Economics, Environment


Filipines - ManilaJust came back from the Philippines and I could see with my own eyes a very clear example of how the environment is the basis of the economy.

Manila suffered severe floods a month ago: 4 typhoons visited the archipelago and almost all the city (20million hab) was flooded.  Water and mud reached three-stories high. This might sound like the typical climate change story (and it partly is): unusual intense rains blocked the sewers, not used to such big flows. However, the fact is that when being there I could see how the high intensity of torrential waters was only responsible for 50% of the damage; the truth is that sewers were blocked by the huge amounts of waste, mainly plastic bags, dumped in the streams across the city. If the damage that these plastic bags caused had been included in their prices they would have been so expensive that they had not been able to be sold. The price of the plastic bags only reflected part of the cost of production but in no way its environmental cost.

On the top of that, the mud that covered the city was dragged by the waters from the hills surrounding the city. This had not happened in the past because the forests were keeping the soils in place (40 years ago similar storms struck Manila but the mud stayed in the hills) . During the last 20 years all these trees have been cut to build residential complexes and gulf fields. It is now clear that those trees, because of its function, had a lot higher value than what economists and developers thought and what prices reflected. And the top of the paradox is that those paying most of the price of removing the trees are now the poor people living downtown who have seen their households covered with mud. Those who live in the hills only paid a marginal cost for cutting the trees.

All in all; man-made climate change, man-produced plastic bags and forests cut by men are all three the living demonstration of bad economics. The prices didn’t tell the truth; most of the costs (that should have been included in the price) were to be paid after the products were sold and the profit was made by some whilst costs had to be shouldered by many.

Economic theory is useful to nurture philosophical discussions and make one’s ego feel good but seeing with my eyes the effects of getting things wrong (and it’s been 200 years of bad economics) is as humbling as it is infuriating. Being “green” is not a trend, not even a matter of political choice; it is about understanding that the real meaning of economics is the efficient management of today’s and future’s resources in a world of scarcity.

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