags behind many of the European countries. Part of the reason for that is that the cost of wages is less. Similarly what we see is that the Japanese, because they had higher fuel prices, developed the hybrid car, so that now as fuel prices are starting to bite in the United States there's an interest in hybrid cars. But the United States has to rent that technology, we have to contract with the Japanese to allow them to use that technology. So, in a sense we're shooting ourselves in the foot by not trying to make resources more expensive, which will force companies and businesses to go out and find better ways of doing things. When certain types of expenses, for example, getting rid of toxic materials, if it's done legally, it is relatively expensive. When those expenses started to be put on businesses, many businesses discovered that their profits went up. They made savings because of the increased costs and those savings more than compensated for the increased costs.
Before the energy crisis, I remember two little things. One: if you went to the frozen foods section of a supermarket before the 1973 energy crisis, you would have an open counter so that, in effect, the frozen foods system was acting as an air conditioner for the entire store. Second: Dow Chemical Company had a running electric sidewalk going through their entire corporate headquarters, and nobody every bothered to turn it off until the energy crises when people said 'gee, we have to look at energy seriously.
CS: Are we talking about heated sidewalks?
MP: Heated sidewalks. And they never turned it off! And although Michigan has long winters, the expense of running a heated sidewalk over the summer was a net loss so the increase in the energy cost actually created a savings. Some corporate executives, for instance the head of Dow Chemical, have written books saying 'Boy, if we move to more environmentally reasonable policies, we can actually save money.
CS: I want to get eventually to what the alternatives would lead to greater preservation and conservation of the environment. Let's talk about something you bring up in your book, The Perverse Economy ñ the distinction between economies that are productive and those that are extractive. Explain the difference and why this difference matters to you.
MP: Well, an economy that is basically extractive is running down the resources, itís using non-renewable resources and it's unsustainable. It can work, it can be very, very profitable in the short run because you're not paying any costs of trying to make things run better. But itís unsustainable. If we have a productive economy you try to do things better with what you have in a way that can be, somehow, sustainable. All this is relatively common sense and doesn't really amount to much. What I tried to do in the book was to create a context in which you could see the destructiveness of the extractive system that we're living under today and the dangers that it's causing. Everyday, you pick up the paper and you read about a new extinct species and you read about what happens when the mangroves are destroyed, causing the tsunami to wreak so much more damage. We're seeing all sorts of signs of this. Global warming may be the most intractable that we're facing now, but these things are going to be starting to cause some great costs. The extractive nature of the price system made us blind to its costs.
CS: And these phenomena have an impact on the commons, on shared things like air and water, and water is something you're very interested in and concerned about in your book The Perverse Economy. There is one very influential take on the market called the tragedy of the commons. This idea was put forth by Garrett Hardin. Before we talk about your problem with Hardin's argument, what is the tragedy of the commons?
MP: Hardin says that you had a system in which everybody in the village would be able to graze as many animals as they want until the problem developed of overgrazing, which would cause environmental catastrophe. The market was the solution because it ration grazing. Then, you could have a sustainable economy. This particular article became very, very popular. Environmentalists, free-marketeers, virtually everybody applauded what Garrett Hardin was saying because everybody read into it a story that they wanted. There was a little problem, and that was the history that this story was supposed to reflect was made up, it had no basis in fact. Hardin had read one article that wasn't very solid and that was the basis of this whole thing. And the other problem was that, in reality, villages were pretty good in working out shared, collective ways of using the resource, and the village would get together and they would decide how much could be done, and these were environmental arrangements that were actually pretty solid. It wasn't based on the market, but the market doesn't do a very good job of rationing despite what Garrett Hardin says.
CS: We're speaking with Michael Perelman on ìAgainst the Grainî today on KPFA 94.1 FM and kpfa.org KPFA.org. He's professor of economics at California State University at Chico. His other books include Steal this Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity and Pathology of the US Economy Revisited. We're talking today about his book The Perverse Economy: The Impact of Markets on People and the Environment. My name is CS Tsoong and we'll take a short music break and we'll be back with Michael Perelman, stay with us.
