Coyocan, October 6th, 2017
The Nobel committee awarded the 1971 prize in economics to Simon Kuznets “for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development.”1 Nowadays, economic growth usually means the growth of the Gross Domestic Product (GDP), or the value of a country’s traded production and services.2 Although sometimes mistaken for the inventor of the GDP measure, Kuznets did advocate for its use and called it “indispensable to economic thinking and social planning”.3 Indeed, the measure gives some insight into a country’s productive capacity and collective income, but it also has its shortcomings. The limitations are famously worded by Robert Kennedy: “…it measures everything in short, except that makes life worthwhile.”4 Kennedy pointed out that the profits from arms manufacturers, cigarette advertisement, and exploitation of natural resources add to the GDP of a country, and among other examples, he highlighted the omission of the quality of healthcare and education, happiness, and “the intelligence of our public debate or the integrity of public officials.”4
A literature of eleven thousand, and counting, articles has been built on Kuznets (1955, p. 26), about which he remarked: “The paper is perhaps 5 per cent empirical information and 95 per cent speculation, some of it possibly tainted by wishful thinking.” And yet, his name is inextricably linked with this pervasive exercise of wishful thinking: the Kuznets-curve. Kuznets hypothesized that there exists an inverse-U-shaped relation between a country’s income and inequality; that is, at first inequality rises with income, but starting from some income level, continued growth of income is accompanied by declining inequality. Evidence at the time of the Nobel award was predominantly in line with the Kuznets-curve, strengthening the case for policies that promote economic growth. However, since the award, there has been plenty of economic growth and little evidence of declining inequality.5 The promise that economic growth benefits all seems to be false; reductions of inequality are not automatic and seem to require income redistribution.
There exists another persistent hypothesis, much like the original Kuznets curve, called the environmental-Kuznets-curve (EKC). The EKC hypothesis has pollution rise with income at first, until some ‘turning point’ income level, from which pollution starts to fall with further economic growth. The EKC was popularized by the World Bank’s World Development Report (1992, p. 38): “The view that greater economic activity inevitably hurts the environment is based on static assumptions about technology, tastes and environment investments.” They provided the following intuition: At first economic growth puts pressure on the environment through a scale effect. That is, without changes to the structure of the economy, or available technologies, pollution grows proportionally with economic activity. However, at some higher income levels, further growth starts to raise both the demand for improvements in environmental quality and the investment opportunities to do so.
The drive back to Mexico City through landscapes filled with volcanos was calm, only the city was more challenging, but manageable with my co-pilot. It seems Karlos has a superpower; the ability to sleep any time anywhere. He had already slept most of the day before we left, and could still sleep about half of the ride. We shared a beer at the airport and went our separate ways in the metro. My stop was at Viveros Derechos Humanos, where I was picked up by Antonio. Antonio and I had met a couple of months ago during a French language course in Montpellier, and now, we were both a little surprised that he was the first to host. I was welcomed to stay in the guest room of his father’s house, where Antonio lives with his father, Señor Antonio, sister, Regina, twin brother, Alejandro, and mother-in-law. Confusingly, Alejandro wears his beard the same way Antonio did in Montpellier, while Antonio now had a clean shave.
Mexico City, also referred to as Mexico CD or DF, short for ciudad or district federal, is gigantic. It still makes most top ten rankings for largest cities around the world. The federal district, while being is Mexico’s smallest state in terms of surface, is only second to the surrounding state of Mexico in terms of its population.6 It currently counts some 9 million inhabitants, and depending on how much of the surrounding metropolitan area is included in the count, a little over 20 million people. The crowds are most notable in terms of congested roads, packed metros, and often, air pollution. Figure 5.1 shows that Mexico City had about twice the concentration of suspended particles deemed acceptable by the World Health Organization in the late 1990s. The histogram suggests that smog reduces with income, consistent with an EKC relation for the air quality in megacities, as smog once went up with early income growth. Since, Mexico City’s air quality was on the rise over the early 2000s, but last year’s smog again reached harmful levels.7
Figure 5.1: Air pollution in megacities in the late 1990s.
