Naked Economics: Undressing the Dismal Science pdfdrive com

particularly “clean” about cooking over an open fire.) Environmental quality is a
luxury good in the technical sense of the word, which means that we place more
value on it as we get richer. Therein lies one of the powerful benefits of
globalization: Trade makes countries richer; richer countries care more about
environmental quality and have more resources at their disposal to deal with
pollution. Economists reckon that many kinds of pollution rise as a country gets
richer (when every family buys a motorcycle) and then fall in the later stages of
development (when we ban leaded gasoline and require more efficient engines).
Critics of trade have alleged that allowing individual countries to make their
own environmental decisions will lead to a “race to the bottom” in which poor
countries compete for business by despoiling their environments. It hasn’t
happened. The World Bank recently concluded after six years of study,
“Pollution havens—developing countries that provide a permanent home to dirty
industries—have failed to materialize. Instead, poorer nations and communities
are acting to reduce pollution because they have decided that the benefits of
abatement outweigh the costs.”
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Climate change is a trickier case, in that carbon emissions rise with
economic growth, at least in developing countries in the near term. Big, rapidly
growing countries like China and India have a voracious appetite for energy; to
meet that need, they turn mostly to carbon-based fuels. China is heavily
dependent on coal, which is a particularly bad CO2 offender. Trade makes these
countries richer. As they get richer, they will use more energy. As they use more
energy, their CO2 emissions will rise. That’s a problem. So what is the best

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remedy?
If you think it is to curtail trade, let me present a slightly different version of
the same basic challenge. China and India are sending more and more of their
citizens to university (while extending basic education more widely, too).
Education is making China and India richer. As they get richer, they use more
energy . . . Do you see where this is going? Should we ban education?
No. The answer to the CO2 problem is to promote growth—in India, China,
the United States, and everywhere else—in ways that minimize the
environmental damage. The best way to do that is to discourage the use of dirty
fuels by imposing some kind of carbon tax that is harmonized across countries—
sooner rather than later, because India and China are making development
decisions, such as building power plants, that are going to be with us for fifty
years.
The case for keeping people poor because it’s good for the planet is
economically and morally bankrupt.
Poverty is a bitch. The principal of a high school near Chicago’s Robert Taylor
housing projects once told me that when I was writing a story on urban
education. He was talking about the challenges of teaching kids who had grown
up poor and deprived. He might as well have been talking about the state of the
world. Many parts of the world—places we rarely think about, let alone visit—
are desperately poor. We ought to make them richer; economics tells us that
trade is an important way to do it. Paul Krugman has nicely summarized the
anxiety over globalization with an old French saying: Anyone who is not a
socialist before he is thirty has no heart; anyone who is still a socialist after he is
thirty has no head. He writes:
If you buy a product made in a third-world country, it was produced by
workers who are paid incredibly little by Western standards and probably
work under awful conditions. Anyone who is not bothered by those facts,
at least some of the time, has no heart. But that doesn’t mean the
demonstrators are right. On the contrary, anyone who thinks that the
answer to world poverty is simple outrage against global trade has no
head—or chooses not to use it. The antiglobalization movement already
has a remarkable track record of hurting the very people and causes it
claims to champion.
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The trend toward more global trade is often described as an unstoppable force. It
is not. We’ve been down this road before, only to have the world trading system
torn apart by war and politics. One of the most rapid periods of globalization
took place during the end of the nineteenth century and the beginning of the
twentieth. John Micklethwait and Adrian Wooldridge, authors of A Future
Perfect, have noted, “Look back 100 years and you discover a world that by
many economic measures was more global than it is today: where you could
travel without a passport, where the gold standard was an international currency,
and where technology (cars, trains, ships, and telephones) was making the world
enormously smaller.” Alas, they point out, “That grand illusion was shot to
pieces on the playing fields of the Somme.”
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Political boundaries still matter. Governments can slam the door on
globalization, as they have before. That would be a shame for rich countries and
poor countries alike.

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CHAPTER 13
Development Economics: