Saturday, December 18, 2010

The empty world assumption

We mention all-too-briefly in The Economics Anti-Textbook the implicit 'empty world' assumption that underlies much of the simple economics presented to students. (See the quote at the beginning of Chapter 7.) Non-renewable resources get little attention as do serious environmental problems. There are no limits to growth -- a technological fix or an innovation spurred on by price signals can be relied upon to get us out of any jams.

  I was reminded of this attitude when I read the text of a recent talk give by Naomi Klein at TED. It's worth reading, but  I find her characterization of economists "mechanistic thinking" on the question of climate change a bit unfair. She doesn't cite anyone, so it's hard to be sure who or what she has in mind, but the best work -- like that of Nicholas Stern or Martin Weitzman -- is hardly "mechanistic" but gives a central role to the huge risks involved.

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