The North Sea. Photo by Captain Tim.
Spend? Save? It turns out that economist John Maynard Keynes came up with a name for the quandary I am in about saving, spending, and an economy we are watching slip beneath the waves faster than a melting glacier. He called it the Paradox of Thrift.
The Paradox goes like this: if I save money, reduce spending, and pay down debt, I am doing what seems good for me individually, in a stormy economy. But my retreat, Keynes tells me, can actually be bad for the larger economy: if we all respond in the same way, demand will fall, production will slow, and recession will take over.
Now I am no economist – just ask my dear Amy. But I have arrived at the conclusion that perhaps the Paradox of Thrift could represent an opportunity to induce some much needed economic change. And as I snooped around for advice, I found that some economists actually agree with me. Or should I say that I found I agree with some economists?
The solution to the Paradox is to demand, consume and produce the local and renewable. Keep whatever shrinking wealth we might have within sight, build local economic muscles, protect local jobs, and begin to construct a sustainable region and home place.
For example, (as I have been wondering, endlessly) what if we could buy enough local food, in quality, quantity and diversity, to sustain us? What if we didn’t have to purchase edibles from halfway across the globe, or the nation? We would save energy, cut pollution, create jobs, and simultaneously change the landscape of our regions. You know, farms for malls – that kind of thing.
We try to buy local at our neighborhood public market, but the supply of local produce and meats is pretty thin. There are a few organic produce farmers on weekends, but that’s about it. Eastern Market is a wonderful place to visit, an important historic resource, and a true and beloved Capitol Hill asset. But as for the food you can purchase there, it’s not much better (and is more expensive) than the nasty Safeway down the street. I suppose we could do better if we had a car….
And what if, as I ask endlessly, our energy came from local and renewable sources? We could start a municipal composting program, reduce our waste, provide fertilizers for a now-burgeoning regional agricultural industry, and use the biomass of the compost to generate power. Here in Washington only 4% of our electricity comes from renewable sources. Solar? 0%. Wind? .5%. Solid waste – burning waste products, mostly paper, to generate steam to turn turbines? 1.4%. And biomass? .2%.
The local power company, PEPCO, is scrambling to increase power available from local, renewable sources. They have said that they want nearly 10% of Washington’s power to come from renewables by 2020. Not at all great, but a tiny start.
Maybe we can outflank the Paradox, and Keynes. Perhaps we can channel all of our purchases, and demands, into local resources. First, I guess, we’ll need to learn what local resources we have – we’ll need some kind of an inventory. I don’t really know much about my choices. I can turn on the radio or TV and find out where to buy a Toyota, but as for products grown or constructed in the city, or region, there’s not much guidance available.
Oh, I can surf to find out where to buy half a cow, or a bushel of organic potatoes. There’s plenty of information available, just no system that makes sense of the information. At the moment, the connections between local goods and local consumers relies on individual resourcefulness.
One next step might be to make these connections strong, obvious, inevitable, permanent. Why can’t I walk into any local store and find the best products from local sources? Why do I have to go on a reconnaissance mission to find a grass fed pork chop? What if we made local and regional stuff the stuff that’s on the shelves in our neighborhood supermarket, or hardware? If we demand it, and then purchase it, this might happen.
Ahhh – a sea of opportunity, aswirl in a Paradox. Stormy, maybe. But oceans of possibilities.
A Town Square 
Interesting questions, H. A lot of thought, and work, is needed on them by economists. A few random thoughts…
Finding local produce, grass-fed meats, etc. should be fairly easy as demand increases. (Already finding them as an alternative in the store.) Other mechanisms and alternatives will emerge. A related question – can we grow enough food locally to sustain the new city? How many Polyface Farms would we need?
Some tough economic questions come to mind –
1.) Is there an economic model that reconciles sustainability and growth?
1a.) Is population growth essential for economic growth?
2.) How do we deal with the economic law of comparative advantage (described by economist David Ricardo) and what will producing our food locally do to the economies of (say) the southern hemisphere?
3.) Is there a role for government that isn’t worse than the disease (such as – creating simple, effective incentives that aren’t corrupt)?
Time to get to work.
GG – as ever, thanks for the thoughts. Herewith a few quick responses – I will have to work further on your questions to reach any level of real plausibility.
1. Economic models for sustainability and growth? Yes, they are all over the place. Take a look at McKibben’s “Deep Economy” as one example. I will pull together a further list.
1a. Population growth is not necessary for economic growth. One of the great levelers in this regard: technology. Many of the goods that we acquire and consume every day are now produced using substantially less labor, and in some cases less material, than previously. Something like working smart instead of working hard. Best example: number of persons farming versus productivity per acre. We are paying other, gigantic, prices for this shift, as in pollution, lack of diversity, use of drugs and chemicals, etc. But more is certainly being done with less. I also think that the answer to this question is very much tied to thinking about your next question.
2. Comparative advantage is a funny thing, in a flattening world. If the world were truly flat, and one had to take into consideration that the conveyance of goods was now an increasing factor (instead of being ignored in 19th century equations formulated by Ricardo et. al.), then comparative advantage flattens as well. And we’re seeing this – wage differences flattening globally, for example. The UAW and the big three are up against non-unionized workers in far flung locales, and their world is becoming painfully flat at a breathtaking pace. (Doesn’t help that they make crappy product).
The one big difference, in a truly regionalized or localized urban world, would be unique access to specific resources. The problem will be: you can make unique, and desirable, stuff, but can you afford to move it afar? The question becomes one of finding new, sustainable means to benefit from your localized (comparative) advantages.
As to what happens in another hemisphere, or across the globe, if we produce more for ourselves locally – I think the answer again is “flattening.” We take care of as much in our home places as we can, and so does everyone else.
I need to think about this some more.
3. Role for government? Pass a damned gas tax!! Now!!!The role of government is to recognize that we need radical, instantaneous changes in our lives, economies, cities, towns, infrastructure, and to help to make these changes happen as quickly and effectively as possible.
Make no mistake, there will be much pain in this change. But for me, the role of government will be to lead, to recognize the mess, to find the best solutions, to offer incentives for going the right way and punishment for straying.
I guess I also think that in a globalized world there is a role for governments to set standards that cross national boundaries. This levels playing fields. And could even assure our health and safety – using Chinese milk and lead painted toys as prime examples.
At least that’s my first pass.