- guardian.co.uk, Friday 16 July 2010
Martin Wolf, probably Britain's best-known economics commentator, was right to argue in the Financial Times recently that there is a hole in the heart of contemporary economics. But he was wrong to suggest that it is land, and by extension natural resources, that is missing. The real gaping gap in current economic thinking is its lack of appreciation of the productive power of human beings.
Contrary to Wolf's argument, and that of many other authorities, there is no absolute shortage of land. Even in as developed a country as Britain, only about 10% of the land is built up. To the extent there are shortages, they are artificially created rather than the result of human overuse.
As James Heartfield argues in Green Capitalism, the shortage is not of land itself, but of land with a legal title to farm or develop. Every year, millions of acres are retired from agricultural use – a trend encouraged by European Union schemes. In effect, such programmes reward farmers for keeping their land out of use. An increasing amount of land is also being put under national park schemes.
On the other hand, the productive power of human labour is almost invisible in contemporary economic debate and in wider public discussions. Human beings are typically seen as vast consumers of resources: we are accused of accumulating massive quantities of "stuff" in our homes, plundering the world of natural resources and even putting the survival of the planet at stake.
Yet this greenish view of humanity is grossly one-sided. It ignores our problem-solving ability, our ingenuity, our capacity to create great things. We are not just mouths to feed – we also have brains capable of great feats of imagination and hands with which to reshape the world.
This one-sidedness leads, among other things, to perverse discussions of natural resources. For example, it is common to talk about water as if it is a service miraculously provided by nature. It is too often forgotten that it takes a huge amount of engineering – magic created by human effort – to provide clean water from a tap. Water has to go through many processes before it reaches us including collection, storage, filtration and disinfection. After use, it is flushed away through another barely appreciated triumph of technology: the sewage system.
Underestimating human creativity also has direct implications for discussions of economic policy. For instance, the overwhelming weight of the debate about how to tackle the deficit is on curbing consumption rather than raising production. Shortly after the election, the unseemly disagreements began. Would it be better to cut parks or swimming pools? Is it preferable to reduce one benefit rather than another? What is the best way to increase the financial burden on university students?
There is little debate about restructuring the economy to generate higher output. Hardly any discussion of how to promote a more innovative culture. One of the few exceptions is the Big Potatoes group, which recently launched the London Manifesto for Innovation. Among the principles it upholds are the need to think big; to take risks; to be prepared to benefit from serendipity; and to reject the notion of environmental limits on human action.
An economics blind to human ingenuity is a travesty. Rather than harking back to arcane debates about land it is high-time for our productive power to be integrated into a genuinely new economics.