The Politics of

Simple Living
Why Our Economy Is Making Life Worse
and How We Can Make It Better

by
Charles Siegel

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Cover: A Dutch couple bicycles along the Amstel River, a short
ride south of Amsterdam. Photo by Charles Siegel.

ISBN 978-0-9788728-7-8
Copyright © 2014 by Charles Siegel

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Contents

Chapter 1: A Turning Point ...................................................... 7
Chapter 2: Work-Time Choice ................................................. 17
Chapter 3: Cities at the Limit ................................................... 31
Chapter 4: Families at the Limit............................................... 45
Chapter 5: Health Care at the Limit ........................................ 60
Chapter 6: Growth and Sustainability .................................... 81
Chapter 7: From Progressive to Preservationist .................... 95
Chapter 8: Three Futures .......................................................... 111
Chapter 9: To Live Wisely and Agreeably and Well ............ 134

Appendix: Counterproductive Growth .................................. 145
Notes ........................................................................................... 157

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Chapter 1
A Turning Point

The world’s rapid economic growth is creating more wealth but is
also straining ecological limits. We can already see the early stages
of two possible futures that loom ahead of us.
One possibility is ecological crisis. World temperatures have
already increased by about 0.8 degrees centigrade, causing more
devastating storms in the United States and hunger in some developing nations. These problems will become far worse if we do
not control global warming.
The other possibility is prosperity. Hundreds of millions of
people in the developing nations have joined the world’s middle
class during the last few decades. Fifty years ago, China was known
for its massive poverty, which had existed from time immemorial,
but now China is on the verge of becoming a middle-class nation.
India and other nations plagued by extreme poverty are not far
behind.
If we project recent growth rates, we find that the world as a
whole could emerge from poverty very soon. A recent study by the
National Intelligence Council predicted that most people in the
world could be middle class in 2030, saying, “The growth of the
middle class constitutes a tectonic shift. For the first time, the
majority of the world’s population will not be impoverished.”1 By
the end of this century, the world generally could be economically
comfortable, if we can avoid ecological disruption—but that is a big
“if.”
The current political discussion does not even mention one key
issue. What should people do after they become economically
comfortable?
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It will be much harder to avoid ecological crisis if people who
are already comfortable devote their lives to making more money,
living in bigger houses, driving bigger cars, and buying more
luxury products. We will be more likely to avoid crisis and the
massive suffering that it would bring if people decide that they
want a more balanced life after they become comfortable, spending
less time working so they have more time to devote to their families
and to their own interests.
Today, our economic planning is based on the idea that, no
matter how affluent we become, our economy should keep growing
as rapidly as possible. Few people even have the choice of
downshifting economically so they can live a more balanced life.
We need a new politics of simple living that gives us this choice.

The Coming Century
If we can deal with the ecological problems caused by growth,
most of the world could lift itself out of poverty during the twentyfirst century, just as America and the other developed nations lifted
themselves out of poverty during the twentieth century. Let us
project the economic trends of the last three decades into the future,
so we can see how quickly prosperity is spreading.
Because China is growing so rapidly, it shows the issues that the
world faces in stark relief. In 2010, China’s per capita GDP was just
over $7,500, over thirty times as much as in 1980 (after correcting for
inflation). Growth has reduced poverty dramatically in China:
Between 1981 and 2008, the number of Chinese living in extreme
poverty decreased from 84% to 13%, as nearly 700 million people
moved out of extreme poverty.2 Almost one-third of Chinese
households now meet their definition of middle class, with incomes
of $5,000 to $15,000 per year, and that number is expected to rise to
45% by 2020.3 Its streets are clogged with cars today, though they
were full of bicycles a few decades ago.4
If the rapid growth rate of the last three decades continues,
China’s per capita GDP would equal the United States’ current per
capita GDP in the 2020s. China’s growth rate will slow as its
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economy matures and as its population ages, but if economic
growth continues at the more realistic rate predicted in a recent
World Bank study, the Chinese will be as affluent in the 2040s as
Americans are today.5
It would put immense stress on the world’s environment if these
trends continue until the average Chinese consumed as many
resources as the average American does today:
■ If China consumed as much oil per person as America now
does, China alone would use more than the world’s total
current oil production.
■ If China consumed as much paper per person as America
now does, China alone would need more paper than the
world currently produces.
■ If China generated as much greenhouse gas emissions per
person as America now does, China alone would generate
more emissions than the entire world now generates.6
■ If Chinese owned as many cars as Americans, it would
have over a billion cars, more than the entire world has
today.7
As a general rule, for a wide range of resources, if the average
Chinese consumed as much as the average American does today,
China alone would consume more resources than the entire world
does today.8
Yet China is not the only developing nation that is moving
toward American levels of consumption. India is just a few decades
behind China, and its potential ecological impact is as great as
China’s. If the Indians consumed as many resources as Americans,
India also would consume more resources than the entire world
now consumes.
Even more striking, the world will reach America’s current level
of income in about 2090 if recent growth rates continue. In 2010, the
world had a per capita GDP of about $10,787, much more than
1980’s $6,173 (after correcting for inflation),9 and if this growth rate
continued, the entire world will have a real per capita GDP equal to
the United States current level just before 2090. The world’s growth
rate will slow as economies mature and as the population ages, but
it is plausible that the world could become middle class in this
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century and could reach the current American standard of living in
the first half of the next century.

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Figure 1: Projected Per Capita GDP in China, India, and the World

The conventional wisdom says economic growth should continue after the world reaches America’s current level of income—
just as the conventional wisdom says America’s economic growth
should continue though we have already reached this level. All of
the politicians in America today want to stimulate our economy so
it grows as rapidly as possible, and most of the world has exactly
the same attitude. It is hard to imagine the ecological stress it would
cause as the world moves beyond this level and keeps trying to
grow as rapidly as possible.
Recent rates of growth show that this century could bring
worldwide prosperity. But unless we change our current economic
policies, it is more likely that this century will bring ecological
disruption that causes massive human suffering, particularly in the
poorest nations of the world.
Environmentalists tend to focus on the nightmare scenarios. If
there is no action to control global warming, it could cause flooding
of coastlands and desertification of 30% of the world’s land,
bringing worldwide food shortages and hundreds of millions of
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deaths. As fossil fuels become scarcer, soaring energy prices could
cause wars over resources.
Yet we should also look at the unprecedented opportunity that
we have. All through history, the vast majority of people in the
world have lived in poverty, with no more than the basic shelter
and food needed to survive, and with the threat of famine always
looming. Most of the world still lives at a subsistence level today.
But the world could emerge from poverty during this century, if we
can avoid ecological disruption.

Counterproductivity
There are obviously ecological risks to continuing rapid
economic growth as the rest of the world approaches and moves
beyond America’s current standard of living. But is there any
benefit to continuing growth to this point?
The evidence shows that there is little or no benefit to growth
after people reach a level of middle-class economic comfort that the
average American reached decades ago. The economist Richard
Easterlin first noticed in 1974 that surveys showed Americans had
not become any happier since the 1950s, despite decades of growth
and rising income across all economic classes. This finding still
holds up today: American’s self-reported happiness peaked in 1958,
and it has jogged up and down a bit but has never reached that
peak again. Though our per capita GDP has more than doubled, we
are not as happy as we were a half-century ago.11
International comparisons prove the same point. Beginning in
1990, the World Values Survey asked people in many nations how
happy they are. Figure 2, shows the results of a recent survey,
comparing the happiness rating based on this survey with the per
capita GDP of each nation at the time. We can see in the figure that,
in lower income countries, the happiness rating generally increases
as income increases, but after countries reach about one-half of the
United States’ per capita GDP, happiness no longer increases
significantly as GDP increases.
This result is not surprising. In poor countries, more income is
needed to provide people with decent housing, food, education,
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health care, and other essentials; it makes sense that people will
become happier as they can afford more of the necessities and basic
comforts of life. But when people reach about one-half of the
average American’s current income, they have enough to make
them comfortable, and there is relatively little benefit to consuming
even more.

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Figure 2: International Comparison of Per Capita GDP and Happiness

America’s per capita income in the 1960s was less than one-half
of what it is today (after correcting for inflation),13 and Americans
felt very prosperous at the time: In 1958, a best-selling book called
America “the affluent society,”14 and the economic boom of the
1960s made the nation feel even more prosperous. The average
American of the 1960s had the necessities and comforts needed to
live a good life. There was still poverty in the country at the time,
but as we will see in a later chapter, economic growth has not even
reduced our poverty rate since then.
Once you have the basic elements of economic comfort, such as
good housing, health care, and education, and you also have some
luxuries, such as music, books, and travel, consuming even more
does not bring great benefits—but it does bring real costs.
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Growth continues to cause massive environmental costs even
after it stops bringing significant benefits. There would obviously be
less chance of ecological disruption in the coming century, if nations
that were already economically comfortable tried to achieve the best
possible quality of life rather than the fastest possible rate of
economic growth. We can imagine a future where the developed
nations decided to shift to slower growth now, where China decides
to slow growth in a couple of decades, and where the other developing nations decide to slow growth as they also reach the level
where they have a comfortable middle-class standard of living.
Slower growth in the developed nations would obviously make it
easier to avoid ecological disruption and to lift the world out of
poverty.
There are many other costs of growth that are less well known
than obvious ecological problems such as global warming. Later
chapters will show that we have reached the point where the sideeffects of growth make our cities less livable, make it harder to
educate our children, and make it harder to maintain our health.
This is what we will call the counterproductivity of economic
growth.15 When growth moves beyond a certain point, it brings
insignificant benefits, but it continues to cause significant problems.
After we pass this point, we spend more on housing and
transportation, but our cities become less livable and harder to get
around. We spend more on education without improving student
achievement. We spend more on health care without improving our
health. After we pass this point of counterproductivity, growth
threatens to decrease our well-being, because its costs can be greater
than its benefits.
Global warming is just one example of the many costs of growth
that could leave our children less well off than we are.

A Politics of Simple Living
We often hear about the problems caused by growth, but we
rarely hear about practical policies that could slow economic
growth by giving people the option of living simpler and more
satisfying lives.
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As a practical matter, there seem to be huge obstacles in the way
of slowing growth. Whenever there is a recession, slower economic
growth causes higher unemployment. Economists and politicians
all react by saying we need faster growth to provide more jobs.
In addition, many Americans feel that they are just getting by
economically. Higher income people might be able to cut back on
their spending, but average Americans generally feel that they
cannot.
How can it be that average Americans today feel they are just
getting by, while the nation felt affluent in the 1960s, with half as
much as we have today?
It is because we are burdened with a huge amount of
compulsory consumption, which people cannot avoid even though
it does not bring any significant benefit. We need a politics of
simple living that gives us the choice of stepping off the treadmill,
by avoiding this compulsory consumption and downshifting
economically. It should include policies such as:
■ Work-Time Choice: Today, most people have no choice but
to take full-time jobs, because most part-time jobs have low
hourly pay and no benefits. We need policies that allow
people to choose part-time work (as workers can already do
in the Netherlands and Germany), so they have the option
of working shorter hours, consuming less, and having more
free time.
■ Walkable Neighborhoods: Since the end of World War II,
federal freeway policies and local zoning laws have forced
most American neighborhoods to be built as low-density
sprawl where people cannot leave their houses without
driving their cars. We need to build walkable, transitoriented neighborhoods, so people have the option of
reducing the substantial economic burden of automobile
dependency.
■ More Family Time: Today, we subsidize families who use
day care and after-school programs, but we do nothing to
help families who work shorter hours to care for their own
children. We should give families with preschool children a
tax credit that they could use either to pay for day care or to
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work shorter hours and have more time to care for their
own children.
■ Healthier Lives: Today, Americans spend almost twice as
much on health care as people in other industrial nations,
but our health is not as good as theirs. We need to provide
health care without promoting all this waste, and we need
to encourage people to improve their own health by
exercising, eating better diets, and living healthier lives.
In addition to these policies that give people the option of
downshifting economically, a politics of simple living requires
policies that distribute income more equally, so everyone has the
opportunity to live well. As we will see, since the Reagan revolution
of the 1980s, most increased income has gone to the very rich, the
United States has become the most unequal of all the developed
nations, and our poverty rates have gone up. We need policies that
give everyone who works a fair share of our prosperity—both the
income to live comfortably and the free time to live well.
A politics of simple living demands a massive change in our
political thinking.
Our political ideologies, both conservative and progressive, date
to the nineteenth century, when most people lived in poverty and
rapid economic growth clearly was needed. Our conservatives
claim that unleashing the free market will promote faster growth,
and the benefits will trickle down to everyone. Our progressives
claim that government intervention is needed to promote growth
and to spread its benefits widely. The two sides argue about which
will do the better job of promoting growth.
This single-minded focus on economic growth made perfect
sense when these political ideas first became popular, but during
the coming century, it will become clearer and clearer that it no
longer makes sense, as the ecological and social costs of growth
become more and more obvious.
This single-minded focus on growth already makes no sense in
the United States and other developed nations, where we have
reached the point where there are few benefits to further growth.
The ideologies of the nineteenth and early twentieth century
promised a better future to people who lived near the poverty level,
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as growth gave them decent housing, basic education, and essential
health care. But continuing growth no longer offers an optimistic
vision of the future: Even if it were ecologically possible, a world
where we live in bigger suburban McMansions and drive bigger
SUVs on bigger freeways would not be an inspiring vision of the
future.
After we reach the point where we have a comfortable standard
of living, more consumerism does not equal a better way of life. We
need to replace the old vision of rapid growth with a new vision of
a future where people have enough income to be economically
comfortable and also have enough time to spend with their families
and friends, time to exercise and keep physically fit, time to be
active members of their communities, and time to develop their
talents as fully as possible.
Decades ago, we passed the point where the average American
has the income to live comfortably but needs more free time to live
well.
Most books about the limits of economic growth focus on the
policies that deal with increasing pollution and demand for resources. This book looks at how to deal with these problems, but it
focuses on the policies that would let people live a better life after
we move beyond the age of rapid economic growth.
Environmentalists have already painted a convincing picture of
the nightmare future that rapid economic growth could cause. We
will be more successful politically if we also paint a convincing
picture of a better future.

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Chapter 2
Work-Time Choice

There is a question that is central to how we live our lives and to
whether our economy is sustainable—but that no mainstream
American politician has talked about since the Roosevelt administration. That question is: Should we take advantage of increasing
productivity to consume more or to have more free time?
Ever since the beginning of the industrial revolution, improved
technology has allowed workers to produce more output in an hour
of work. During the twentieth century, the productivity of
American labor (the term that economists use for output per worker
hour) grew by an average of about 2.3% a year—which means that
the average worker in 2000 produced almost ten times as much in
an hour as the average worker in 1900, as shown in Figure 3.16
During the nineteenth and early twentieth century, workers took
advantage of higher productivity both to earn more income and to
work shorter hours. But in post-war America, the trend toward
shorter hours suddenly stopped. Since 1945, in a dramatic break
with the historical trend, we have used the entire gain in
productivity to produce and consume more without increasing
workers’ free time. In fact, we have done something even more
extreme than that: During recent decades, Americans have been
working longer hours, and we actually work more now than in the
1970s.
We could help deal with global warming and many other
environmental problems by taking a more balanced approach:
Instead of using higher productivity only to increase consumption,
we could also use it to reduce work hours, as we did during most of
our history. That would mean a slower rate of economic growth,
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but it would also mean a better way of life, with more free time as
well as more income.

Figure 3: American Productivity (Output per Worker Hour)

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The War over Work Time
History shows that Americans today do not work long hours out
of choice, as some conservative economists claim. Though most
people do not remember it today, there was a political battle over
work hours during the 1930s, which led to a deliberate political
decision to set the standard work week at 40 hours and to stimulate
economic growth rapid enough to provide workers with these 40hour jobs.
During the nineteenth and early twentieth century, unions
fought for shorter hours just as fiercely as they fought for higher
wages. Because of the unions’ efforts, the average workweek in
manufacturing declined dramatically, from about 70 hours in 1840
to 40 hours a century later.
In the early nineteenth century, the full-time employees in
American factories typically worked six days a week, twelve hours
a day, a total of 72 hours per week. In Lowell, Massachusetts,
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humanitarian reformers established factories as part of a social
experiment meant to help young women work and save some
money before marriage, and even these reformers required the
women to work 12 hours a day, six days a week, with only four
holidays per year apart from Sundays. Those were the standard
full-time work hours.