Source: Gurjar et al. (2008, p 1601).
Antonio lives in Coyoacan, one of the sixteen municipalities within the federal district, and perhaps most famous for the Frida Kahlo museum. Since I visited the city about five years ago, I felt invited to skip some of the tourist highlights this time around. Instead, I enjoyed exploring the city by metro and foot, visiting UNAM, book stores and several museums. If you happen to visit Mexico City with little time, consider visiting the Dolores Olmedo museum instead of the Frida Kahlo museum. It has collections of both Diego Rivera and Frieda Kahlo, about hundred peacocks and a dozen Xoloitzcuintlis, a.k.a. the Mexican Hairless Dog. This dog breed is named after the Aztec god of thunder and believed to guide souls in the afterlife. Perhaps other dogs do so as well? There was a sign at the museum that said Xoloitzcuintlis are in danger with extinction, but fortunately, it can be updated due to a revival in their breeding.8
Table 5.1 shows CO2 emissions and GDP per capita in 2014 for the twenty-five most populated countries, together with their change from 2004 levels. A first glance suggests that there may be some EKC mechanism at play: CO2 emissions per capita have increased for most low and middle-income countries (with Mexico and South Africa as notable exceptions). And indeed, the high-income countries have realized both a reduction in emissions and income growth over the past decade. However, sometimes first glances may be deceiving. For example, Arrow et al. (1995) reminds us that the observation of an inverse-U relationship between pollution and economic development from cross-country comparisons could also be the result of international trade rather than evidence of the EKC; that is, the same pattern can occur in case high income countries outsource their polluting economic activities to lower income countries rather than a reduction in pollution through technological development.
Table 5.1: Per capita CO2 emissions and income for the 25 most populous countries in 2014 and changes from 2004.
Source: World bank data
So, does the EKC withstand more thorough empirical scrutiny? In one of the earlier EKC studies, Shafik and Bandyopadhyay (1992) studied ten different pollutants: From these ten pollutants, only two air pollutants behaved in line with the EKC hypothesis (sulphur dioxide and suspended particles),9 two pollutants decreased continuously with income (urban sanitation and water pollution),10 and two others increased continuously in income (carbon emissions and municipal waste),11 while the remaining pollutants were unrelated to income. The EKC literature has grown considerably, perhaps exponentially so, and by 2004 there were enough articles exploring the EKC relationship to warrant two literature reviews. Focusing mostly sulphur dioxide emissions, Stern (2004, p.1435) concludes: “It seems unlikely that the EKC is an adequate model of emissions or concentrations. I concur with Copeland and Taylor (2004), who state that: ‘‘Our review of both the theoretical and empirical work on the EKC leads us to be skeptical about the existence of a simple and predictable relationship between pollution and per capita income.’’ ”12 More recently, in a meta-analysis of 547 estimates from 69 different studies focusing on deforestation, Choumert et al. (2013, p. 25) find: “that the more recent the year of publication is, the more the likelihood of having an EKC declines.”
To put it mildly, the literature has not provided overwhelming evidence in favor of a EKC relationship in general. The relationship seems to be more complicated, as Copeland and Taylor (2004, p. 66) concluded: “there is now a great deal of evidence supporting the view that rising incomes affect environment quality in a positive way. This suggests that when we assess the effects of growth and trade on the environment, we cannot simply associate increased economic activity with increased environmental damage. Beneficial changes in environmental policy will likely follow and this leaves the net impact on the environment unclear.” However, even if the downward sloping part of the EKC relation were to exist for CO2 emissions, a better question is: Do we have the luxury to wait until we grow ourselves out of global warming? According to Antonakakis et al. (2017, p. 808), the answer is a convincing no: “Put differently, there seems to be an ethical dilemma, between high economic growth rates and unsustainable environment and low or zero economic growth and environmental sustainability.”
Imagine the sight of a city built in the middle of a brackish lake, with fresh water served by aqueducts, and where pyramids dominate the skyline over the surrounding floating farms. This may sound like a scene from a fantasy or science fiction movie, but when Hernán Cortés arrived at Lake Texcoco in 1519, he saw a city somewhat like you just imagined, he saw the city of Tenochtitlan in the middle of the lake. To be more precise, the farms, or chinampas, were on artificial islands rather than floating. These islands were created by piling up soil in between weaved underwater fences, and eventually secured by the willow trees or cypresses planted at the corners. The chinampas were highly productive; even more so in the nearby fresh water lake Xochimilco. Chinampas allowed for up to seven harvest cycles a year, due to the use of the nutrient rich lake sediment as fertilizer and crop rotation. No wonder that Tenochtitlan could grow to one of the largest cities at the time Cortés encountered it.
Today, there is not much left of Tenochtitlan. Mexico City’s central plaza, Zócalo, is located were Tenochtitlan’s original central plaza used to be, and its Templo Mayor is replaced by the Mexico City Metropolitan Cathedral using the stones from the destroyed pyramid. While Lake Texcoco was drained after the Spanish conquest, Lake Xochimilco is still a lake, or rather when you inspect google-maps, a system of canals. I got to Xochimilco by a tram ride that offers views of some magnificent murals by contemporary artists, and afterwards, I visited the lake by trajinera, a twelve-person gondola. I saw one kingfisher, perhaps looking for an axolotl, but the part of Xochimilco that I visited was left mostly to canal-vendors and these trajineras that rowed around couples, mariachi bands, and birthday parties. The number of empty trajineras in the docks hinted at how crowded these canals can get.
Later that evening, Regina told me that there are two other parts of Xochimilco; a part with industrial flower fields and the ecological reserve of Cuemanco that harbors organic chinampas.13 She explained that these farms use the milpa agriculture technique “in which farmers plant a dozen crops at once including maize, avocados, multiple varieties of squash and bean, melon, tomatoes, chilis, sweet potato, jícama, amaranth, and mucuna.... Milpa crops are nutritionally and environmentally complementary. Maize lacks the amino acids lysine and tryptophan, which the body needs to make proteins and niacin;.... Beans have both lysine and tryptophan.... Squashes, for their part, provide an array of vitamins; avocados, fats.”14 Moreover, beans provide the soil with nitrogen, chilis serve as a natural pesticide and squash, like zucchini, would work well against weeds. For centuries, the milpa-ecosystem has also supported the axolotl, a salamander species with regenerative capabilities, that is endemic to Xochimilco. Unfortunately, pollution from the pesticides used by the neighboring flower fields, urban sprawling, and overexploitation of groundwater are making it increasingly difficult to manage the milpas and threaten the axolotl. Despite its superpower, the ever-declining population of the axolotl is now critically endangered.15
Table 5.1 reveals more than a potential EKC alone. For example, it shows the highly unequal distribution of global CO2 emissions (e.g. per capita emissions differ by two orders of magnitude between the US and Ethiopia). This unequal contribution to global warming has been one of the main challenges in reaching international agreements on how to address the issue. While there may be some reason for cautious optimism about the decreases in CO2 consumption per capita in some countries, those countries still have a long way to go before their emissions are at sustainable levels. Although insightful, Table 5.1 does not show how total emissions have developed.16
According to the same World bank data, global CO2 emissions totaled 36.1 billion tons in 2014 and have been rising every year since 1960, except for five economic crisis years.17 Referring back to the epic change that these emissions have caused, as mentioned in my previous letter, Figure 5.2 presents estimates of CO2 concentration over the past millennium. These climate histories are created by analyzing the concentration in air bubbles that are trapped at different depths of ice cores; Figure 5.2 uses ice cores from East Antarctica’s Law Dome. One can see how the concentration of CO2 started to skyrocket from about the industrial revolution, and to remind you, current CO2 concentrations are well over 400 ppm. To truly appreciate how dramatic this change is, see Figure 5.3, which depicts estimates for historic levels of global temperature, atmospheric CO2 and sea levels dating as far back as 800.000 years.18 The graphs reveal two things: First, during this entire period the CO2 concentration oscillated between 200 and 300 ppm, and second, Hansen (2012)explains: “As you see, there's a high correlation between temperature, CO2 and sea level. Careful examination shows that the temperature changes slightly lead the CO2 changes by a few centuries…"
Figure 5.2: Historic records of CO2 concentration
Source: Amended from Etheridge et al. (1998), only the 2017 concentration from Manua Loa observatory has been added.