. "[Music Break]
"And you are listening to "Against the Grain"on KPFA 94.1 FM, KFCF in California's central valley and online at KPFA.org On our companion website againstthegrain.org you'll find a link to Michael Perelman's latest book The Perverse Economy: The Impact of Markets on People and the Environment that was published by Palgrave Press in 2003. Michael is the author of various books on the theme of political economy. Sasha Lilley, my co-producer, is at the controls and my name is C. S. Soong.
"Michael, you go into the question of government subsidies, and since water seems to be a big concern of yours you talk about the government subsidizing water so that it costs very little for farmers, for example in California. What impact do government subsidies have on the environment? Is this something we ought to put a stop to?
MP: Not necessarily. It ought to be done rationally, rather than just through influence. These water subsidies are an inducement to wastefulness, that is, as long as water is very, very cheap you'll see irrigation methods which are relatively wasteful of water and you'll see crops being grown that shouldn't be irrigated. Crops, for example, in California, that are using scarce water that could be grown just as easily elsewhere by rain-fed agricultural systems. Cotton is a good example. There are poor farmers all around the world who would love to be able to sell cotton, but subsidized US cotton is subsidized twice; it's subsidized first with the water and then further subsidized with the subsidies directly to the farmer. These subsidies mean that the US is able to under-price third world farmers who then go bankrupt, and then with the resulting instability you get all sorts of problems. On the other hand, looking at what governments can do in terms of organizing the economy, you get a different sort of picture. And here I tend to think about what happened during the war; governments, more or less, do away with the market and they try to go into direct control to make the economy achieve one particular purpose, namely to defeat the enemy, to survive the war, whatever. So during war, during emergencies, that is when you had the earthquake in San Francisco, if I were to set up a stand and sell bottled water for ten dollars a bottle I wouldn't be hailed as a great entrepreneur, I would be hailed as a terrible person who is taking advantage of people's tragedy. So when these serious events occur, we throw out the market anyway, we look and say, How can we organize this to make it more rational? And if you then go back and you look you see how wars actually work, it's very destructive, but at the same time they give a clue as to how you could organize an economy and create a more rational way of life.
CS: Give us an example. What did the British Government do, during World War I, to that nation's economy?
MP: One of the things that happens during war is that you have to make sure that your people are healthy, you also have to make sure that morale is strong. So, during World War I Britain, more or less, began a welfare state, and that welfare state persisted until Margaret Thatcher began to dismantle it. It was a major success in terms of what it did for Britain during the War. You had family allowances, you created national insurance and all sorts of social measures that made British society a better place. And in fact, one study that I've seen suggested that one of the reasons that the Germans lost World War I was that they did a worse job than France or England in making the people feel good about their society. There was a greater feeling of exploitation, and that cost the Germans greatly. In the United States, for example, we got the school lunch program. Why? Because Louis Hershey, who was then director of the Selective Service Commission, realized that too many of the young tenant farmer boys that he was drafting were incapable of meeting the physical demands of the Army. So the school lunch, in this country, with the pressure of war, people start looking at results rather than just looking at quotations on the stock market, or profit balance sheets from corporations.
CS: How would planning work and what would be the merits of planning versus a market economy in peacetime? And maybe that's actually a difficult thing to imagine in this country, but peacetime when you don't have, for example as in wartime, a common purpose, a sense of solidarity, mutual support. You're saying planning in peacetime is a better way to operate the economy in terms of the environment as well?