Figure 4: Average Work Week in US Manufacturing

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Gradually, as new technology allowed workers to produce more
per hour, wages went up and the workweek declined. As Figure 4
shows, the workweek in manufacturing declined steadily through
the nineteenth century and early twentieth century. Around the
time of World War I, Americans began gradually shifting from the
traditional six-day week to a five-and-a-half-day week, with half of
Saturday off as well as Sunday. During the 1930s, we adopted the
five-day, 40-hour week. Work hours in manufacturing are interesting, because we have the best historical statistics for them and
also because manufacturing jobs are virtually all full-time, so Figure
4 shows very clearly that a typical full-time job has not always
meant a 40-hour week. The standard 40-hour work week was an
invention of the Depression and the post-war period.
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The Great Depression gave labor unions another reason to fight
for shorter hours during the 1930s: They believed a shorter work
week would reduce unemployment by sharing the available work.
The Black-Connery bill would have set the work week at 30 hours in
order to reduce unemployment, and labor strongly supported this
bill, with William Green, president of the American Federation of
Labor, as a leader. The bill was passed by the Senate on April 6,
1933.
At the time, many people believed that the 30-hour week would
just be the first step. The Depression was caused by inadequate
demand, and many speculated that people were beginning to reach
the point where they did not need to consume much more. As
technology continued to improve and workers continued to
produce more each hour, it seemed inevitable that workers would
produce everything that people wanted in fewer and fewer work
hours, so the work week would have to keep getting shorter to
avoid unemployment.
Business leaders opposed the Black-Connery bill fiercely, and
they said that instead of shortening hours, we should fight
unemployment by promoting “a new gospel of consumption.”
Initially, the Roosevelt administration backed Black-Connery, but
because of business opposition, it abandoned its support for this bill
and worked for a compromise that would satisfy both business and
labor. Without Roosevelt’s support, Black-Connery failed by just a
few votes in the House of Representatives.
Roosevelt’s compromise plan had two features: the 40-hour
week, and government programs to stimulate the economy and
provide jobs.
The Fair Labor Standards Act of 1938 set the standard work
week at 40 hours, which did not actually reduce work hours for
most workers, since the average work week was already less than
this because of the Depression. In addition to setting this standard
work week, the Roosevelt administration tried hard to promote
economic growth in order to give every worker one of these 40-hour
jobs. Under Roosevelt’s New Deal, the federal government built
highways, dams, and other public works projects to provide more
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jobs, and it tried to stimulate the economy so the private sector
would provide more jobs.
After World War II, Roosevelt’s compromise—the forty-hour
week plus policies to stimulate the economy and provide jobs—
became the status quo. We still live with this compromise today.
In post-war America, there were fears that the country would
fall back into another depression, so the federal government spent
vast sums of money to stimulate the economy. For example, there
were federal programs to build freeways and to guarantee
mortgages for new suburban housing to stimulate the automobile
and construction industries, and there was bipartisan support for
Keynesian economics with deficit spending to encourage rapid
economic growth.
The private sector also did its share by spending more on
advertising, and our leaders told us that it was our obligation to buy
the products. In one famous example, a reporter asked President
Eisenhower what Americans could do to help end the recession of
1958, and this dialog followed:
Eisenhower: Buy.
Reporter: Buy what?
Eisenhower: Anything.19

All these efforts succeeded in stimulating growth that was rapid
enough to give Americans those standard 40-hour jobs. In a reversal
of the historical trend, the standard workweek did not decline
during the 1950s and 1960s, despite higher wages and widespread
economic prosperity. Since the 1970s, the average workweek for all
American employees has actually increased, because employers
have pressured them to work longer hours and because more
people feel compelled to take a second job to make ends meet; the
average American employee worked 180 more hours per year in
2006 than in 1979.20
Despite the tremendous changes in our society and the
tremendous growth of our economy since the 1930s, Roosevelt’s
compromise is still with us today. Everyone takes it for granted that
people should have standard 40-hour-a-week jobs, and every
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politician promises to promote economic growth in order to provide
more of those 40-hour jobs.
We cannot be sure what balance of free time and income people
would want if they had the choice, but the inflection in the graph of
the average work week (Figure 4 above) shows clearly that we have
distorted this decision in the direction of longer hours, more income
and faster growth. From the beginning of the industrial revolution
until the Depression, average work time declined. Suddenly, after
World War II, average work time stopped declining. This sudden
shift was clearly a result of federal laws establishing a 40-hour week
and of federal policies to stimulate the economy and provide more
jobs.
Our society is out of balance because we have spent many
decades focusing on increased output and ignoring increased free
time. Because women entered the workforce during this period,
many families now face a time famine, without enough free time to
take care of their own children. One-quarter of all Americans say
that they constantly feel rushed, and another one-half say they often
feel rushed, leaving only one-quarter who say they have enough
time.21 If today’s time-starved Americans knew the history of the
battle over work hours, most would probably think that they would
be better off if Black-Connery had passed and given us a 30-hour
week.

Choice of Work Hours
Most Americans today have no choice of work hours, because
most decent jobs are full-time jobs. Part-time jobs usually have low
wages, no benefits, no seniority, and no opportunity for promotion.
You can get a part-time job if you want to work in a fast-food
restaurant, but you usually have to take a full-time job if you want
to work as a plumber, an engineer, an accountant, a lawyer—or if
you want most jobs with security, benefits, and decent pay. To give
a glaring example of our unfairness to part-time workers, many
college teachers now work part-time as “Adjunct Professors”: They
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are paid far less per course than full-time professors, and they have
no chance of getting tenure.
Studies have shown that 85% of male workers have no choice of
hours—their only practical options are a full-time job or no job.22
Economist Juliet Schor has estimated that, if the average male
worker cuts his hours in half, he will cut his earnings by more than
80% because of the lower pay and benefits for part-time workers;23
the average woman would lose less, but that is because women are
more likely to work part-time, so they already have lower wages
because of discrimination against part-time workers.
Despite the low pay, many people choose to work part time. The
great majority of part-time workers are part-time by choice, and
only 29% work part time because full time work is not available, as
Figure 5 shows. This graph shows the numbers for 2009, during a
deep recession when it was difficult to find full-time work. The
percent who work part time because they cannot find full-time
work is much lower when the economy is healthy; for example, in
2005, only 17% worked part-time because they could not find full
time work, and the rest worked part time because they wanted to.24

Figure 5: Reasons for Working Part-Time

23

25

Obviously, more people would want to work part time, if parttime employees were paid as well and treated as well as full-time
employees.
To give people the option of working part-time, so they can
consume less and have more free time, we should adopt policies
that let people choose their work hours, as some European nations
have already done:
■ End discrimination against part-time workers: By law,
employees who do the same work should get the same
hourly pay, whether they are full-time or part-time. Parttime workers also should have prorated benefits, the same
chance of promotion and the same seniority as full-time
workers, with seniority based on the total number of hours
an employee has worked. The European Union has already
adopted policies like these to end discrimination against
part-time workers,26 and the International Labor
Organization has adopted a convention forbidding
discrimination against part-time workers, which applies to
the fourteen nations that have ratified it.27
■ Allow workers to choose shorter hours: The Netherlands
and Germany have laws saying that, if a full-time employee
asks to work shorter hours, the employer must
accommodate the request unless it will be a hardship to the
business.28 These laws are the ideal, but if they are too
strong for us to adopt immediately, we can pass the
Working Families Flexibility Act, first introduced in
Congress in 2007, which gives employees the right to
request shorter hours but does not require employers to
grant the request; a similar law has been successful in the
United Kingdom, where employers grant more than twothirds of requests.
The Netherlands was the first country to adopt policies
encouraging part-time work. In 1982, under the agreement of
Wassenaar, labor unions moderated their wage demands in
exchange for shorter work-hours. At first, hours were reduced
largely by providing more holidays, but beginning in the 1990s, the
emphasis shifted to providing more part-time jobs: From 1990 to
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1996 the number of businesses with part-time clauses in their union
agreements increased from 23% to 70%.29 In 1996, the Netherlands
passed a law forbidding discrimination against part-time workers,
which has since been adopted by the entire European Union.
Increased part-time work is considered to be the main cause of the
“Dutch employment miracle” of the 1990s, when unemployment
fell from the very high 13% of the mid-1980s to 6.7% in 1996, the
lowest level in Western Europe at the time.30
In the year 2000, the Netherlands adopted the Working Hours
Adjustment Act, which requires businesses with more than ten
employees to accommodate requests for shorter hours, if they do
not cause economic hardship to the employer. As a result of all
these policies, 48.3% of all workers in the Netherlands work parttime as of 2011, up from 25% in 1993.31 The average Dutch worker
works only 81% as many hours per year as the average American
worker (including full-time and part-time workers).32
Rudd Lubbers, the Prime Minister when the agreement of
Wassenaar was implemented, has written:
The Dutch are not aiming to maximize gross national product per
capita. Rather, we are seeking to attain a high quality of life....
Thus, while the Dutch economy is very efficient per working hour,
the number of working hours per citizen is rather limited. ... We
like it that way. Needless to say, there is more room for all those
important aspects of our lives that are not part of our jobs, for
which we are not paid and for which there is never enough time.33

These policies would not force anyone to work shorter hours.
They would give people the option of working shorter hours, letting
them decide for themselves whether to consume more or to have
more free time.

Choice or a Shorter Workweek
In the past, American work hours became shorter as the
standard work week was reduced. It still makes sense for us to
shorten standard work hours, to catch up with Europe’s shorter
hours, but in today’s society, there are a number of reasons why it is
even more important to focus on the choice of work hours.
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Choice of work hours accommodates recent changes in the
family. Until a few decades ago, most families were supported by
one breadwinner. Today, families are much more diverse. Some
people are still the only wage earners for their families, and they
may need to work longer hours to get by. Other families are made
up of two working professionals without children, who can easily
afford to work shorter hours.
Choice of work hours has political advantages. Conservatives
would argue against a shorter standard work week by saying that
people want to work and earn more, but it would be hard for them
to argue against letting people make this choice for themselves.
Shortening the standard work week also creates conflicts between
employers and employees by raising the cost of labor (which is why
the 35-hour work week has become so controversial in France), but
choice of work hours does not create this conflict (which is why this
choice has not become controversial in Germany and the
Netherlands).
Choice of work hours would reduce inequality of income,
because people with higher hourly earnings are more likely to work
shorter hours. Ultimately, it could change our definition of success:
We would consider people successful if they not only had a higher
income than average but also had more free time than average.
Most important, choice of work hours would let people make a
deliberate choice of their standard of living. Each person would
have to decide whether it is more important to consume more or to
have more free time, and this choice would make people think
much harder about their purchases. Instead of buying a McMansion
and an SUV, you could buy a smaller house and car and work (say)
one day less each week. If you have fixed work hours and a fixed
salary, you might as well buy the biggest house and the biggest car
you can afford; but if you have a choice of work hours, you will
consider that consuming less would allow you to work less.
Choice of standard of living has become important now that we
have moved from a scarcity economy to a surplus economy.
In theory, choice of work hours has always made sense. Economic theory has always said that people should have a free choice
among different products, so they can choose the combination of
26

products that gives them the most satisfaction. This theory implies
that people should be able to choose between consuming more and
having more free time for exactly the same reason: They should be
able to choose the combination of consumption and free time that
gives them the most satisfaction.
In practice, this choice was not very important in the past. Until
the mid twentieth century, most people consumed not much more
than the essentials, so they could not go very far in choosing more
free time rather than more income. As a result, most economists
overlooked the issue historically.
In today’s American economy, though, most people consume
more than the essentials and could get by with less income and
more free time. The choice between more free time and more
income is now critical to determining what sort of lives people lead.
This choice is needed to let people live in the way they prefer.
This choice of more free time rather than more income is also
important to dealing with our most pressing environmental
problems. For example, a recent study by the Center for Economic
and Policy Research found that, if Americans worked as few hours
as western Europeans, it would lower our energy consumption and
greenhouse gas emissions by 20%.34
A popular movement toward simpler living could help to reduce
all our environmental problems, but that movement cannot become
widespread as long as most people do not even have the choice
between consuming more and having more free time.

What Is the Economy For?
With choice of work hours, we would still need planning to finetune the economy in order to avoid inflation, unemployment, and
other economic disruption. Keynesian planning became popular in
response to the unemployment of the Great Depression. Monetary
planning became popular in response to the inflation of the 1970s. If
there were a mass movement to shorter hours, new methods of
planning would be needed to respond to slower growth.
In one example of the sort of planning we would need, the
Canadian economist, Peter Victor, has created a computer model
27

that lets him study how the Canadian economy would react to
slower growth or to no growth. The results of running the model
differ dramatically as he changes the values for macroeconomic
variables such as the savings rate, the rates of public and private
investment, and the length of the work week. In one run, the end of
growth brings economic instability, high unemployment, and rising
poverty. In another run with different values for these variables, the
end of growth brings economic stability, reduces both poverty and
unemployment by half, and reduces the ratio of debt to GDP by
75%. The second scenario has a higher savings rate, a lower rate of
private investment, and a higher rate of public investment, and it
avoids unemployment by reducing work hours.35
There are very few macroeconomic studies of this sort, and more
would be needed to help us develop policies to accommodate widespread work-time choice and the slower growth it could bring.
But the key difference in macroeconomic planning would be
this: Today, we try to create economic growth rapid enough to give
people standard 40-hour jobs. With work-time choice, we would try
to create growth rapid enough to give people the number of work
hours that they actually want.
Today, the economy must grow rapidly, whether or not people
want more products, purely to create more 40-hour jobs. With
work-time choice, people would work enough to buy the products
they want, and then they could stop.
Our economic debate usually focuses solely on inflation and
unemployment, technical questions that only economists can deal
with. We also need to ask the underlying human question: What is
the economy for?36
Obviously, the purpose of the economy is to produce things that
people actually want.
Everyone realizes this when they talk about work that we do for
ourselves. For example, we do the job of patching the roof because
we want to keep the rain from coming in, and when we have
accomplished this goal, we stop. We do not keep tearing up the roof
and patching it again in order to “create jobs” for ourselves.
But when it comes to the formal economy, we become totally
mystified, and we believe that there is a benefit to “creating jobs.”
28

We do not work to produce the things that we want to consume.
Instead, we believe we must produce and consume more things to
create more work.
If we thought about the human purpose of the economy, we
would realize that in the formal economy, as in production for our
own use, we should produce what we want to consume and then
stop.
Economists have expert knowledge that helps them deal with
inflation, unemployment and other economic problems, but
ordinary people are the ones who should decide how much they
want to consume. The technical questions about inflation and
unemployment, which only economists can answer, should be
subordinate to the human question about what balance of work and
free time gives you the most satisfying life. People should be able to
answer this human question for themselves, by making decisions
about their own work hours based on their own desire for more
income and more free time.

Compulsory Consumption
For most Americans, though, choice of work hours alone is not
enough.
Wealthier Americans could cut their work hours significantly by
giving up luxuries, but when we look at average Americans, we
find that most people feel hard pressed economically. They might
be able to cut their work hours a bit by downshifting economically,
but if they cut their work hours by much, they would not be able to
get by.
When the Black-Connery bill was introduced during the 1930s,
in the days before most women worked, everyone thought it was
plausible that that one worker could support a family by working
thirty-hours a week. Americans today earn much more per hour
than Americans did during the Great Depression, but most would
be shocked by the idea that they could support their family with the
income of one person working a 30-hour week.
In the 1960s, Americans had half as much income as today (after
correcting for inflation), and they felt affluent. But today, most
29

Americans could not even get by on half of their income. Why do
we need so much more income than we did in the 1930s or the
1960s?
The problem is that we are burdened with a huge amount of
compulsory consumption. In addition to allowing the personal
choice of work hours, we need larger social and economic changes
to free people from this compulsory consumption and give them the
choice of living more simply.
In the next few chapters we will look at practical policies that
could let us step off the consumption treadmill. We will see that, in
the cases of urban planning, education, and health care, we in the
United States are moving beyond the point where growth brings us
any benefits, but our current policies do not give people the choice
of consuming less.
We need new policies that give people the choice of living
simpler, more satisfying lives.

