Sunday, March 29, 2009

Economics and Environmentalism

If there is a permanent 50% reduction in the demand for paper products (books, newspapers, office paper, etc), what do you think happens to the number of trees in the U.S. and in the world over time?

Your choices are:

a. The number of trees will increase

b. The number of trees will remain the same

c. The number of trees will decrease

Now consider these questions, and see if thinking about them changes your answer above.

If there is a permanent 50% reduction in demand for wheat, does the number of wheat stalks increase, stay the same, or decrease?

If there is a permanent 50% reduction in demand for cars, does the number of cars produced increase, stay the same, or decrease?

The answer to the first question, which is (c), is the same as the other questions: reduced demand will lead to reduced output.

If that seems an odd comment about trees, it is probably because we have been led to believe that rapacious logging companies get access to a forest and cut trees down, and then move on to the next forest.

That can only happen in a world without strong property rights, which has been the case at times in parts of the world and in the past. But today, logging in the U.S. and much of the world is by forestry companies that own the land/forests, and after cutting a tree down plant a new one - for the same reason that a farmer sows wheat seeds after harvesting this season's wheat crop.

So if demand for paper/wood products decreases, forestry companies will plant fewer trees - hence over time fewer trees will grow and exist.

So go ahead and enjoy a book, your wood-framed home, and other paper products. In addition to the pleasure you derive from that product, take heart that more trees will exist because of your demand for paper products.

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