Environmental Capital

Learned a new concept today: coal as capital.

Schumacher argues that we should treat coal and oil as capital instead of income. Because I’m not an economist, I had to ask help to figure out what exactly that meant.

With the assistance of Ed Lenert, my prof/boss I think I’ve got it down.

If you get $10 million out of a harvest of corn, the cost of reseeding, fertilizing and doing the process all over again will be returned to you the next harvest – a return on your invest for growing corn.

But with coal as a finite resource, there is no return. The cost of mining and essentially destroying the land cannot be repaired simply because it isn’t factored into the cost.

If we treated coal as the precious finite resource it is, we would have to take a conservationist attitude.

I mean, would you just throw a gold necklace away? We put a high value on it because it is rare and finite. Having the same attitude toward coal would mean reducing energy usage and investing in renewable energy.

And that’s the difference between income and capital!

Limitless Economy

An attitude to life which seeks fulfillment in the single-minded pursuit of wealth – in short, materialism- does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited. – E.F. Schumacher, Small is Beautiful

This may seem like an argument pitting materialism with conservation, socialism versus capitalism, greed versus sacrifice. But this is really a question about what makes us happy and how that effects our environment.

In the preamble to our Declaration of Independence, we are endowed with the right to the pursuit of happiness.

The image of happiness impressed upon us has been, at least since the 1950s, living in a suburban home with 2.5 children, having a nice car, a beautiful spouse and a well-paying job. Most of those qualities are material. Our idea of success is easily quantifiable – how big is your paycheck?

In our modern capitalist system, we can keep consuming and consuming because the more we consume the better our economy becomes.

Indeed, after the terrorist attacks on September 11 our president, George W. Bush, asked us to go to shopping malls and spend money. Well, he wasn’t so glib. But in past times of crises leaders have asked us to sacrifice, to save, to conserve, to donate, to volunteer. Why is it that a president would make a consumerist call to action?

According to Bush, it helps the economy grow and we get stuff. Getting stuff equals instant happiness. In order to be happy, we have to consume. It’s a never ending cycle. Our consumption knows no bounds!

But this boundless pursuit of happiness has tremendous pitfalls.

Adam Smith, the father of capitalism said in The Theory of Moral Sentiments:

The great source of both the misery and disorders of human life, seems to arise from over-rating the difference between one permanent situation and another…Some of those situations may, no doubt, deserve to be preferred to others: but none of them can deserve to be pursued with that passionate ardour which drives us to violate the rules either of prudence or of justice…

Although Smith and Schumacher have differing economic philosophies, both recognize that greed and avarice leads to the destruction of societies and peace.

So what does all this high-minded babble have to do with solar energy?

Before we can move forward into the argument for renewable energy, we have to come to terms with limitations to our happiness and redefine what fulfillment means to us. (Some would argue that limitations could even make us happier.)

Would you pay more in the short term for a lifetime supply of energy? Would you invest time and money into a technology that could better our environment? Would you sacrifice a shingled roof for silicon solar cells?

What do you value more – the permanence of the sun or the ease of coal?

What would make us happy?