30

Chapter 3
Cities at the Limit

The way we build our cities and neighborhoods imposes a
tremendous economic burden on the average American.
Spending on transportation has soared as our cities have been
rebuilt around the automobile. One hundred years ago, most
Americans who lived in cities and suburbs walked as their main
form of transportation. Today, most Americans cannot leave their
homes without driving; they have no choice but to pay for their
cars, for gasoline, for insurance, and so on.
Spending on housing has also soared. The low-density,
automobile-oriented suburbs that most Americans live in today are
much more expensive than the apartments, row houses, and streetcar suburbs that Americans lived in a century ago.
Most Americans do not have the choice of avoiding these costs.
Since the mid-twentieth century, most federal transportation
funding has gone to freeways, and most local zoning laws have
required developers to build low-density, auto-dependent suburbs.
These costs increased dramatically, precisely because it was
government policy during the post-war period to encourage more
spending on automobiles and suburban housing in order to
stimulate the economy—part of the post-war consensus that grew
out of Roosevelt’s response to the Depression. We needed economic
growth rapid enough to provide everyone with 40-hour-a-week
jobs. During the post-war decades, auto-dependent suburbs were a
central to the “rising standard of living” that government promoted
to absorb consumers’ excess purchasing power and to avoid another
Depression. The Highway Trust Fund and other federal programs
funded freeway construction in cities and suburbs. Until the 1960s,
31

the Federal Housing Authority (FHA) offered low-cost loans only
for new housing built in suburbs.
In retrospect, most city planners today agree that these policies
caused the biggest problems of contemporary American cities:
traffic congestion, less livable neighborhoods, destruction of open
space, high levels of energy consumption, and over five tons of
carbon dioxide per year emitted by the average vehicle.

Consuming More Housing and Transportation
If we look back at the history of the American city, we can see
that consuming more housing and transportation made cities more
livable initially but now makes cities less livable. Counterproductivity has set in
Before the nineteenth century, all cities were built as “walking
cities.”37 Because most people got around by foot, cities had to be
very dense. People lived in three to six-story buildings, in
apartments or in narrow row houses, often with shopping on the
ground level. Streets were narrow, and buildings were not set back
from the sidewalk. The older parts of European cities and towns are
still built this way, and some early American cities were just as
intense: The streets of eighteenth century Philadelphia looked like
the streets of London, though there were vast areas of open land
nearby.
Early in the nineteenth century, steam powered ferries and
horse-drawn omnibuses let Americans live at lower densities. New
middle-class neighborhoods typically were made up of row houses:
Streets were wider, houses were set back a few feet from the
sidewalk and had larger backyards, and trees were planted along
the sidewalks. Houses were commonly built on one-twentieth-acre
lots.
From the 1870s until World War I, horse cars on steel tracks,
cable cars, and electric trolley cars let the middle class move to
“streetcar suburbs,”38 which we think of today as classic American
neighborhoods. They were made up of free-standing houses, with
adequate backyards, small front yards, and front porches looking
32

out on tree-lined streets. Houses were commonly built on one-tenthacre lots.
Streetcar suburbs felt spacious and quiet, but their most
important form of transportation was still walking—even though
they were about one-tenth the density of the traditional walking
city. Streetcars were used for commuting to work and for occasional
trips to other parts of town, but everyone lived within walking
distance of a local shopping street. You could catch a streetcar on
the main street, but you usually just walked to the stores, doctors’
offices, and other services that were right there. People nodded to
neighbors sitting on their porches as they walked to the local
shopping street, and they met their neighbors at the local stores.
A carriage was a sign of wealth one hundred years ago, and (as
astounding as it seems today) middle-class Americans who lived in
cities or suburbs generally did not own vehicles.

Figure 6: Typical Lot Size in Middle-Class American Neighborhoods

Many people like cities, but for those who prefer a suburban
way of life, new transportation technology and economic growth
brought real benefits during the nineteenth and early twentieth
century. From the walking city, to the row-house neighborhood, to
33

the streetcar suburb, middle-class neighborhoods became greener,
quieter, more spacious, healthier, and safer for children.
During the twentieth century, Americans moved to even lower
density suburbs.
After World War I, the typical middle-class neighborhood was a
bungalow suburb with one-sixth acre lots. Often, the neighborhood
stores were not close enough to walk to easily, but cars were
becoming more common, and people could drive a few blocks to
buy their groceries.
After World War II, when the federal government actively
promoted suburban sprawl, the typical middle-class neighborhood
was a freeway-oriented suburb with homes on quarter-acre lots. To
buy groceries, you had to drive on high-speed arterial streets, where
the traffic could be nerve-racking. Each adult—and even each teenager who reached driving age—needed a car.
During the rest of the twentieth century, we continued to travel
longer and longer distances, as sprawl became worse and shopping
moved to remote big-box stores.
Reversing the trend of the twentieth century, per capita vehicle
miles traveled (VMT) declined slightly between 2000 and 2010.
There are a number of explanations for this decline. Most obvious is
the “great recession” that began in 2007: Foreclosures were most
common in the newest, most auto-dependent suburbs; and people
who are unemployed drive less because they do not commute to
work. The aging of the population also reduces driving, because
people who are retired do not commute to work. In some metropolitan areas, sprawl cannot go further because it has reached the
maximum distance that people are willing to drive. In other areas,
sprawl has been limited by environmentalists’ efforts to stop
freeways and preserve open space.
There are also social changes that have led some observers to
predict that driving will continue to decline. Driving has been
reduced by the renewed popularity of walkable neighborhoods. The
baby boom generation is about to begin retiring, and a recent survey
by the National Association of Realtors shows that many plan to
move from the auto-dependent suburbs where they raised their
children to urban downtowns, suburban town centers, or small
34

towns. The so-called millennial generation, born between 1979 and
1996, is beginning to form families, and surveys show that they
prefer urban downtowns and suburban town centers, because they
are more interesting and more convenient than auto-dependent
suburbs.39

Figure 7: During the Twentieth Century, American Driving Distances Soared

40

Even more striking, surveys show that teenagers no longer focus
as much on cars as they did fifty years ago. They are more likely to
use electronics as the way to keep in touch with their friends and to
show their independence.41
To some extent, VMT has been reduced because of economic and
demographic trends, but to some extent, it has been reduced
because of a change in values that may go further. We still have a
long way to go to reduce automobile dependency: The average
American still drives more than twice as much as in 1960,42 though
in 1960 there was already widespread recognition among people
knowledgeable about city planning that Americans drove too
much.43
35

Counterproductivity and the City
By now, most urbanists recognize that post-war urban design
was a failure. It is a perfect example of counterproductivity: All the
increased consumption of transportation and land made our
suburbs less livable than the streetcar suburbs were. Excessive
automobile use made neighborhoods noisier, more congested, and
less safe for children. Endless freeways, strip malls and tract
housing paved over the open countryside that had attracted people
to the early suburbs. The sense of community of the early suburbs
disappeared, as local shopping streets were replaced by anonymous
regional shopping centers.
The most important trend in urban design in American today is
the New Urbanism, a reaction against conventional suburbia.44
Urban designers such as Andres Duany and Peter Calthorpe are
building neighborhoods modeled on the streetcar suburbs that were
built before World War I. Some cities and counties have adopted
form-based codes that require traditional neighborhood design, to
replace conventional suburban zoning, so developers are no longer
required by law to build sprawl, as they still are in most of the
country.
New Urbanism has been so successful because many people
agree that post-war suburbia, with housing on one-quarter acre lots,
is less livable than streetcar suburbs, with housing on one-tenth acre
lots. All the extra land that we consume does not give us more
livable neighborhoods.
Growth has made transportation less convenient and more
stressful, just as it has made neighborhoods less livable.
All the extra money that we spend on transportation—on our
freeways and our two or more family cars—does not make it
quicker for us to get around. Research has shown that the amount of
time that Americans spend commuting to work remained constant
from the 1840s (when suburbanization began during the early years
of the industrial revolution) through 1990, despite the vast changes
in technology during that time.45 The total amount of time that
Americans budget to transportation also tends to remain constant,
about 1.1 hours per day.46 As speeds have increased, suburbs have
36

sprawled and malls have gotten bigger, so people drive further to
get to their jobs or go shopping, rather than getting where they are
going more quickly.
After remaining constant for 150 years, the average American’s
commute time began to increase in the 1990s. By 2006, the average
commute had increased to 18% more than its historic norm. Over
3.4 million Americans drove more than an hour and a half to work,
twice as many as in 1990. 47
These people generally commuted such long distances because
they moved to very remote suburbs to find affordable housing. On
the east and west coast, low-density suburban zoning has created a
scarcity of housing, but the cost of a house is tens of thousands of
dollars lower for each additional freeway exit that you drive. Lowdensity zoning forced people into long, stressful commutes, left
them without enough time for their families, and made them take
on debts they could not afford. These are the patterns that were
common when cities were sprawling rapidly in the years following
1990; of course, they have been partly reversed since the collapse of
the housing market during the “great recession.”
When we look at how American neighborhoods have changed
historically, the typical pattern of counterproductivity is clear.
Neighborhoods became more livable as the middle class moved
from the walking city, to row houses, to streetcar suburbs. At that
point, middle-class Americans were already living in neighborhoods that were adequate. The streetcar suburbs gave families
enough space, enough privacy, enough quiet, a big enough back
yard. Post-war suburbia did not bring much added benefit, but it
did cause real social and environmental problems, such as traffic
congestion, the ugliness of strip malls, loss of farmland and open
space, and a scarcity of land that drove up housing costs. We have
reached the point where the costs of urban growth outweigh its
benefits.
Yet most Americans today have no choice but to live in lowdensity suburbs, where each family needs two or more cars. During
the post-war period, the federal government promoted this sort of
development so forcefully that it now accounts for most of our
housing stock. In the single decade following 1950, for example, the
37

number of dwelling units in the United States increased by 63%.48 In
a few decades after the war, suburban sprawl became the dominant
form of American neighborhood.
Most zoning laws today still require developers to build lowdensity housing separated from other uses, forcing people to live in
auto-dependent neighborhoods.

Transforming Our Cities
There is now a reaction against sprawl and a move toward what
is called “smart growth.” If this movement succeeds, American
cities could be transformed as dramatically in the next few decades
as they were during the post-war decades.
We need to transform our cities because freeway-oriented
sprawl puts an economic burden on Americans and is less livable
than traditional walkable neighborhoods. And we urgently need to
transform our cities to help deal with global warming.
Transit-Oriented Development
We should shift transportation spending away from the current
emphasis on building new freeway capacity. Instead, government
should support public transportation and development around
transit stops as vigorously as it supported freeways and sprawl
during the post-war decades.
From the 1950s through the 1980s, almost all federal
transportation funding was used to build freeways. Beginning in
the 1990s, the federal government made some transportation
funding flexible, so it could be spent on either freeways or public
transportation. About 58% of the funding for Federal Highway
Administration programs between 1992 and 2002 was flexible
funding, but the states spent only 5.6% of this funding on public
transportation and the rest on highways.49
The federal government should make all of its surface transportation funding flexible, and urbanized states should realize that
the way to solve their traffic problems is by building public
38

transportation and transit-oriented development, rather than
building new freeways.
We will still have to spend most of our transportation funds on
maintaining existing highways, but spending on new transportation
capacity should focus on public transit and on improvements for
pedestrians and bicyclists.
As we build more public transportation, we should also create
incentives for developers to build walkable neighborhoods near
transit stations. We need a federal program to stimulate the same
sort of building boom around transit stations that the FHA
generated around suburban freeways in the 1950s and 1960s.
This development should be near transit and have walkable
street systems, but it does not have to be very high density: Around
transit stations in the center city, we would build apartments, but
around transit stations at the edge of the city, we could build the
sort of streetcar suburbs that the New Urbanists are now designing,
with apartments above the shopping on Main Street, and with freestanding houses as the main housing type.
This new development is needed to give Americans the choice of
living in walkable, transit-oriented neighborhoods. After many
decades of government support for sprawl, most Americans no
longer have this choice, because so much of our housing is in autodependent neighborhoods. There is no chance that these neighborhoods will disappear in the foreseeable future, and we need to
provide more balance and more choice by developing neighborhoods that are built around the pedestrian.
Demand for housing in walkable neighborhoods has increased
dramatically, and their prices are high because zoning laws have
prevented us from keeping up with this demand. During the
decades after World War II, when there was a mass movement to
the suburbs, urban housing was cheaper than suburban housing;
but now urban housing in many metropolitan areas sells for 40% to
200% more per square foot than equivalent housing in sprawl
suburbs. Likewise, homes in New Urbanist streetcar suburbs sell for
a premium over homes in sprawl suburbs.50
Promoting new pedestrian-oriented development would reduce
the upward pressure on housing prices in general. We can make
39

housing more affordable by increasing the supply, but for
environmental reasons, we must do this with public transit and
transit-oriented development.
There is No Free Parking
To transform American cities, we should also apply a key
principle of the politics of simple living: People who live more
simply should not be forced to subsidize people who are heavier
consumers.
Today, everyone is forced to subsidize the automobile, whether
or not they drive. For example, the costs of paving streets and of
traffic signals are paid for out of cities’ general funds, so everyone
pays for them through sales taxes and property taxes—including
people who use only one-tenth as much street space because they
bicycle or use public transit rather than driving.
One way to reduce these unfair subsidies is to make drivers pay
their own way by funding roads and traffic signals primarily with
user fees on the automobile, rather than with sales and property
taxes that everyone pays. The federal gasoline tax used to build
freeways is this sort of user fee,51 and we need similar user fees to
pay for local roads, traffic signals, and the like.
The most blatant subsidy to the automobile is “free” parking.
Businesses generally provide free parking for their employees: 95%
of all employees drive to work, and 86% park for free, 9% pay a
subsidized price, and only 5% pay the full price of parking.52 Most
businesses provide free parking for customers: the parking for 99%
of all non-commute trips is free.53 Virtually all new housing
provides parking for residents at no extra cost.
The subsidies are large. It costs an average of $5,000 for each
space in a surface parking lot, and an average of $19,650 for each
space in a parking garage.54 Zoning laws typically require that each
person has one parking space at home, one at work, and occasional
use of other free parking spaces at shopping centers, parks, and
other services. For each vehicle in a typical urban area, there are an
estimated total of three off-street parking spaces and two on-street
parking spaces.55
40

One comprehensive study found that subsidies to parking are
equal to over half of what the owner spends directly on each car.56
For every dollar that people spend directly on their cars, they get
subsidy of more than 50 cents for parking (not to mention all the
other subsidies to the automobile).
Of course, all the “free parking” is not actually free. Employers
account for employee parking as part of the cost of labor, and they
pay lower wages and salaries to make up for this extra cost.
Developers have to charge higher prices for housing to pay for the
parking they include, and businesses have to charge higher prices to
customers to pay for the parking they provide. Everyone pays these
higher prices, whether or not they drive.
There are more equitable ways of dealing with the cost of
parking.
Many environmentalists have called for laws requiring a
“parking cash out” for commuters. Instead of providing free
parking, employers would charge a fee that covers the full cost of
parking, and they would also give their employees a transportation
allowance that is large enough to pay this parking fee. If employees
drive to work alone, they can use the transportation allowance to
pay the parking fee. If employees use two-person carpools, they can
use half of their parking allowance to pay for parking and can keep
the other half for themselves. If employees bicycle or walk to work,
they can keep the entire parking allowance for themselves. This
plan would cut commuter traffic by an estimated 15 to 20%,57 and it
would give a substantial cash bonus to people who do not drive
alone to work. For the first time, it would give people the option of
downshifting economically by changing commute mode and of
keeping the money they save because they do not need parking.
Likewise, we could require landlords, condo developers, and in
some cases even single-family-housing developers to charge
separately for the housing unit and for the parking, charging
enough for the parking to cover the full cost of building it. In denser
cities, where parking is structured, this could reduce the cost of
housing dramatically for people who do not own cars.
Some environmentalists have also called for zoning that allows
car-free housing, where residents could rent cars for occasional use
41

but would agree by contract not to have their own cars and would
not get permits needed to park their own cars on the streets. This
would lower the price of housing, and the price would tend to stay
low because there is less chance of gentrification when residents
cannot own cars.
In Great Britain, section 106 of the planning code makes it legal
to build car-free housing, and the idea has been catching on in that
country. The London Borough of Camden alone has approved
construction of 3,500 car-free housing units, whose residents cannot
get on-street parking permits.58
We could go further and create car-free neighborhoods by
zoning some areas with good transit service to require that all new
housing must be car-free. Because this housing would attract people
who want to downshift economically and work part time, these
neighborhoods would be filled with people during the days.
Residents would get to know their neighbors, because they would
walk to local stores to do their shopping. And the neighbors would
be interesting to know, because they would be people who want
free time for their own pursuits.
During the 1950s, some old neighborhoods, such as Greenwich
Village in New York and North Beach in San Francisco, became
popular for just these reasons: You could live there cheaply because
they had low-cost housing within walking distance of shopping,
and they attracted interesting people because you could live there
cheaply. But these neighborhoods were victims of their own success
and became so popular that rents soared. Their success shows that
there is demand for this sort of neighborhood: If cities began to zone
for car-free neighborhoods in locations with good transit service,
many people would be interested in living in these neighborhoods
at least during parts of their lives.
The new neighborhood of Vauban, which is a ten-minute bicycle
ride from the center of Freiburg, Germany, is an example of a carfree neighborhood designed to attract families with children.
Parking is available only at a garage at the edge of the neighborhood, and spaces sell for 17,500 Euros each. There are four
kindergartens, a Waldorf school and many playgrounds in this
neighborhood, where one-third of the 4,700 residents are children.
42