Figure 5.3: Historic levels of global temperature, atmospheric CO2 and sea level.
Source: Hansen (2012)
"...Small changes in Earth's orbit that occur over tens of thousands of years alter the distribution of sunlight on Earth. When there is more sunlight at high latitudes in summer, ice sheets melt. Shrinking ice sheets make the planet darker, so it absorbs more sunlight and becomes warmer. As Earth warms, CO2 and methane will be released by warming ocean and melting permafrost. And more CO2 and methane cause more warming. So, CO2, methane, and ice sheets were feedbacks that amplified global temperature change causing these ancient climate oscillations to be huge, even though the climate change was initiated by a very weak forcing.19 The important point is that these same amplifying feedbacks will occur today. The physics does not change…
What sea level rise can we look forward to? The last time CO2 was 390 ppm, today's value, sea level was higher by at least 15 meters. Most estimates are that, this century, we will get at least one meter.” Señor Antonio asked me whether I had seen satellite photos of Earth by night, I had and have used them in class. Figure 5.4 shows the negative of one such photo. The photo reminded me of a map in relation to the prospective sea level rise. One that illustrates the challenges that this sea level rise may bring us even better than the photo does. Figure 5.5 depicts the global population density, giving an impression how many of us live in coastal areas.20 I took the map from a TED-talk by de Graaf (2013). De Graaf co-founded a social enterprise Blue21 that specializes in floating architecture and has done some feasibility studies for Blue Frontiers to build the world’s first seastead; that is, a city floating in the ocean. How long do you think it will be before we’ll have the first pyramids floating in our oceans?
Figure 5.4: Earth by night April and October 2012
Source: NASA Earth Observatory/NOAA NGDC (2012)
Figure 5.5: Population density map
“You may be able to fool the voters, but not the atmosphere.”
Donella H. Meadows
4. Speech at the University of Kansas, 1968. In the same speech, Kennedy lamented that: “Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things.”
5. See Piketty (2014).
6. Mexico DF has an area of close to 1.500 km2, which about five times Malta or less than five percent of the size of the Netherlands.
7. See Cave (2012) for coverage of an attempt to remedy the problems with smog with the vertical gardens, Orsi (2016) reports the high levels in 2016, and visit aire.cdmx.gob.mx for current levels of smog in Mexico City.
9. Both pollutant cause most of their damage locally and are harmful to human health.
10. Admittedly, these pollutants may be attributed to the EKC column, because water pollution has probably risen with initial GDP growth prior to the start of the sample.
11. Perhaps the turning point for CO2 levels was still out of sample in the early nineties, the recent drop in CO2 levels per capita in high income countries is encouraging. Possibly, there is an out of sample turning point for household waste as well.
12. Copeland and Taylor (2004, p.8). Copeland and Taylor (2004) mostly reviewed studies that took international trade into account.
14. See Mann (2005, pp. 197–198).
16. For example, in Mexico and South Africa total emission have risen, despite a fall of per capita emissions, because their populations have outgrown the reduction.
17. Four years in the early eighties during oil-crisis and in 2009 during the financial crisis.
18. To give some perspective on how far back these climate histories go, humans have roamed the Earth for about 200,000 to 315,000 years. The latter estimate comes from a fossil in Jebel Irhoud, Morocco, see Callaway (2017).
19. A weak forcing refers to a small energy imbalance; or, in the sink analogy, it refers to a small difference between the inflow and outflow.
20. The slight differences between Figure 5.4 and 5.5 are consistent with Table 5.1. Countries that emit less show less dark areas in Figure 5.4 as compared to red in Figure 5.5, because the same countries have less light pollution as well. According to Cesar et al. (2003), about two out of every five people live within 100 kilometers from the coast.