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Saturday, April 01, 2017

The Economics of "Women's Crucial Role in Combating Climate Change"

The NY Times has published a piece with a great title and a mediocre analysis.  Yes, women play a crucial role in combating climate change but not for the reasons the piece talks about.    In this piece, I'd like to discuss some ideas of Gary Becker and some ideas of Julian Simon.  Economists think differently.

Environmentalists such as Paul Ehrlich have often written out their equation of I = P*A*T  where I is environmental impact, P is population, A is affluence and T is technology.  Let's think this through.

Women play a key role in determining fertility patterns.  Gary Becker was the leading economist thinking about the economics of fertility.  The economic approach emphasizes that the price of a child (including the opportunity cost plays a key role in determining fertility).  Put simply, Hilary Clinton chose to have one child (a high quality child named Chelsea because Hilary wanted to have the time to also have a career).  This in a nutshell is Becker's famous quality/quantity tradeoff.  As women obtain more human capital and live in cities, they have greater market place opportunities and this reduces their fertility. They marry later and have fewer children and invest more in their skills (think of Chelsea or my son).

In this sense, the rise of cities and women's opportunities in cities means that women do play a crucial role in combating climate change as reduced fertility does reduce global GHG emissions.  Now I recognize that affluence increases as urbanization takes place and this income effect could offset the reduced scale effect (that population slows).  But as there are fewer people and if they live in compact cities, forests regenerate and the ecosystems are likely to be able to sequester more carbon.

Now Julian Simon would flip things around. He would point to endogenous technology (the T in the equation above). He would say that we would have more opportunities to have more Einsteins and Elon Musks if the world has more people!   If human capital substitutes for natural capital, then our greatest minds will be greater if there are more people born (a lottery ticket argument).  Now Heckman and Becker would say that we need people but we also have to invest in these people, so this would be an endogenous skill formation model rather than a "birth model" that a genius arrives according to some exogenous arrival rate.  In the Becker and Heckman model, these geniuses are created by nature and nurture and women play a key role in the family here.

We can re-read the NY Times piece but I do not believe it discusses urbanization, fertility or endogenous technological change so it somehow missed the entire story.