When kindergarten lets out, there are not lines of cars waiting to
pick up the children; instead, there are long lines of parents on
bicycles with trailers that carry children—a very convenient and
low-stress way to get around a car-free neighborhood, where you
do not have to worry about being run down by a reckless driver.59
Currently, people who do not have cars still have to put up with
the environmental costs of their neighbors’ cars: Their neighborhoods are noisy, congested, and less safe, because the streets are
filled with cars. Car-free neighborhoods give people a real trade-off.
If you opt to live in one of these neighborhoods, you lose the
convenience of having a car, but you get the benefit of having a
quieter neighborhood, pleasant public spaces, streets that are safer
for your children, and stores that you can bicycle to without being
threatened by cars. People do not have this option today, and many
might consider it a good trade-off.
Employee parking cash-out, car-free housing, and car-free
neighborhoods are meant to give people more choices. People still
could still live in auto-dependent suburbia, but they would also
have these new options that they do not have today. In fairness, the
people who choose to live without cars should not be forced to
subsidize the people who choose to drive.

Cities and Simple Living
With traditional neighborhood design and less auto-dependency,
we could spend much less money on housing and transportation
and, at the same time, have cities that are more livable than our
cities are today.
With a shift from sprawl suburbia to transit- and pedestrianoriented neighborhoods, the cost of transportation could be cut
roughly in half, because trip lengths would be cut dramatically and
many trips would shift to walking and bicycling. Of course, car-free
neighborhoods would save even more.
With a shift from sprawl suburbia to traditional walkable neighborhoods, like the old streetcar suburbs, the cost of housing could
be cut by about 30%, according to one extensive study of the
43

subject.60 In addition, smart growth saves cities 38% of the cost of
developing infrastructure, such as roads and water lines.61
Overall, Americans could save as much as one-third of what
they spend on housing and transportation (the two largest
expenditures for the average household), if they chose to live in
neighborhoods where cars are a convenience rather than an
everyday necessity. And spending less money would give them
neighborhoods that are more livable and more convenient than our
usual sprawl suburbs.

44

Chapter 4
Families at the Limit

Many Americans do not have enough time for their children. In the
decades following 1970, the amount of time that the average
American child spent with parents declined by ten hours per
week,62 as work hours increased.
The issue of family time is one of the best opportunities to make
Americans think critically about our narrow focus on economic
growth. People care enough about their children that, if we raised
this issue, they would see that they would be better off if they could
choose to work less and have more time for their families.
Unfortunately, mainstream liberals keep focusing on the same
tired policies that progressives supported at the beginning of the
twentieth century. The government should spend more money on
child care, more money on universal preschool, more money on
schooling, and more money on after-school and summer programs.
They assume that families do not have enough time for their
children, so government should take over their job.
Demands to spend more on schooling made sense in 1900. At
that time, only 6% of Americans were high school graduates, and
urban elementary schools often had 50 children or more in a class.
To give an extreme example, one Victorian school system, the
Lancaster schools that were started by Joseph Lancaster in early
nineteenth century and were widely imitated, taught the urban
masses with a ratio of one teacher for every 300 to 1000 students,
using a system where some children supervised others.63 When
progressives started demanding more money for schooling, the
schools desperately needed that money.
45

These demands make no sense today. Spending on education
increased dramatically during the twentieth century, and the
evidence shows that America now spends more than enough on
schooling. Though we do need more government funding for public
universities, which are raising tuition to levels that put them out of
reach of many families, we do not need to spend more on public
schools through high school. As we will see, international and
historical comparisons show that spending more on schooling stops
improving education when it reaches about one-half of what we
now spend in the United States.

Consuming More Schooling
Early in the twentieth century, educational achievement improved as spending on public schools increased; but since the 1960s,
there has been no correlation between increased spending and
achievement.
In 1920, American schools spent only $720 per pupil (in 2008-9
dollars), and in 1960, they still spent only $3,441 per pupil (in 2008-9
dollars), very little compared with the $12,922 per pupil that they
spent in 2008.64 Through the 1950s, increased spending was still
needed and helped to improve achievement.
Yet during the 1960s and early 1970s, achievement declined as
spending on education soared. For example, scores on the SAT
peaked in 1963 and then declined sharply. In part, this was because
the pool of test-takers increased, but in 1977, a panel organized by
the College Board found that the decline was also caused by
lowered expectations and reduced homework.65 Even more convincing, there was a 37% decline in the absolute number of students
who scored above 700 from 1972 to 1994, which obviously cannot be
explained by the larger pool of students taking the test.66
As it happened, achievement began to improve during the early
1980s—right after spending on education stopped increasing for a
few years because of a severe recession and Reagan’s spending cuts.
We can see in Figure 8 that achievement has been trending upward
since about 1980 but is still far below its 1963-64 peak.
46

Since the 1960s, there has been no correlation between
achievement and increased spending. We spend more than three
times as much per student as in 1964 (after correcting for inflation),
but the students learn less.

Figure 8: Educational Spending and SAT Scores

67

Counterproductivity and Education
Why did educational achievement decline while spending
increased? It is a perfect example of counterproductivity. Most
American children already got adequate schooling in 1963, so that
spending more money since then has not improved education
significantly. At the same time, the growth economy has harmed
education significantly: It has overworked parents and left them
without enough time for their children, and it has created a
consumer culture that undermines the effort needed for learning.
Many studies within the United States have shown that
spending more on schooling no longer improves achievement,
beginning with the extensive statistical studies by James Coleman in
the 1960s and Christopher Jencks in the 1970s showing that quality
47

of schooling has a very small influence on educational achievement
compared with quality of community and family life.68 In a series of
papers over two decades, Eric Hanushek has looked at 300 studies
of the effect of spending on educational achievement in the United
States; he found that most studies show there is no correlation
between spending and achievement, about 15% show that higher
spending correlates with higher achievement, and about 15% show
that higher spending correlates with lower achievement.69
International comparisons of spending point to the same conclusion. The United States spends about one-third more per student
than the average of the other industrial nations, but our
achievement is lower than average (Figure 9).
Spending per
Student

PISA Science Score
of 15 Year Olds

United States

$16,441

488.9

Other Industrial
Nations

$13,410

504.1

Figure 9: Educational Spending and Achievement in the Industrial Nations

70

A broader international comparison is even more revealing.
Based on the data available (Figure 10), it seems that increased
spending improves achievement until spending reaches Australia’s
level, which is about half as much as the United States. Above that,
achievement does not seem to increase because of higher spending.
Judging from this international comparison, spending more money
on schooling seems to have no benefit once you reach Australia’s
level, but in reality, spending more may bring small benefits—so
small that they are outweighed by other cultural factors.
Though spending more no longer improves education significantly, our hypergrowth economy does work against education
in some ways.
Our economy requires many parents to work two full-time jobs,
leaving them with little time for their children. More children than
ever are cared for by state agencies or are latchkey children who
return to empty homes after school. According to the Census
48

Bureau, one-third of all school-age children are home alone during
at least part of the week.71 For children under 10, loneliness,
boredom, and fear are the most common results of being home
alone. For children in their early teens who are home alone, peer
pressure can lead to experimentation with alcohol, smoking, and
sex.

72

Figure 10: Educational Spending and Achievement Internationally

Even worse, Lawrence Steinberg’s study of over 20,000 High
School students in nine communities—the most extensive ever
done—found that about 25% of all High School students have
“disengaged parents [who have] ‘checked out’ of child-rearing”
completely.73 The children of these disengaged parents are more
likely to be emotionally immature, to use drugs, to become delinquent, to suffer from anxiety, depression or psychosomatic
complaints, and to be unsuccessful in school.74
In addition to taking too much of parents’ time, our consumerist
culture undermines character traits that are essential to learning.
For example, when the high school in San Ramon, California,
adopted a rule forbidding students to bring iPods to school, the
students organized a letter writing campaign to protest the ban. A
49

flood of letters to the editor complained that it was unthinkable to
ban iPods from campus and to expect the students to go through
the entire day without any entertainment.75
Teachers often say that the children expect them to make the
classes entertaining enough to hold their attention; for example, one
high school teacher of accelerated students says, “I’m an entertainer.
I have to do a song and dance to capture their attention.”76 Many
students expect to sit back passively and be educated by their
schools, just as they expect to sit back and be entertained by their
televisions and iPods. They are less likely to make the effort that is
needed to learn anything difficult.
According to a recent study by the Kaiser Family Foundation,
the amount of time that eight-to-eighteen-year old children spend
with media increased from 6 hours 21 minutes per day in 2004 to 7
hours and 38 minutes in 2009. In 45% of all homes, the television is
on most of the time, even when no one is watching it, and 71% of
children have their own televisions in their bedrooms. In homes
where the television is left on, children watch an hour and a half
more per day, and children who have televisions in their bedrooms
watch an hour more per day. This overuse of media is a direct
distraction from learning: Almost half of all children watch
television while doing their homework.
Media addiction works against academic achievement. This
study found that 47% of the children who are heavy media users
(spending more than 16 hours per day with media) get fair or poor
grades, compared with only 23% of children who are light media
users (spending 3 hours a day or less with media). Minority
students are affected most: black and Hispanic students spend
about four and a half hours more per day with media than white
students.
It is astounding that heavy users are defined as those who spend
more than 16 hours a day with media. There are only 24 hours in
the day, so if you spent 8 hours sleeping, 16 hours with media
would take up all your waking hours. Yet heavy users manage to
spend more time than this.
Parents are the key to reducing children’s media addiction. The
study found that, in homes where parents set rules, children
50

typically spend three hours per day less with media. Yet 72% of
children said their parents did not limit their television watching.77
The usual pattern of counterproductivity explains why other
industrial nations have higher academic achievement than the
United States. Once you spend as much as the average industrial
nation, spending more in education is not as important to
achievement as other cultural factors. Though they spend less than
we do, parents in the other industrial nations have more time for
their children, and their children are not as hooked on the culture of
media and entertainment.

Instead of Day Care
We do not need to cut our spending on education. Even though
we spend more than other industrial nations without better results,
the amount we spend is a relatively small percentage of the GDP.
Education spending does not threaten to break the federal budget,
like our spending on health care, and it does not blight the
environment, like our spending on sprawl. We can easily afford the
luxury of having smaller classes.
But we do need to develop policies that encourage parents to
devote more time and more effort to raising their children—which
means that we need to move beyond the old progressive idea that
the key to solving all our educational problems is to spend more
money on preschools, more money on schools, and more money on
after-school programs.
We need to realize that improving the quality of schools is
important but is not primarily a matter of spending more money.
Some promising ideas for improving schooling are teacher
evaluation systems that take student achievement into account,
which are supported by the Obama administration, and charter
schools, which allow schools that use a variety of different teaching
methods, so more successful models can be imitated. Good teachers
have a lasting effect on earnings and other measures of success:
According to a recent study that tracked 2.5 million students for
over twenty years, replacing just one poor teacher with an average
51

teacher would raise the lifetime incomes of all children in one year’s
class by a total of $266,000.78 In New Haven, the city and teachers’
union are cooperating in an experiment to improve the quality of
teachers by making it easier to fire teachers who are clearly
incompetent,79 and this is one possible initiative that could improve
achievement.
Just as important as improving schools, though, is finding
policies that would let parents spend more time with their children.
As one step, we should stop discriminating against parents who
care for their own toddlers by giving child-care funding equally to
all families with preschool children.
Currently, federal tax laws allow a tax credit to pay for 35% of
child-care expenses, up to a maximum of $3,000 for one child or
$6,000 for more than one child. This is one of the most widely used
tax credits,80 and it goes only to families with children in day-care.
Affluent dual-income families get a child-care tax credit, but
families get nothing if they work shorter hours and sacrifice income
so they can care for their own children.
Instead, we should offer this tax credit to all low and middleincome families with preschool children, whether or not the
children are in day care. The credit should be phased out for
families with higher incomes: A dual-income family that earns
$200,000 per year can afford to pay its own child-care expenses.
The current tax credit gives people an incentive to work longer
hours and spend less time with their children, because it pays for
day care and gives nothing to families who care for their own
children. If we just leveled the playing field, it would give many
people the opportunity to live more simply and have more family
time.
Child Care and the Family Budget
Ideally, we should give low and middle-income families with
preschool children a non-discriminatory tax credit large enough to
pay the entire cost of quality day care. Families who need day care
could use this credit to pay for the day care. Most families could
52

choose whether to use this credit to pay for day care or to work
shorter hours and have more time for their children.
Child-care advocates sometimes claim that we must subsidize
daycare and preschool, because the average family now needs two
incomes to get by. This claim shows that they are totally blind to the
failure of the growth economy: They apparently do not know that
the median family earns about twice as much today (after correcting
for inflation) as in 1950,81 when almost all families cared for their
own preschool children, with much of the increased income going
to compulsory consumption.
Even without reducing compulsory consumption (for example
by building walkable neighborhoods) the average family could
have the option of caring for its own children if we just gave the
price of day care to the family directly. We can see this by looking at
some sample numbers. One estimate, made in 1999, calculated that:
■ The average woman’s income after taxes is $18,998.
■ The additional costs of the woman’s working are $14,500,
including $7,000 for day care.
■ Therefore, the net added income is $4,498.
This estimate of the additional costs of working is an example,
not a statistical average, but these costs were a reasonable estimate
or what many families paid in 1999 in order to earn a second
income.82 Of course, costs have increased since then.
If we had non-discriminatory child-care tax credit, the $7,000
credit for one preschool child would be more than the $4,498 that
was the net benefit of the second income. This credit alone would be
enough to make it economically possible for the family to work
shorter hours and care for its own child.
In combination with work-time choice, this policy would let both
men and women live more balanced lives, with time for both work
and family.
Fifty years ago, the typical family was supported by a man
working forty hours a week. If this were a reasonable world, the
entry of women into the workforce would have given us families
supported by two people who divide the forty-hour work week
53

between them. Instead, today’s typical family is supported by two
people working an eighty-hour week between them.
We have moved so far away from a sensible work-life balance,
because we have inflexible work hours, and because we have childcare policies that discriminate against people who care for their own
children.
The Failure of Preschool
Child-care advocates often claim that preschools improve children’s academic performance, but they are distorting the evidence. In
reality, the overwhelming majority of studies show that preschools
can bring small improvements in the academic achievement of poor,
at-risk children, but they have no effect at all on the achievement of
middle-class children.
In a typical example of how mainstream liberals have distorted
this issue, Hillary Clinton wrote:
significant headway has been made in the field of biology, where
researchers have begun to grasp how the brain develops. ... Dr.
Frank Goodwin, former director of the National Institute of
Mental Health, cites studies in which children who could be
described as being ‘at risk’ for developmental problems were
exposed at an early age to a stimulating environment. ... At the age
of four months, half of the children were placed in a preschool
with a very high ratio of adult staff to children. ... those in the
experimental group averaged 17 points higher in IQ tests.83