MP: Yes. I mean, there's no question about it. Running a power plant is going to be affecting people hundreds, perhaps even thousands, of miles away. A few years ago Michio Koku talked about the mercury that Midwestern coal plants are depositing in Vermont, because when you burn the coal you get the mercury moving all around. This doesn't work with the price system, I mean, how are you going to put a price on that mercury when it's affecting all sorts of people throughout the whole ecosystem in different ways? And you and I are breathing in smog from that brown cloud that hangs over much of Asia, dust and pollutants coming from coal plants in China are coming in and polluting us right now. And, of course, we're putting our own pollution over to Asia. The price system just can't manage because you're having separate, individual agents making decisions and it's impossible to have a price system that can coordinate all of the different costs because you can't put prices on these things.
You ask, how would you organize a different system? When World War II came, nobody asked How would you organize a system? They just went ahead and did it. And you know what? If you draw a line of productivity over time, you see a huge spike over World War II despite the fact that the supposedly most productive workers were being siphoned off into the military. And yet productivity went up because people were feeling a sense of solidarity, a sense of purpose that they don't normally feel. Almost a century ago, William James gave his lecture about the moral equivalent of war, and what he was saying was war, so far, has been the only force that can discipline the whole community, and somehow, it's going to be very important for us to figure out a way to create something comparable. We didn't hear much about the moral equivalent of war until we got to the second oil shock, and then in 1977 Jimmy Carter picked up the theme and started by saying 'Now, I want to have an unpleasant talk with you about a problem unprecedented in our history,' and he goes on and talks about the oil crisis, and mentioned, in fact, the moral equivalent of war. But he didn't explain how people could do things together, and it just sounded like something that was going to be an imposition and that would take away the standard of living. Carter, who at that time was quite popular, saw his popularity plummet and it never recovered. Today when people talk about Jimmy Carter, they don't talk about the Jimmy Carter before the speech, they talk about the Jimmy Carter after the speech who was sort of an insignificant figure that seemed to be able to accomplish nothing. I can't give you a formula, CS, and say 'Here's my blueprint, this is the way to do it,' but it's something that would have to really involve all sorts of people at every level of life, it couldn't be just top down, which is the way Carter's moral equivalent of war sounded. Like, 'Here are these regulations...' He didn't say it that way but it came across... Not, How you could be involved in this, How you could be part of it, How you could feel good about being a part of this solution. Socialism, social planning, something like that, I think, is going to be necessary for survival, not just your ideology, you're a Socialist, and you'd prefer that... Our very survival is going to require a very different type of planning than we have seen before.
CS: Advocates of a market economy might point, and actually you point this way as well, to a couple of interesting examples. One is the automobile giant Henry Ford, who was apparently very conscious of waste creation and saw recycling, and in a very diligent way, as in his economic interest. There's also the British Ecological Society formed in 1913, which was actively worried about the ecological condition of the colonies, and wondered what kind of management of environmental issues and needs could be used there. Can't we just say, Well look, there are some good examples out there within the current system, let's just hope more actors within the market economy take up the banner, realize the necessity, and make their own voluntary efforts?
MP: Here's the problem with that: In many cases you do get very positive things, I mentioned before about Dow Chemical President ***** [41:11], who said 'Yeah, we got more profit out of this,' just what Henry Ford did. Henry Ford, when he ordered a box of roller bearings from Timco Roller Bearings he would make sure that the box was of a particular dimension and that it would be made out of a particular type of wood, and he would disassemble the boxes and those would be the floorboards in his cars. I mean, that's wonderful! But this was something he could do with Timco Roller Bearing and make serious savings which were commendable. But, here's the problem, and we get back to the network effect, when you're dealing with the complexity of the environment, one individual corporate executive, or engineer isn't going to be able to take in the whole. You need somebody that understands... That's some way, not some person, because no person could understand it all, but you need a network that can understand, take into account, this complexity of the entire system, and just leaving individuals do one part would almost be like if we're going to build a house, CS, and I tell you 'You go build the front wall, and I'll go build the back wall, and someone else...,' and we don't have a blueprint that we're working off of. The house probably wouldn't fit together. And the environment is a much more complicated blueprint than you'd get in a individual house. That's the problem that I see.
