Nature recently published a book review of Dr. Seuss's classic "The Lorax," so I figured that sharing my [coincidentally] recent thoughts on the book was fair game.
I recently bought the picture book for my 3-yr old cousin and read it to her when she visited New York. The next day while washing dishes, I started wondering to myself if I thought Seuss actually captured the challenge of sustainable development correctly. I decided that he didn't.
The Lorax captures the canonical problem of resource economics: how fast should we extract natural resources for their use in the economy? The "Once-ler" character finds a forest and cuts down the trees to manufacture goods with the help of his family. He is reprimanded by the "Lorax," who shows up to reprimand the industrialists in an effort to protect the birds, bears and fish who live in the forest. The Once-ler doesn't stop and ends up transforming the entire forest into market goods, the wildlife go hungry and migrate away, and the Once-ler ends up a remorseful hermit. The moral of the story is clear: unabated resource extraction is morally wrong since it has large welfare impacts for the individuals that utilize the resources "sustainably" (here the wildlife). [If you want to know more of the story, you can read the synopsis, buy it or watch the cartoon on youtube: pt. 1 & pt. 2].
Is this the right message to be teaching our kids? Not if your kids are graduate students in sustainable development.
Something about the book was bothering me, and I realized that Seuss completely disregards all the social gains from transforming the forest resource into welfare-enhancing goods. From a public finance perspective, an optimal management policy for the Lorax's forest would balance the benefits from using the forest against the costs of losing it. The social value of the Once-ler's manufactured products is clear in the book since he gets rich from selling his wares, but Seuss's model of the system (if we can call it that) basically throws out all of these gains. In contrast, lots of attention is focused on the social losses incurred by the wildlife, so the implicit cost-benefit analysis of Seuss includes only costs and no benefits.
It is certainly true that "The Lorax" correctly identifies one market failure: the wildlife in the forest do not have property rights to the forest, so they are not properly compensated for its loss. So the component of the book's moral that worries about the distributional consequences of resource use is correct. But these distributional concerns may not affect the sustainability of development, per se, captured in the book. (As far as I know, research on the impact of the income distribution on sustainability remains unsettled).
In sustainable development, the crux of the challenge is captured by Hartwick's rule: in order for economic development to be sustainable, value earned by the extraction of natural resources must be re-invested in productive capital of greater or equal value. If we extract resources and just consume them in unproductive ways (eg. we only use fossil fuels to drive around jet-skis because it's fun) then eventually our economy will screech to a halt. But if we take some of those resources and use them to build capital that will continue to produce value in the future (eg. we use fossil fuels to build solar panels) than development can continue even when the original resource base is depleted. So long was we re-invest the gains from resource extraction faster than we extract resources, our total capital base will grow.
In "The Lorax," we don't know what happens to the resource base because the products manufactured using the trees vanish from the model (i.e pages). They are used by someone for something, but we have no idea how productive that activity is. Further, we would need to know what the Once-ler did with his earnings: did he re-invest them in schools? If we wanted to evaluate whether the Once-ler's approach was sustainable, we would need to know the social value of the forest when it was still standing and the value of the capital it helped generate when it was harvested.
Next week: lessons for biodiversity management from "One fish, two fish, red fish, blue fish."