Clinton exaggerates the program’s benefits for at risk-children:
IQ initially increases by 17 points, but the improvement diminishes
over time and, by the time the children reach high school, it is less
than 5 points, not enough to make much difference in school
achievement.84
Just as important, Clinton does not mention that the at-risk
children in preschool did much worse than the national average,
though they did better than at-risk children who did not go to
preschool. For example, 30% of the children in one of the most
successful of these of these programs had to repeat a year in school,
compared with 56% of the at-risk children who stayed home; at-risk
54

children did better if they used this program, but they still did far
worse than middle-class children.
It is not surprising that the benefits of these programs were
small, since studies have shown that differences in quality of
preschool account for only 1% to 4% in the differences in children’s
cognitive development, and the rest can be attributed to differences
among their families.85
Constant repetition has convinced middle-class parents that
their children brains will be hard-wired to make them smarter if
they are in preschools during the first three years of their lives, but
in reality, the studies overwhelmingly show that preschool has no
lasting benefit for middle-class children.
In fact, preschools providing “enriched environments” for poor
children usually just do the same things that most middle-class
parents already do. Studies have shown that children are more
successful in school, if adults talk to them long before they have
learned to speak, read to them, sing to them, give them interesting
toys to play with, and have repeated affectionate interactions with
them. Most middle-class parents already do this, but many lowincome parents do not.
After working in preschools to improve the vocabularies of poor
children, Betty Hart and Todd Risley did research to learn about the
effect of the children’s homes on vocabulary. They spent two and
one half years observing forty-two families with children from 7
months to 3 years old. They found that the average child in a poor
family on welfare heard only 616 words per hour, the average child
in a working class family heard 1,251 words per hour, and the
average child in a professional family heard 2,153 words per hour.
By age four, the child in the poor family heard 13 million fewer
words than the child in the working class family. They also found
that parents in middle-class families tend to be more affirmative
and encouraging. The children in professional families averaged 32
affirmations and 5 prohibitions per hour, the children in workingclass families averaged 12 affirmations and 7 prohibitions per hour,
and the children in poor families averaged 5 affirmations and 11
prohibitions per hour.86
55

You do not need a degree in brain science to talk to and
encourage your preschool children, but many parents need to be
told how important it is to do these things.
We could improve child raising dramatically by funding a largescale public education campaign with advertisements showing
parents talking to infants, reading to toddlers, and having affirmative interactions with children, and telling parents how important
these activities are to their children’s long-term success. This public
education campaign should also tell parents that children do not do
as well in school if they spend more than three hours a day with
media, emphasizing how important it is for parents to set
reasonable limits on use of television and other media by children of
all ages, up through the teens.
Public health improved dramatically because of the antismoking campaigns of the 1970s and 1980s, which spread the word
that people should do more to protect their own health. Education
will improve dramatically when we spread the word that people
should do more to raise their own children.

Money or Time for Children
We need to ask the same question about older children that we
are asking about preschool children: Should we spend more money
schooling them or more time raising them?
Mainstream progressives want to help these children by
spending more on schools, on after-school programs, and on
summer programs; but we have seen that we have reached a point
where the demands for more money for schooling are useless. The
demands for more money for after-school and summer programs
are worse, because they would lead us toward a society where
children’s activities are so programmed that they have little time to
do anything serious on their own.
To grow up into autonomous adults, children and teenagers
need time for their own thoughts and their own projects. For
example, people who grow up to be serious readers virtually all
begin by reading for pleasure on their own time—even though they
56

may dislike the books they are required to read as their school
assignments.
Not very long ago, playing baseball with the other kids on the
block was an essential part of American childhood: As the children
chose teams, settled disputes, and even invented new games with
their own rules, they learned to organize themselves and to make
decisions on their own.87 Not very long ago, American children and
teenagers had plenty of free time for play, reading, and solitude,
during the hours after school and during their long summer
vacations.
But today, most parents want to put their children in after-school
and summer programs, because there is no one to take care of them
at home. Middle-class parents also want their children in teams
where the adults organize their baseball or soccer games, rather
than letting the children learn to organize games themselves;
usually, they live in low-density suburbs where there are few
children nearby, so there is no choice but organized play.
These middle-class parents believe that over-scheduling
organized activities will help their children succeed economically,
and there is probably some truth to this belief. Just as choosing
teams and running their own baseball games used to prepare
children for an entrepreneurial economy, where many people ran
their own businesses, spending long hours on organized sports
prepares today’s children for a economy where they will work long
hours in a corporate organization. Over-scheduling them with
organized activities leaves middle-class children unable to make
good use of their own free time; unlike most working-class children,
who are accustomed to self-directed play, most middle-class
children get bored if they have unstructured time.88
If parents had free time and lived in walkable neighborhoods,
they could be home to watch casually over children who are
playing with the other kids on the block or are playing alone in their
rooms—as parents typically did fifty years ago. Today’s parents
should at least have this option: They should not feel that they must
put their children in after-school programs and full-time summer
programs, because they work such long hours that the only
57

alternative is having latchkey children who come home to an empty
house.

Commodities or Activities
When we step back and look at them in perspective, the
conventional progressive idea that we should provide universal free
preschool does not seem much different from the conventional idea
that we should provide universal free parking.
Both violate the key principle of a politics of simple living: If
people choose to consume less and do more for themselves, they
should be able to keep the savings rather than being forced to
subsidize those who consume more.
Both violate this principle because they subsidize the heavy
consumers and ignore everyone else. People who walk or bicycle do
not get any benefit from free parking, and people who care for their
own toddlers do not get any benefit from free preschools. Yet
everyone pays higher prices or taxes to support the free parking and
preschools, whether or not they use them.
We subsidize parking and child-care because we consider them
necessities: Most families cannot go shopping or go to work without
finding a parking space, and most families cannot get by
economically without putting their children in day-care and earning
two incomes.
Yet there was a time when most Americans got along perfectly
well without either of these “necessities.” One hundred years ago,
Americans did not need all this transportation, because they usually
got around on their own power by walking. Fifty years ago,
Americans did not need all this child-care, because they usually
took care of their own preschool children.
As Ivan Illich has said, the modern economy tends to convert
activities into commodities. Activities that most people used to do
themselves—moving around and caring for children—have become
commodities that the economy produces for people to consume—
transportation and child-care.89
58

Those who demand universal free child-care (like those who
cannot imagine a world without free parking at every destination)
are so completely mystified by the modern economy that they do
not believe people can do more for themselves. They ignore the real
needs of most Americans, who would be better off if they consumed
less transportation and spent more time walking, and if they
consumed less child-care and spent more time with their children.

59

Chapter 5
Health Care at the Limit

Health provides good examples of all the elements of counterproductivity:
■ The failure of growth: America spends almost twice as
much as on health care as the other developed nations, but
we have lower life expectancy and much higher levels of
infant mortality, because our lifestyles have become less
healthy.
■ Compulsory consumption: With our current insurance
system, individuals have no choice of downshifting. You
pay the same amount for insurance, even if you do not want
the wasteful treatments.
■ The need to do more for ourselves: The most important
things Americans can do to improve our health is to
exercise, to eat better diets, and to give up cigarette
smoking.
We should reform health insurance to reduce costs and
unnecessary treatments, bringing our spending closer to the level of
the other industrial nations. And we should promote healthier ways
of life to bring our life expectancy up to the level of the other
industrial nations.

Consuming More Medical Care
America’s health-care spending has increased from 5.1% of the
GDP in 1960 to 17% of the GDP today. This is a huge increase,
considering that per capita GDP itself has more than doubled since
1960.90
60

Yet improvements in health have slowed, despite the huge
increase in spending. American life expectancy went from 47.8
years in 1900 to 68.2 years in 1950, increasing more than 21 years
during the first half of the twentieth century. But life expectancy in
2000 was 77, increasing only 9 years in the second half of the
century.91

Figure 11: Medical Spending and Life Expectancy in the United States

92

Health care is different on one important way from city planning
and education, which we looked at in earlier chapters: there have
been many advances in medical technology that have increased life
expectancy, so counterproductivity has not set in, as we can see in
Figure 11. For example, statins were approved by the FDA in 1987
and are widely used to reduce the risk of heart attacks. There are
also many specialized treatments that save some lives and that have
given the United States a reputation for medical breakthroughs, but
many are extremely expensive: for example, each year of life saved
by implanted heart defibrillators costs between $1.2 million and $1.5
million.93
Much of our increased spending has gone to new technologies
that are useful, but our method of funding health care also
encourages spending on treatments that are unnecessary or even
61

harmful. There are several ways of estimating how much of our
health care spending is wasteful.
Studies at Dartmouth University that compare medical costs and
outcomes in different parts of the United States have estimated that
one-third of American health-care spending is wasted.94 Likewise, a
recent consensus report prepared for the Institute of Medicine by a
panel of experts found that about 30% of all American health-care
spending is wasted, a total of about $750 billion.95
Comparisons with other industrial nations seem to show that
almost one-half of our spending is wasted. America spends almost
twice as much per capita on health care as the average for other
industrialized nations, but has lower life expectancy and much
higher infant mortality than the other industrial nations (Figure 12).
Spending Per
Capita
(2005 US Dollars)

Average Life
Expectancy At
Birth

Infant Mortality
per 1000 Live
Births

United States

$6,350

78

7

Other Industrial
Nations

$3,488

80

3.35

Figure 12: Medical Spending and Life Expectancy in Industrial Nations

96

Broader international comparisons seem to indicate that threequarters of our health care spending is wasted. Figure 13 and Figure
14, which include developing as well as industrial nations, show
that higher health care spending no longer correlates with increased
life expectancy or reduced infant mortality when spending is more
than about $1,500 per capita, about one-quarter of the $6,350 that
the United States spends.
Not all of these differences are the result of spending on
treatments that are totally useless. We Americans use many
treatments that have a small benefit, so small that it is outweighed
by our unhealthy behavior. In addition to leading the world in
health care spending, the United States leads the world in obesity,
as we can see in Figure 15. We have worse health than nations that
spend one-quarter as much as we do on health care, because the
62

health problems caused by obesity and other lifestyle factors
outweigh the small benefits of our extra spending on medical care.

97

Figure 13: Medical Spending and Life Expectancy Internationally

Figure 14: Medical Spending and Infant Mortality Internationally98
63

Regardless of exactly how much of our medical spending is
wasted, these international comparisons show very clearly that we
have reached a point where spending more money on medical care
is not as important as other factors that promote good health, such
as diet and exercise. This explains why other nations have better
health than the United States, though they spend much less on
medical care.

Figure 15: The US Has Most Obesity of Any Industrial Nation

99

Counterproductivity and Health
Health care is a perfect example of counterproductivity.
Spending at one-half of our current level is enough to provide
adequate medical care in the other industrial nations, and spending
more brings relatively small benefits.
The same is true of the rising standard of living. Health
improved over the past centuries largely because economic growth
gave us better sanitation, housing, and nutrition, but most Americans have reached the point where further improvements in the
standard of living also become useless or even harmful. For
64