CS: That's the voice of Michael Perelman, he's a professor of economics at California State University at Chico, he joins us today on ìAgainst the Grain.î My name is CS Tsoong, and on our companion website Againstthegrain.org you will find a link to his book The Perverse Economy: The Impact of Markets on People and the Environment. And he's the author of a number of books on the theme of a political economy. Let's get back to this question of a planned economy versus a market economy, and you point in your book to a debate between two Austrians, a market champion named Ludwig von Mises (I'm probably mispronouncing that) and a socialist, Otto Neurath. And this debate was on whether planning could be as efficient as the market. You referred a little bit to productivity; what was that debate like and what should we learn from it?
MP: Well, the debate had to do with the questions that you're raising, so it's a very nice segue. Neurath was a very, very brilliant poleman, [word?] he was the person who figured out the signs that you used without words to tell you where you go and what to do, he was very, very interested in planning, he was a socialist, and he looked at the mobilization of war, and he thought that the planning could be extended to peacetime. And von Mises was probably the most important market theorist of a particular brand of economics called Austrian economics. Many of the listeners have probably heard of the name von Hayek, and von Hayek was a disciple of von Mises. And Mises was saying that you could not have planning because you had to have some sort of measurement for planning, so how could you compare whether you should use a waterfall to produce electricity or whether you should do coal mining? So what sort of measure are you going to have? And the measure, of course, that von Mises proposed was money and market prices. But, in the end, von Mises and none of his disciples really mentioned, that is they let it pass, that he conceded that there are all sorts of things that the market does not take into account, that they're outside of the sphere of money computations.
CS: Such as?
MP: To use the example of beauty, health. But, we would use everything that economists would label as externalities. Externalities are a strange, economic-speak for things that fall outside of the market when you and I have a transaction.
CS: Such as when something we do pollutes the environment and it has health effects on people?
MP: Exactly. And so these fall outside of the market system. Then, of course, of you're going to try to correct these you'd have to have some sort of planning, or something like what a planner would use in making the calculations. Now, Neurath's description of planning was relatively crude; it was all expert-type, top-down, but the debate was very interesting because it led to all sorts of other debates that were influential in economics in which von Mises claimed to have proven that the Soviet economy could not work, and many people took him at his word on that.
CS: We have just a few minutes left, do you have any examples, Michael, of nations that have planned economies, or something approaching it, that you want to point to and say that 'Here is where it's working, and look at the environmental impact,' and maybe we should say the less harmful environmental impact of the policies of this particular government or nation. Is there something, is there a beacon we can point to here?
MP: No. What there are little lights that you can see, but I don't think that you can see a beacon. Because we've never really had a planned economy that could work at peace, without fear of external threat. So that doesn't give us a fair measure of what a planned economy can do. When you see what China did, in terms of feeding its people with a very limited land base under socialism, that was extraordinary! That is you have something like a quarter of the world's population on a landmass that is very infertile, in which most of the agricultural base is either right along the coast or its a type of farming that's artificially created, that is whether it's hacking the mountains but not having the mountains so you leave them bare and the mud slides down like we see with logging, but where you terrace the mountains and you can produce this crop and water will drip down from one terrace down to another... I mean, these are magnificent achievements! Now they weren't all built under socialism, some of them had begun thousands of years ago, but they're marvelous achievements that weren't made by markets. Cuba, in its organic gardening, is very impressive. It was cut off from Soviet tractors, and petroleum, and farm chemicals, and moved into organic gardening, organic farming and seems to have made great strides in this, but we don't have a model, we don't have a blueprint. It's something we all can work on.
CS: And if you want argument for what Michael Perelman has in mind, you might want to pick up The Perverse Economy: The Impact of Markets on People and the Environment. Perelman is spelled P-E-R-E-L-M-A-N, we have a link to in on againstthegrain.org you teach economics at California State University at Chico. Michael, thanks so much for joining us on "Against the Grain."
MP: Well thank you very much it was a tremendous pleasure.