example, spending more on suburban-sprawl housing makes us
exercise less than we did in the days when we walked.
Let’s look in more detail at these two elements of counterproductivity: much of our increased health care spending is useless,
while economic growth can sometimes harm our health.
Useless Treatments
By the 1970s, when we spent only one-third as much per capita
on health care as we do today, social critics were already saying that
many of our common medical treatments were useless.100
Americans considered it substandard to be born at home—by
the 1960s, virtually all of our births occurred in hospitals—but
studies have shown that home births, attended by lay midwives
whose training was a year of apprenticeship, can have fewer
complications than hospital births, attended by teams of highly
trained doctors and nurses. Because hospital births are organized
around doctors’ schedules, there is pressure to shorten labor.
Because midwives cost less, they can have more patience with the
natural process of birth, so they are more successful than hospitals
in cases where prenatal examination shows that birth will proceed
without complications.101
Americans also considered it substandard to die at home. They
die in hospitals, surrounded by tubes, doctors, and technicians,
rather than at home, surrounded by friends and family. Often there
is no treatment that will lengthen useful life: The hospitals are filled
with machines whose main function is to maintain life in a
vegetable state after all hope of recovery is gone.
And there are useless—or even harmful—medical treatments
from cradle to grave.
Dr. John Wennberg, a professor at Dartmouth Medical School,
found tremendous variations in the use of medical procedures in
nearby areas, without any benefit to the locations that spend more.
For example, he found that about 70% of the children in Stowe,
Vermont, but only 10% of the children in Waterbury, Vermont, had
tonsillectomies by the time they were 15 years old. About 50% of
men in Portland, Maine, but only about 10% of the men in Bangor,
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Maine, had prostate surgery by age 85. Twice as many people had
heart surgery in Des Moines, Iowa, as in Iowa City. Because of
different medical cultures, doctors in some towns recommended
these procedures much more often than doctors in others. Yet in
every case, except for extremely poor areas where people lack basic
health care, Wennberg found that high-use areas did not have better
results than low-use areas.
A team from Dartmouth, led by professor Elliot Fisher, has
continued to use Wennberg’s methods and has found that Medicare
spending varies dramatically through the nation without improved
outcomes. For example, hospitals in Sacramento, Ca. spend $34,659
per Medicare patient, while hospitals in Los Angeles, Ca, spend
$58,480 per Medicare patient with no better result.102 In fact, he
found that, mortality is 2% to 5% higher in regions that spend more,
presumably because medical procedures can cause some risk of
death even when they provide no benefit.
Based on this study Fisher concluded that about one-third of
America’s current medical spending goes to services that do not
improve health and may damage health.103
One good example of a treatment that has become harmful
because it is so overused is Computed Tomography scans (CT
scans, formerly called CAT scans for Computerized Axial Tomography), which use computer processing to generate a threedimensional image from a number of x-ray images. The United
States performs 62 million CT scans per year, one for every five
people; at this rate, the average person would get about sixteen CT
scans in a lifetime. Many are unnecessary, and all are potentially
harmful, because a CT scan exposes the patient to almost 1000 times
as much radiation as an x-ray, adding to the lifetime risk of cancer.
CT scans are very valuable in treating patients who come to the
emergency room with chest pains but without other symptoms of a
heart attack, because they can determine whether the patient is
actually having a heart attack. Yet most CT scans are performed on
patients who have no symptoms, and these scans have never been
shown to provide any benefit. Because of this and other procedures,
the amount of medical radiation that the average American is
exposed to has grown six-fold during the past few decades.
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According to Food and Drug Administration regulations,
manufacturers of CT scanners only have to show that they are safe
and provide accurate images, not that they provide any medical
benefit, and manufacturers spend heavily on marketing scanners to
doctors. Medicare usually pays for any device approved by the FDA
without asking for evidence of effectiveness, but there was so much
talk about wasteful use of CT scans that Medicare almost changed
this policy. In June, 2007, Medicare officials said that they were
considering doing a large-scale study of the effectiveness of CT
scans and paying for them only in cases where they had value for
patients. There was a strong response from the Society of
Cardiovascular Computed Tomography, which lined up a dozen
senators and 79 representatives to support its position and
pressured Medicare to drop this study and keep funding CT scans
without knowing whether they are useful.104
There are many other clear cases of Medicare waste. For
example:
■ Avastin: In 2010, the FDA found that the drug Avastin is
not effective in treating breast cancer, though it does have
severe side effects. Yet Medicare decided it would continue
to pay for Avastin, which costs about $88,000 for one
patient for one year.
■ Colonoscopies: The United States Preventive Services Task
Force says doctors should not perform colonoscopies on
most people over 75. There is no evidence that they save
lives among these people, and there is a risk of perforating
the intestine, which increases with age. Yet Medicare pays
for colonoscopies for patients of any age.105
Many other procedures often provide no health benefit. A recent
report from nine medical specialty groups recommended that
doctors perform 45 common procedures less frequently. The
American College of Cardiology said that cardiologists should stop
performing stress cardiac imaging on patients with no symptoms.
The American College of Radiology said that radiologists should
stop performing imaging scans on patients with simple headaches.
Specialty groups made similar recommendations for many other
common procedures, which are expensive but have no benefit.106
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These useless treatments can cause unnecessary suffering. For
example, doctors initially thought that treating advanced metastatic
breast cancer with chemotherapy and bone marrow transplants had
a 10% chance of lengthening the patient’s life, but a recent article
concluded that “the actual chance of meaningful benefit from this
treatment is zero, and that the only effect of the treatment was to
make patients’ remaining months of life miserable”107
There are also strong commercial pressures to overuse drugs.
The United States is one of only two industrial nations that allow
direct advertising of drugs to consumers. As drug advertising was
deregulated, spending increased 58-fold between 1991 and 2003, to
$3.2 billion per year.108 The ads all tell you to ask your doctor
whether this drug is right for you, but doctors have very little sales
resistance; they prescribe 75% to 80% of the drugs that their patients
ask for.109
The drug companies control most of the research about their
own products. Before 1970, most drug research was funded by the
National Institute for Health and performed in universities, but
government funding has declined and drug company funding has
increased dramatically, to the point where 80% of clinical trials were
performed by for-profit companies in 2002.110 Drug companies often
do not publish results of trials that show their drugs are ineffective
or dangerous. For example, of 44 studies of five new antidepressant
drugs, 22 showed they were effective and 22 showed they were no
better than a placebo, but 15 of the 22 unfavorable studies were
never published and became public only when the drugs’
manufacturer applied to have them approved in Sweden, which
requires applications to include all the studies that have been done,
not just the published studies.111
The drug companies also control most information that doctors
get about drugs. Most states require doctors to receive continuing
education, and in 2003, drug companies funded 70% of continued
education, at a cost of $1,500 per year for each physician in the
United States.112
Not surprisingly, huge numbers of Americans take drugs that
are unnecessary or harmful. Twenty-two million Americans (one of
ten adults) have taken drugs that were later withdrawn as unsafe.113
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The most famous example is Premarin, which replaces estrogen
after women have reached menopause. This was the most widely
prescribed brand-name drug in the United States in 1966, and again
in 1995, and many doctors recommended it for all post-menopausal
women. Then a 1998 study showed that it increased the risk of heart
disease, and a 2000 study showed that it increased the risk of breast
cancer, so it is now used in a more limited way. It is estimated that
overuse of Premarin caused more than 100,000 added cases of
breast cancer.114
If our health care system pushed so many people to take a drug
that is harmful, imagine how many people are taking drugs and
using other treatments that are ineffective.
Health Costs of Growth
Though much of what we spend on health care no longer brings
significant benefits, economic growth causes very real threats to
health. Today’s most common diseases—such as heart disease,
cancer, obesity, hypertension, and diabetes—are the by-products of
economic “progress.”
The number-one cause of death in the United States is heart
disease, which is caused primarily by cigarette smoking, lack of
exercise and junk-food diets.
The second greatest cause of death is cancer. For decades,
everyone thought that we could find a cure for this disease if we
spent enough on research and development. In 1971, Richard Nixon
declared that “the time has come when the same kind of concentrated effort which split the atom and took men to the moon
should be turned toward conquering this dread disease,” and
Congress allocated $2.7 billion to the National Cancer Program. Yet
most scientists agree that this program’s main achievement was to
show that cancer is primarily an environmental problem, caused by
carcinogens in tobacco, air, water, food, and workplaces. Cigarette
smoking and modern technology itself are the prime causes of this
disease.
These two leading causes of death, accounting for more than half
of all deaths, are obviously aggravated by the modern economy.
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Another major threat to our health is the current epidemic of
obesity. Between 1980 and 2008, the obesity rate doubled for adults
and tripled for children. Today, more than one-third of adults and
17% of children are obese.115 If current trends continue, there will be
65 million more obese adults in the United States in 2030 than in
2010, which would cause 8 million added cases of diabetes, 6.8
million added cases of heart disease and stroke, and over 500,000
added cases of cancer. Obesity causes many other diseases that
lower quality of life, such as osteoarthritis, infertility, asthma, sleep
apnea, and birth defects.116
Some American children are now developing type-2 diabetes
and high blood pressure, which were virtually unheard of among
children a few decades ago. The increase in obesity has outweighed
all improvements in children’s health, leaving American children
today significantly less healthy than in 1975.117
This increase in obesity is a by-product of “progress,” caused by:
■ Less Exercise: For example, in 1969, 66% of American
children walked to school. By 2000, only 13% walked to
school and most were driven to school.118
■ Less Healthy Diets: American children eat about five times
as much fast food today as in 1970. Almost one-third of
American children eat fast food every day, and those who
eat fast food consume 187 calories a day more than those
who do not, enough to gain an extra 6 pounds per year.119
Older Americans are becoming less healthy for similar reasons.
A government study of Americans aged 55 to 64 found that 42%
had high blood pressure and 31% were obese in the 1990s, while
50% have high blood pressure and 39% are obese today.120 Their life
expectancy is higher, even though their general health is worse,
because they are more likely to use treatments such as statins to
reduce the risk of heart attack.
Another recent study found that Americans 55 and over are less
healthy than Britons of the same age.121 They have much higher
rates of diabetes, high blood pressure, heart disease, strokes, lung
disease, and cancer.122
One study, projecting the effects of obesity into the future, found
that the current generation of children will live three to five years
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less than they would have if they were not obese. The trend toward
rising life expectancy will be reversed, and these children will have
shorter and less healthy lives than their parents. During childhood,
obesity causes relatively little disease, but as these children become
middle aged, it will cause widespread heart attacks, strokes, kidney
failure, diabetes, and earlier death.123
Others say that new technologies could increase life expectancy
to 100 years,124 but even if they do, many people may not be healthy
enough to enjoy the extra years of life. Americans between 55 and
64 are less healthy than Americans of the same age were ten years
ago, though new technologies such as statins are still increasing
their life expectancy. Obesity could make the current generation of
children much less healthy when they reach their fifties and sixties,
though new technologies may keep them alive despite their poor
health.
Though life expectancy is still rising, counterproductivity has
already affected America’s general health. People in other industrial
nations spend much less on health care, but they are more likely to
walk rather than driving everywhere, and they are more likely to
cook using fresh ingredients rather than eating fast food and junk
food. They are healthier than Americans, because we have reached
a point where spending more on health care is less important than
exercise, diet, and other actions that improve your own health.

Health Insurance Reform
We need to reform our health insurance system to provide
universal coverage and to reduce costs.
The simplest way to get universal coverage would be a singlepayer insurance system, like Canada’s. A single government health
insurance plan would cover everyone, and people would still be
able to choose their own health care providers. This is sometimes
called “Medicare for All,” because Medicare already provides this
sort of insurance plan to Americans over 65. It is estimated that
single-payer insurance would reduce health-care costs by about 14%
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by reducing administrative expenses—a significant savings, though
it is just a fraction of our overspending.125
It is also possible to get universal coverage by giving tax credits
to lower-income people so they can afford coverage, by forbidding
insurance companies from denying coverage to people with
preexisting conditions, and by requiring all Americans to have
coverage. If we require insurance companies to insure people with
preexisting conditions, we also must require everyone to buy
insurance; otherwise people would game the system by not paying
for insurance as long as they are healthy and getting insurance only
when they need expensive medical treatment.
The Obama administration’s health-care reform law takes this
general approach. Though it extends coverage to more people, this
law does relatively little to reduce costs.
There are many things we can do to cut medical costs. We could
limit direct-to-consumer advertising of drugs. Many suggest that
we could save large amounts of money by shifting from a fee-forservice model to a result-based model of health insurance.
Here we will look just two ways to cut medical costs, health
savings accounts and health-care choice. Both follow the key
principle of a politics of simple living, allowing people to choose
less expensive forms of treatment and to keep the money that they
save.
Health Savings Accounts
We could cut health-care spending by replacing our usual
comprehensive health insurance with a combination of health
insurance to cover large expenses and health savings accounts to
pay smaller expenses. The best known proposal for health savings
accounts was written by John Goodman and Gerald Musgrave.126
Though rates vary depending on age and location, full health
insurance coverage for a family of four typically cost about $4,500
per year during the 1990s, when Goodman and Musgrave wrote,
compared with $1,800 for a policy with a $2,000 deductible at that
time.127 Employers would have saved money by paying for this
high-deductible coverage and giving the employees $2,000 per year
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to put in health savings accounts that they could use to pay the
deductible, which would have cost $3,800 rather than $4,500 for full
insurance.
In this proposal, the health savings accounts would be the
property of the employees, who could leave any unspent balance to
their heirs after they die.
Health savings accounts save money, because people spend
more carefully when they have to pay the bills themselves. For
example, a RAND Corporation study found that people who pay
95% of their medical bills up to $1,000 spend 50% less than people
who have full medical coverage.128 Of course, it makes sense for
insurance to pay for basic preventive medicine, such as regular
medical and dental checkups, so people do not try to save money in
the short run in ways that hurt their health in the long run.
Conservatives were the first to propose the idea of health
savings accounts. The earliest proposals had employers put enough
into the account to pay the deductable, but some later conservative
proposals would have made individuals put money into the savings
accounts, hurting lower income people. We should insist that health
savings accounts be fully funded, so there is more money in the
bank for the people being insured as well as lower costs for the
employer.
Despite the obvious financial advantage, it was impossible to
create medical savings accounts for many years, because money put
into the medical savings account was taxed as income, while
employees’ health insurance coverage was not. With the sample
costs we looked at above, employers would no longer save money if
they had to give employees, say, $3,000 so the employees had $2,000
after taxes to put in the health savings accounts.
Federal tax laws changed in 2004, allowing Americans to have
tax-free health savings accounts if they have health insurance with a
large deductible, but only 8 million Americans have insurance plans
that qualify.129 If we were serious about lowering costs, we would
go further by requiring all employers who provide health insurance
to offer at least one option with fully funded health savings
accounts.
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Health-Care Choice
To cut overall costs significantly, we also need to control major
medical expenses. About 10% of our population accounts for 60% of
our health-care spending,130 and because they spend far more than
the deductible, health savings accounts would not give them any
incentive to hold down costs.
The first step needed to control major medical expenses should
be relatively easy politically. We need a federal government agency
that reviews the literature and publishes studies of the costeffectiveness of medical treatments. To make this possible, we must
make all clinical trials public, for example, by requiring drug
companies to submit the results of all the trials of drugs that they
want to have approved. If the federal cost-benefit studies are well
publicized, they could help us eliminate much of the useless and
potentially harmless 30% of our current spending. There would
probably be a movement to ban insurers from covering treatments
that have no benefits but do have risks. It is astounding that the
Republicans in Congress have blocked this sort of fact-based
approach to health care.
The second step is more difficult politically. We should define a
basic package of cost-effective treatments, which would probably
cost about as much as health care in the other industrial nations,
and we should reform health insurance to give people the option of
choosing this basic package and keeping the savings. Employers
who provide more expensive health insurance would be required to
give employees the option of choosing the cost-effective package
and receiving the savings in the form of extra pay. A basic Medicare
tax deducted from everyone’s earnings would cover the costeffective package, and people would have the option of paying a
larger tax during their working life to qualify for less cost-effective
treatments after they are sixty-five.131
People should have a number of tiers to choose from, the basic
cost-effective basic package and a series of packages with higher
costs and more treatments available.
To give one obvious example, the basic package would cover
hospice care rather than hospital care for people with terminal
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illnesses. Hospitals often use any means available to keep patients
with terminal illnesses alive, even when there is no possibility of
recovery. For example, if patients stop breathing, most hospitals use
breathing tubes to keep them alive artificially. If their hearts stop,
they are resuscitated. These procedures just lengthen the time that it
takes to die. By contrast, hospices keep people with terminal
diseases comfortable, control their pain with drugs, and allow them
to die naturally. Most people would probably prefer hospice care if
they thought about this choice, but most do not think about it and
end up with hospital care.
During the debate on health insurance reform, conservatives
said that Obama’s plan would bring government-run “death
panels” to decide which people would not be treated. They did not
mention that insurance companies are already private-sector death
panels that refuse to cover some treatments and some people. Yet
they did make the important point that an impersonal bureaucracy
should not make this very personal decision.
People should make this sort of decision for themselves,
considering both the benefits and the costs of a treatment.
Currently, patients take into account the benefit, while insurance or
Medicare pays the cost, so there is conflict between patients who
want more treatment and insurers who want to save money. The
sort of insurance reform we have sketched here allows individuals
to make this personal decision for themselves.
A thought experiment can help us come to grips with this issue.
Imagine that, when you are sixty-five years old, you are able to
predict your future, and you see that you will die suddenly at age
eighty unless you spend $1,500,000 on a treatment that would let
you live to be eighty-one. You have the choice of retiring at sixtyfive and living for fifteen more years in good health, or of working
at two jobs until you are eighty and saving every cent you earn in
order to pay for a treatment that lets you live one extra year in
failing health. Most people would choose fifteen good years, rather
than fifteen overworked years plus one year of bad health.
This thought experiment uses an extreme example to show what
sort of question we are dealing with when we ask which medical
treatments are cost-effective. Americans are already near the point
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where choosing a basic plan that costs as much as health care in
other industrialized nations (which have better health than we do)
would let people retire four years earlier or work four and a half
days instead of five days a week during their entire working life.
People should decide for themselves whether they want to save
money and have more free time during their healthy years, or
whether they want to spend extra money on insurance covering
treatments that cost hundreds of thousands of dollars for each year
of added life.
In the last few decades, we have handed this decision to a new
breed of experts known as medical ethicists. Articles about
expensive new medical treatments often quote ethicists who
pontificate about whether we should pay the large extra cost to add
a small amount to life expectancy—but they never ask why
professional ethicists should be the ones to decide how many
dollars an extra year of life is worth.
This is obviously a decision that people should make for
themselves, not a technical question that we should leave to the
experts. We have turned over these decisions to expert medical
ethicists, only because impersonal bureaucracies decide which
treatments we use—rather than the people whose lives are at stake.

Living Healthier Lives
These changes in health insurance would reduce health care
costs, but if we want to improve our health, the most important
thing we can do is to promote healthier habits.
It interesting to compare the importance of healthier habits and
medical care. Of the 30 years that life expectancy increased during
the twentieth century, it is estimated that 25 years resulted from
public health improvements, such as better sanitation, housing,
nutrition, and vaccinations, while about 5 years resulted from
improved medical care. 132 It is also estimated that obesity reduces
life expectancy by 6 to 7 years,133 smoking reduces life expectancy
by 4 years, lack of exercise reduces life expectancy by 1.5 years
(compared with moderate exercise), and (surprisingly) watching
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more than two hours of television per day reduces life expectancy
by 1.5 years.134 Your own unhealthy behavior can shorten your life
by more than the 5 years that is added by all of our medical
spending.
Some of the proposals made in earlier chapters of this book will
improve our health. If people have more time, they can do more
cooking for themselves rather than eating fast food. If people live in
walkable neighborhoods, they get exercise during their everyday
activities. Studies have shown that obesity is more common in autodependent neighborhoods than in more walkable and transitoriented neighborhoods.135
Yet these proposals from earlier chapters are not enough by
themselves. We need to do more to promote healthier habits.
One obvious possibility is a campaign against obesity in the
schools. Schools have begun to improve the food they provide in
school lunches: The United States Department of Agriculture has
adopted new standards, which set maximum calorie limits for
meals and require that schools serve more fruits and vegetables,
more whole grains, and only low-fat or non-fat milk.136
We should also tilt our agricultural policies toward healthier
food. Currently, there are very heavy subsidies to a few crops,
including wheat, soybeans, and corn, lowering the price of
packaged snacks, fast food, and soft drinks, which all contribute to
obesity.137 To improve health, we should subsidize fruits and
vegetables instead of unhealthy foods.
We should go a step further by taxing unhealthy food, such as
sugary soft drinks and high-fat snack foods, and using the revenues
to pay part of the cost of health insurance. During the debate over
health-insurance reform, a group of doctors and health officials
advocated a tax on sugary beverages to help pay the cost of
extending health insurance coverage. They estimated that a tax of
one cent an ounce would raise $14.9 billion in its first year, and
would reduce consumption significantly.138 Though sugary drinks
have been shown to be a major contributor to obesity, industry
lobbyists managed to kill this measure, but we should keep
proposing similar taxes, for sugary drinks and high-fat snack foods,
combined with reductions in other taxes for low-income people.
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We should also ban advertising of junk food to children. Because
of demands from child advocacy groups, threats of lawsuits, and
impending government regulation, eleven food corporations, which
account for two-thirds of the $900 million annually spent on
television food advertising aimed at children under 12, voluntarily
agreed to advertise products on television programs aimed at
children only if they meet federal dietary guidelines. However,
these guidelines are fairly loose: for example, of two sugary
breakfast cereals, Trix will no longer have television ads aimed at
children, but Cocoa-Puffs will.139 These corporations made a
concession to health because of the threat of regulation, but stronger
action is needed.
We should remember how we caused the greatest single improvement in health in recent decades. Following the Surgeon
General’s report of 1964 about the dangers of smoking, we required
all cigarette packages to contain a warning that smoking is
dangerous to your health, we banned cigarette advertising on
television, we raised taxes on cigarettes dramatically, we ran
advertisements about the health hazards of smoking, and we
banned smoking in most public places.
Obesity is now as great a health hazard as smoking was decades
ago, and we can control it if we act as vigorously as we did against
smoking.
Though obesity is our number-one health problem, we should
look briefly at a couple of other policies that would improve health
by giving people more free time.
The United States is the only industrialized nation that does not
require paid sick leave. Forty percent of American workers get no
paid sick days, so many people who are living on the edge
economically have to go to work when they are sick and send sick
children to school, a sure way of spreading contagious disease.
Most unsettling, 86% of restaurant workers get no paid sick days, so
if you eat in restaurants, it is likely that you get regular exposure to
contagion from sick employees. We obviously need a law requiring
paid sick days for workers—so obviously that a survey found that
80% of Americans support this law.140
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Likewise, the United States needs a law providing paid parental
leave. We give parents unpaid time off if they work for companies
with over 50 employees, but mothers who are stressed economically
often go back to work only a few weeks after their babies are born.
Research shows that infants whose mothers have less than twelve
weeks off after their birth have more behavior problems and
reduced cognitive capability at age four, and that the mothers have
worse overall health. Virtually all the nations of the world
guarantee mothers paid maternity leave; the only countries that do
not are Liberia, Swaziland, Papua New Guinea, and the United
States.141 We are in the same league as three of the poorest nations
on earth.

Consuming and Doing
Proposals that encourage people to do more to protect their own
health are important in themselves, but they would be even more
important as part of a larger cultural change. Today, as we said
earlier, we tend to convert activities to commodities: We expect to
consume transportation rather than walking around on our own
two feet, and we expect to consume child care rather than caring for
our own children. Likewise, we expect to consume health care
rather than changing our behavior to improve our own health.
We need to realize that what we do for ourselves is as important
as what we consume.
This idea was obscured during the early period of industrialization. The average person did not even have basic minimum
housing, education, and health care, and progressives focused on
providing these basics to everyone.
But today, in the developed nations, most people already have
these basics, and we have reached the point where consuming more
brings only small benefits. We have looked at graphs showing how
growth affects self-reported happiness, education, and health. The
pattern is always the same: more money improves the result in
poorer countries but not in developed countries. In every case, the
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United States is far beyond the point where spending more
improves our lives.
We need to shift from the old focus on providing people with
more services toward a more balanced view that takes account of
the importance of doing for ourselves.
This book has sketched a number of proposals for city planning,
child care, and health care that would shift our focus by letting
people downshift economically, so they can have more time to do
for themselves. The key principle of these proposals is that we
should give people the option of consuming less and keeping the
savings for themselves. Those who choose to consume less should
not be forced to subsidize those who choose to consume more.
Today, everyone pays indirectly for “free parking” with higher
taxes, lower wages, and higher prices, whether they use the parking
or not. Proposals such as commute allowances for employees would
let people keep the savings if they choose not to drive.
Today, everyone pays indirectly for subsidized child care and
for the child-care tax deduction, whether or not they use them.
Proposals such as a non-discriminatory child-care tax credit would
let people keep the savings when they choose to care for their own
children.
Today, everyone pays indirectly for the high cost of health care,
through lower salaries and higher Medicare taxes. Our proposals
for medical savings accounts and health-care choice let people keep
the savings when they choose to avoid wasteful health care.
During the debate on the recent health care reforms,
conservatives played on public fears that people might not get all
the treatment they want. This sort of complaint is inevitable when
we pay for health care in a way that lets individuals consume more
without paying more. The debate would be very different if people
could consume less and keep the money that they save.

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Chapter 6
Growth and Sustainability

Earlier chapters have looked at policies that give people the option
of downshifting and consuming less. These policies would increase
people’s well-being, because they are based on choice. People
would choose to downshift only if they thought that it would make
their lives better.
These policies would make it easier to control ecological
problems such as global warming, because they would slow
economic growth, but they are not enough in themselves. To deal
with these ecological problems, we must move from the social
issues discussed in earlier chapters to more conventional
environmental issues: We are reaching the limit of the earth’s
capacity to provide the natural resources we consume and to absorb
the pollution we create.

Ecological Economics
Ecological economics is based on the idea that the economy is
embedded in nature. The economy takes resources from the natural
environment, it processes these resources to produce goods and
services, and it discharges the leftover wastes into the natural
environment. Nature provides the resources that are the economy’s
inputs, and nature absorbs the wastes that are the economy’s
outputs.
There is danger of ecological disruption and dieback when
resources are exhausted or wastes are excessive. This sort of dieback
is common in nature. For example, yeast grows in overripe fruit,
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using the sugar in the fruit as food (resources) and excreting alcohol
(wastes). As its population grows, the yeast consumes more sugar
and excretes more alcohol, until there is ultimately a massive
dieback after the yeast consumes all the available sugar or excretes
enough alcohol to poison itself with its own wastes.
When conventional economic theories were being developed in
the nineteenth century, the world’s economy was so small that it
did not have a significant impact on the global environment. There
were serious local environmental impacts—for example, factories
discharged toxic wastes into the air and water—but there were not
significant global impacts, so conventional economics ignored this
issue.
In recent decades, the world’s economy has become large
enough to affect the environment of entire regions and of the entire
earth: the ecological problems of yeast in an overripe fruit are now
occurring on a global scale. Resource depletion and waste emissions
could make the earth less livable, causing a dieback of the human
population.
Two early examples of large-scale ecological effects were the
regional problem of acid rain and the global problem of the
thinning ozone layer, both cases where nature was unable to absorb
the economy’s wastes.
Acid rain occurred when factories made their smokestacks tall
enough to protect local residents from pollution, so emissions of
sulfur dioxide and nitrogen oxide spread through the region,
reacted with water in the air to form acids, and fell back to earth
when it rained. The acid rain killed trees and made lakes so acidic
that fish could not survive. By the 1980s, acid rain was causing
entire forests to die in Germany. When the United States found that
5% of New England lakes were acidic, we used a cap-and-trade
system to reduce these emissions, so that acid rain is no longer a
major problem.
Ozone depletion was caused by chlorofluorocarbons (CFCs)
from aerosol containers, refrigerators and air conditioners. In 1985,
scientists found that the ozone over Antarctica was reduced by up
to 70% during the southern-hemisphere spring. Because ozone
depletion could ultimately cause widespread cancer in humans and
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the death of microorganisms that are at the base of the food chain,
the world agreed in the Montreal Protocol of 1987 to phase out the
use of CFCs, so the ozone layer is now healing.

Resources and Wastes
We face many other regional and global ecological problems.
The world’s immense consumption of fossil fuels has caused two
related problems, which are both well known.
One is a resource problem: We are depleting the supply of
energy that our economy uses as an input. Ultimately, we could
consume so much of the world’s fossil fuels that production cannot
increase quickly enough to meet demand, driving up prices and
jolting the world’s economy. There are debates about when
production will peak, with pessimists predicting impending crisis
and optimists saying that we will be able to delay the peak by
exploiting tar sands and other unconventional fuels.
The second is a waste problem: Fossil fuels are emitting enough
carbon dioxide to cause global warming, which could bring widespread desertification, rising sea levels, and extreme weather, if it is
not controlled. Glaciers on the Tibetan plateau that feed the Indus,
Ganges, Yellow, and Yangtze rivers during the dry season are
already retreating because of global warming, and the reduced flow
of these rivers could create the most massive food crisis the world
has ever seen, spreading hunger through the world’s most
populous nations.142 Global warming could have similar effects on
agriculture throughout the world: Each temperature increase of 1
degree Celsius could cause a decline of about 10% in world grain
production.143
Carbon dioxide concentrations in the atmosphere have already
moved far beyond historic levels, showing how much effect human
activity now has on nature. During the last 700,000 years, there was
an alternation of ice ages, when CO2 reached a low of 180 parts per
million (ppm), and warmer interglacial periods, when CO2 reached
a high of 300 ppm. We now are around 400 ppm and rising rapidly,
well outside of the range that existed when humans and the crops
we depend on evolved.
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Though they are less well known, our immense consumption of
water has also caused two related problems.
One is a resource problem: We are depleting groundwater
because our agriculture uses too much water as an input. Worldwide demand for water used to irrigate farms tripled in the last fifty
years, as electric and diesel pumps have become available that let
farmers pump water from underground aquifers more rapidly than
they are replenished by nature. The Ogallala aquifer under the
American Midwest, responsible for 27% of our irrigated agriculture,
is being pumped about 30 times as rapidly as it is replenished.
Water tables are falling in twenty countries, including the United
States, China, and India, which produce more than half the world’s
grain. In effect, the world now has a “food bubble” produced by
pumping unsustainable amounts of water, and as water runs out,
food production could decline. It has already happened very
dramatically in Saudi Arabia: In the 1970s, they used their oil
money to build equipment that pumped enough water to make
them self-sufficient in wheat, but in 2008, they announced that they
were planning to end wheat production completely because the
aquifer was depleted.144
The second is a waste problem: Agricultural runoff contains
fertilizers, herbicides, and pesticides that pollute the water. Among
wells drawing water from the Ogallala aquifer, for example, 14%
contain herbicides or pesticides, and 5% contain dangerous levels of
nitrates from fertilizer. The most common pollutant is the herbicide
Atrazine, a hormone disrupter that threatens fetal health.145 The
nutrients in the runoff from our farms have also created dead zones
in the oceans, because algae feed on these nutrients and use up all
the oxygen in the water when they die and decay. There is a dead
zone as large as New Jersey each summer in the Gulf of Mexico at
the mouth of the Mississippi River, and the United Nations found
200 similar dead zones in the world’s oceans.146
Many other ecological problems have appeared as the world’s
economy has grown so large that it strains nature’s capacity to
supply the resources it uses and to absorb the wastes it emits. Here
are two examples:
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■ Fisheries: New technologies allowed the world’s catch to
increase dramatically after World War II, from 19 million
tons in 1950 to 93 million tons in 1997—but overfishing has
reduced fish populations so much that the catch is now
declining from its 1997 peak. It is estimated that the
population of large fish in the oceans is now only 10% of
what it was in 1950. Many fisheries have collapsed
dramatically, including cod in the Atlantic provinces of
Canada and oysters in Chesapeake Bay.147
■ Forests: The world lost 20% of its forests in the twentieth
century, as the amount of forested land shrank from about 5
billion hectares to under 4 billion hectares. The developing
nations are now losing about 3% of their forests each
decade, using about three-quarters of this wood for fuel.
Clearing land for agriculture is a major threat to the world’s
largest rain forests in the Amazon and Congo basins.
Deforestation increases flooding and erosion, and it also
reduces rainfall in some places, as trees no longer pump
water out of the ground and release vapor into the air. Haiti
was once heavily forested but now has forests on only 4% of
its land, and deforestation has helped to cause a downward
cycle of poverty, as the country is no longer able to produce
enough food for itself.148
It is striking that two of today’s biggest ecological problems
involve carbon dioxide and water. When early environmental
regulations were put into place in the 1970s, it seemed that the
greatest threats were synthetic chemicals, which did not exist in
nature and caused unexpected problems, such as CFCs and DDT.
But carbon dioxide and water are very common in nature—we
exhale both of them every time we breathe—and they have become
problems only because we emit and use such huge amounts.
Of course, there are things we can do to deal with these
ecological problems. We can shift from fossil fuels to wind and solar
energy, renewable resources that do not emit carbon dioxide. We
can conserve water: At the extreme, drip irrigation with computer
controls can deposit exactly as much water and fertilizer as plants
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need, so water consumption is reduced dramatically, and there is
virtually no excess water or fertilizer to run off.
But users do not have an economic incentive to do these things:
It is cheaper to burn coal than to use solar energy, and it is cheaper
to deplete the aquifer than to use drip irrigation.
If these users continue to make their decisions based on current
economic incentives, ignoring longer-term ecological issues, they
will ultimately cause ecological collapse, leaving us much less well
off than we would be if we had dealt with the ecological problems
in advance. If we keep using fossil fuels as our main source of
energy, we will face desertification and extreme weather events that
make the world far less livable. If we keep over-irrigating our crops,
we will deplete the ground water until the aquifers dry up.
We need some mechanism that replaces the current economic
incentives, which make us burn coal and deplete ground water as if
there were no tomorrow, with new economic incentives that make
us act in ways that are sustainable in the long run.

Cap, Market Mechanism and Refund
Cap-and-trade systems, or variations on them, are the most
direct way to deal with these ecological problems. A cap-and-trade
system limits resource extraction or emissions to a level that is
sustainable in the long run, it issues enough permits to allow this
level of extraction or emissions, and it creates a market where users
buy and sell these permits.149 Rather than issuing permits, we can
get the same result by taxing resource consumption or emissions to
keep them at sustainable levels.
This sort of market-based system is the lowest-cost method of
keeping within ecological limits. Businesses will control emissions
when it costs less than buying permits (or paying the tax), and they
will buy permits (or pay the tax) for the emissions that are most
expensive to control. They will use the least costly methods to keep
within the limit.
Ideally, all the funds raised by these systems should be refunded
to taxpayers. If the government keeps the revenue, then it will be
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tempted to set the limit at a level that maximizes revenue, rather
than at the level that is needed for sustainability.
If the refund were paid equally to all taxpayers, this sort of
system would create an incentive to live more simply: It would tax
people who consume more, and it would refund the money to
everyone, so people who consume less would come out ahead. To
give one obvious example, if a cap-and-trade system on carbon
dioxide emissions drove up the price of gasoline and all the
revenues were given back as a tax credit, then people who bicycled
instead of driving could pocket part of the credit. This sort of
system would also help lower income people in general, because
they consume less.
Cap-and-trade has been used successfully to limit use of one
resource, fisheries. Regional cap-and-trade mechanisms to keep the
catch at a sustainable level are called “individual transferable
fishing quotas” or “catch shares.” When populations of fish
declined dramatically, the initial response was to limit the season
when fishing was allowed, but fishers raced to catch as much as
possible during the allowed time, often working day and night,
which raises costs. Since the 1970s, it has become common to
regulate fishing using catch shares, which allocate the sustainable
catch to different businesses and groups of people, typically
allowing them to sell their quotas. Over 275 of these programs are
used by 35 countries to restore and maintain the populations of
many different species of fish.
Cap-and-trade has also been used successfully to limit pollution,
controlling acid rain at a low cost. By the early 1990s, it was clear
that acid rain, caused by sulfur dioxide and nitrogen oxides from
power plants and factories, was killing trees and some species of
fish. The United States adopted a national cap-and-trade system to
control these emissions in 1995. At the time, utilities predicted that
controlling power plant emissions alone would cost $7 billion, but
the cost turned out to be about $1 billion.150 After cap-and-trade is in
place and businesses know that they will have to reduce emissions
over the years, there is an incentive to develop new technologies
that reduce emissions at low cost, so cap-and-trade systems
generally should cost less than initial projections.
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The world has taken some steps toward controlling carbon
dioxide emissions, but progress is stalled. At Copenhagen in 2009,
the world reached consensus on the goal of limiting warming to 2
degrees centigrade. Many nations pledged to control their emissions
before serious negotiations even began, pledging two-thirds of the
reductions needed by 2020 to put us on the path to this goal. In the
United States, the House of Representatives passed the WaxmanMarkey bill, which would have used a cap-and-trade system to
meet this goal. But the Republicans blocked any companion bill in
the Senate, and since then, their denial of global warming has prevented the world from reaching an agreement on this issue.
Yet capping emissions at this level would not involve significant
costs. The non-partisan Congressional Budget Office found that
Waxman-Markey would have reduced America’s GDP in 2050 by
1% to 3.5%, which means that it would take until 2051 to reach the
GDP that we would have in 2050 without a cap-and-trade, and GDP
would still more than double by 2050.151 The costs of capping
emissions are far, far less than the costs of uncontrolled global
warming.
We can only hope that the United States and the world are able
to act on this issue before we reach some tipping point that makes it
much harder to deal with global warming.
Notice that cap-and-trade works for regional impacts or global
impacts, but not for severe local impacts.
For water, there should be regional caps that avoid depleting the
region’s aquifer. The cap would be lower in drier regions, so they
would spend more on water conservation and would grow fewer
water-guzzling crops.
For carbon dioxide and other greenhouse gases, there should be
a global cap that avoids the worst effects of climate change. No
matter where it is emitted, a ton of carbon dioxide creates the same
impact on climate.
By contrast, cap-and-trade does not apply to toxic chemicals,
because the local impact is too great. Toxic wastes can kill people
living next to a chemical factory, so we use command-and-control
regulations to reduce emissions to the level needed to protect
health. If we used cap-and-trade to limit these emissions for an
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entire region, toxic wastes could still destroy the health of people
living near the factories.
Toxics are an obvious example of a localized impact, and noise is
another interesting example. Let us say that we finally become so
annoyed by the racket in our parks that we decide to reduce noise
from jet-skis and motorboats by 50%. It will not work to cap the
amount of noise and let boat owners trade permits to emit noise:
Every lake in America would still have some people using power
boats and disturbing all the other users. The way to limit noise is by
making some lakes off-limits to jet-skis and motorboats (except for
emergency and utility vehicles, of course). Likewise, we can limit
noise by making some places off-limits to off-road vehicles, and by
making large areas over cities and parks off limits to small private
planes.
In some cases, this sort of direct limit is needed to control local
impacts, but in most cases, some sort of cap-and-market-mechanism
is the best way to move toward a sustainable economy because of
its cost-effectiveness.

The Nature of Growth
Ecological economists point out that continued growth must
ultimately exceed sustainable levels. Any rate of growth involves
repeated doublings, which lead to astronomical levels of production
in the long run, beyond what the global environment could conceivably support. This is why ecologists say that growth cannot
continue indefinitely on a finite planet.
The effects of growth become noticeable suddenly. We can see
how suddenly by doing a thought experiment. Imagine a pond that
has only one one-thousandth of its area covered with algae, and
imagine that these algae reproduce rapidly enough to double the
area that they cover in one day. In the first three days, the algae
grow from the initial 1/1000 to 2/1000, to 4/1000, and then to
8/1000. Even after three days, the area that they cover is less than
1% of the pond, such a small area that we would probably not even
notice them. In the next four days, they grow to 16/1000, then to
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32/1000, to 64/1000, and to 128/1000. Now that they cover more
than one-tenth of the lake, we notice them, but they still seem to be
a relatively small problem that is not urgent. But in the next three
days, they grow to 256/1000, then to 512/1000, and before the end
of the tenth day, they cover the entire lake and kill all other life in it.
Because the problem seems small during the early and middle
stages of growth, we are likely to ignore it until it is close to causing
disaster.
Because effects of growth become noticeable suddenly, most
readers are surprised by the projections in the first chapter of this
book showing how quickly the developing nations will reach
America’s current standard of living if their current growth rates
continue. To round down a bit, China’s economy has been growing
at a rate of about 10% a year in recent decades, which means it
doubles every seven years. Seven years ago, its per capita
consumption was one-eighth of America’s, and the world was just
beginning to see that its demand for resources was a problem. Now,
its per capita income is more than one-fourth of America’s, and in
just two more doublings, its per capita income will be greater than
America’s is now.
When it comes to the effect that economic growth has on the
earth’s ability to absorb pollution and supply resources, we are like
the people who have just begun to notice that the algae in their lake
are a problem and who do not realize that the algae will cover the
lake completely in two or three days.
The results of doubling are even more striking if we ignore
ecological constraints and keep projecting growth into the future
indefinitely. Our example of algae shows that ten doublings give us
growth of more than one thousand fold. Keep doing the math to see
that twenty doublings give us growth of more than one million fold,
thirty doublings give us growth of more than one billion fold, and
so on. If China’s per capita income keeps doubling every seven
years, then in seventy years, it will be over one thousand times
greater than now, and in one hundred-forty years, it will be over
one million times greater than now. It is impossible to imagine the
ecological impact of that growth, and it is also impossible to
imagine how anyone could manage to spend so much money.
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China is an extreme example, but a growth rate of about 3.5% is
fairly common for developing nations, and it is also an easy number
to work with because it involves a doubling time of twenty years.
At this rate, production would increase more than one-thousandfold in two hundred years, more than one-million fold in four
hundred years, and so on.
These projections of current growth rates make it clear that we
will ultimately have to cap many different types of resource use and
emissions, as growth strains the limits of the earth’s carrying
capacity. Cap-and-trade systems for fisheries, acid rain and global
warming are just the beginning.
Note that ecological economics does not require an end to all
economic growth. It requires limits to the growth of resource
consumption and emissions, to keep us within the earth’s carrying
capacity, but economic growth can continue as new technologies
increase resource efficiency, providing more GDP for each unit of
resources consumed.
For renewable resources, such as water, fish, and lumber, we
will ultimately need to cap use at levels no greater than nature’s
ability to produce that resource sustainably. For many renewable
resources, overharvesting will cause a sudden collapse in supply.
Even when there is no danger of collapse, renewable resources will
ultimately outgrow the earth’s capacity unless we cap their growth:
For example, solar energy could generate the amount of electricity
that the United States currently consumes using a land area of about
100 miles by 100 miles (10,000 square miles), a relatively small
portion of the nation’s land, but if our electricity consumption keeps
growing at its historic rate, we would need about one-half of
America’s total land area to generate the amount of electricity that
we would consume in the year 2150, and shortly after that, we
would need more than the America’s total land area.152
For most non-renewable resources, such as metals, we will need
to cap or at least limit extraction after we have enough to support a
prosperous world economy, and then we will need to rely primarily
on recycling the resources we have already extracted. As we extract
more resources, we use poorer ores that create more waste when
they are processed, so it ultimately becomes more efficient to recycle
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than to use virgin materials. We cannot cap extraction yet, but we
can begin to move in the right direction by taxing virgin materials at
a higher rate than recycled materials and by requiring businesses to
design products so they are easily recyclable.
As new industrial processes create new types of waste, we will
have to cap many different types of emissions, as we capped the
emissions that caused acid-rain. Hopefully, we will get better at this
in the future and cap emissions before they do significant damage,
rather than waiting until after they degrade the global environment,
as we are doing with greenhouse gas emissions
These cap-and-trade systems will be needed as the use of each
resource or the emission of each waste product reaches unsustainable levels. Initially, they would not slow growth significantly
but instead would encourage cleaner growth; we have seen, for
example, that controls on greenhouse gas emissions will not slow
growth significantly before 2050 because we can increase production of clean energy. In the long run, however, caps on growth
of resource use would undoubtedly slow economic growth, given
the astronomical levels that continued growth would ultimately
reach.
But capping resource use would not stop economic growth.
Even if the economy did not increase the quantity of resources that
it processed, it could grow by squeezing more products out of the
same amount of resources. It could increase resource efficiency by
shifting production from goods to services or by developing new
technologies that use resources more efficiently. For example, some
scientists predict that in the middle of this century, carbon
nanotubes one-hundred times as strong as steel will be used as the
main structural material in bridges and in other construction,
allowing ten pounds of carbon to substitute for one thousand
pounds of steel. This sort of innovation can let us increase
production without increasing our use of resources.
To illustrate the challenge that we face, consider that, between
1980 and 2005, the weight of the materials needed to produce a
dollar of GDP fell 30% world wide—an impressive improvement in
resource efficiency. But the world’s economy grew so rapidly that
the world used 45% more materials in total in 2005 than in 1980,
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despite increased resource efficiency.153 Improvements in resource
efficiency can support economic growth, but in the long term, it
seems virtually impossible to improve resource efficiency quickly
enough to support the astronomical levels of output that we would
have if we continued the world’s recent levels of economic growth.

Beyond Ecological Economics
The basic idea of ecological economics, that the earth has a
limited capacity to provide resources and absorb wastes, has
become so widespread that it has sparked a small movement
against consumerism.
The most prominent example is “Buy Nothing Day,” observed in
the United States on the Friday after Thanksgiving (our biggest
shopping day) and internationally on the following Saturday. There
are now activities marking this day of protest against consumerism
in 65 countries.
On Buy Nothing Day of 2011, the clothing manufacturer,
Patagonia, placed a full page ad in the New York Times showing a
picture of one of their jackets, with the large headline “Don’t Buy
This Jacket.” The ad describes what the company calls its “common
threads initiative”: To reduce their environmental impact, they
make their clothing as durable as possible, they help you repair it
when it breaks, they help you resell it or give it away when you no
longer need it, and they accept it for recycling when it is finally so
worn out that it cannot be reused. In addition to Reduce, Repair,
Reuse, and Recycle, their ad called on us to “Reimagine … a world
where we take only what nature can replace.”154
The anti-consumerist movement calls on Americans to cut back
on shopping. We spend three to four times as much time shopping
as Europeans.155 We buy about twice as much clothing as we did
just twenty years ago: in 1991, the average American bought 34
shirts, sweaters, dresses, pants, underwear and other units of
clothing each year, and in 2007, we bought 67 units of clothing per
year.156 Our businesses spend $300 billion annually on advertising
to persuade Americans to buy even more—more money than is
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spent on advertising in the entire rest of the world combined.157 The
average American sees more than 1000 advertising messages per
day.158
Yet rejecting consumerism is not enough. We also need a
positive vision of what the world could be like with slower growth.
It is telling that we have Buy Nothing Day focusing on the harsh
news that we should consume less, but we do not have an equally
popular campaign focusing on the good news that we could work
less. Most people think that slower growth is purely a matter of
limits and sacrifices.
In fact, slower growth without shorter work hours is impossible
because of increased unemployment. Whenever there is a recession,
people react by demanding policies to stimulate faster growth in
order to provide more jobs, and mainstream environmental groups
are not there promoting shorter work hours as a better way of
providing more jobs.
Environmentalists will not succeed in slowing economic growth,
until we spread a positive vision of how we can improve people’s
lives by giving them choice of work hours and other choices that
allow them to downshift economically. Shorter work hours could let
us have slower growth without higher unemployment. Policies
letting people downshift in ways that make their lives more
satisfying—for example, letting people choose more time with their
children—could make slower growth politically attractive.

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Chapter 7
From Progressive to Preservationist

Policies that would let us downshift economically have made sense
for many decades, and they are urgently needed now that we have
entered the age of global warming. If the world devotes itself singlemindedly to increased consumption, rapid growth will bring
ecological crisis. If the world takes a more balanced approach, with
more free time as well as more consumption, slower economic
growth will help make our economy more sustainable.
Yet today’s progressives are not advocating policies that would
let people downshift economically. Instead, they stick with the oldleft social policies that progressives backed a century ago to deal
with the problems of a scarcity economy: Government should
spend money to provide people with services—more money to
provide education, more money to provide health care, and more
money to provide jobs.
Progressives need to change their direction, because we face
economic realities today that did not exist a century ago. Growth
has created a surplus economy, so most Americans now consume
more than they need to live comfortably. At the same time, growth
has become a threat to the global environment.

The Rise and Fall of Progressive Politics
The world has changed since Eugene V. Debs first ran as the
Socialist Party candidate for president in 1900.
In 1900, average American income was near what we now define
as the poverty level,159 and industrialism was increasing production
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dramatically. That era’s progressive politics grew out of this
combination of widespread scarcity and rapid economic growth.
In 2000, America’s per capita gross domestic product was more
than seven times what it was in 1900. A minority of Americans still
do not have adequate housing, education, or health care, and we
need to help that minority, but to create a compelling vision of a
better future, we must focus on the majority who deserve the choice
of living simpler and more satisfying lives.
During the first half of the twentieth century, progressives had a
vision of the future that appealed to the majority of Americans: If
the government promoted economic growth and gave everyone a
fair share, then working people could have a decent standard of
living. All through history, the great majority of humanity lived
near the subsistence level. At the beginning of the twentieth
century, American workers still lived in tenements, had minimal
public education, and had little or no health care. Rapid economic
growth made it possible, for the first time in history, that everyone
could have decent housing, education, and health care—nothing
extravagant, but everyone could have the basics.
Socialists believed the government should control the means of
production and plan the economy to benefit working people rather
than just the rich. As part of this economic planning, they wanted
the government to set up centralized organizations to provide the
masses with housing, health care, education, and other basic
services.
New Deal and Great Society liberals had a similar bias, but they
were more moderate. They believed that the government should
stimulate economic growth in the private sector to provide jobs and
generate wealth, and it should tax this wealth to help provide
working people with housing, health care, education, and social
services.
This was the vision that inspired liberals during the 1930s, when
poverty was still the nation’s central economic problem. The New
Deal changed the nation’s ideas about the responsibilities of
government. The federal government should promote the growth of
the private economy, by building public works such as dams,
highways, and power projects, and it should take advantage of this
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growth by using tax revenues to fund programs that provide decent
housing, education, and jobs.
But this vision began to lose its appeal during the decades
following World War II, as America shifted from a scarcity economy to a surplus economy. Post-war affluence gave most middleclass Americans decent housing and education, so these basics were
no longer part of a vision of the future. The freeways and power
projects built by the federal government began to look less like
symbols of a better future and more like symbols of the ugliness of
the modern economy.
Rather than developing new policies to deal with the new
problems of affluence, the left marginalized itself during the 1960s
and the subsequent decades by focusing on the problems of
underprivileged minorities—on groups that do not get a big enough
share of the economic pie.
Historically, the left had always focused on the working class,
who were the great majority of the population, but during the
1960s, many leftists began to say that the working class no longer
was part of their coalition, because workers had moved to suburbia,
bought homes and cars, and started thinking of themselves as
middle class. At that point, the left turned away from the workingclass and instead began to appeal to the minority groups who were
excluded from the general prosperity.
But if your main goal is to bring minorities into the mainstream,
you are focusing on a mopping-up operation that extends the
benefits of the modern economy to everyone, not on the problems of
the modern economy.
It is important to help poor minorities, but it is not good enough
to say that oppressed groups should all get a bigger piece of the pie,
while you ignore the fact that the pie is becoming less and less
nourishing. Back in the days when people believed the technological economy was bringing us a better future, liberals appealed
to Americans by promising to give everyone a share of that future.
But by the 1970s, there were doubts that technology and economic
growth were bringing us a better future.
Liberals of that time did not develop a new ideal for the future
that makes sense in the new context of our surplus economy.
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Instead, American liberalism split into two factions during the
1970s. On one hand, the old left still dominated liberal thinking
about social policy, repeating the left’s traditional idea that we
should spend more money to provide services—more money to
provide child care, education, affordable housing, health care, and
jobs—the sort of policies that had been central in a scarcity
economy. On the other hand, the environmental movement
changed liberal thinking about technology and economic growth,
but it focused on how much damage growth does to the natural
environment, and it did not develop new social policies that would
help people to use our prosperity to live well.
This failure of mainstream environmentalists to develop social
policy is obvious if we ask: “What is the environmentalist policy on
child care?” This is an issue that could make the majority of
Americans see that our economy is failing to give us a better life,
because keeping up with the standard of living has made it
impossible for most people to take care of their own preschool
children, as Americans did a few generations ago. If we campaigned
for policies that give Americans child-care allowances and flexible
work hours, we could encourage parents to work less and consume
less so they can care for their own children, shifting away from
consumerism. But environmentalists have not thought about this
social issue, because they focus on the physical environment, so
liberals just repeat the old-left mantra that we should provide more
funding for child care and universal preschool—without considering that much of the child care is needed so people can work
long hours in an economy devoted single-mindedly to growth.
The failure of mainstream environmentalists to develop social
policy is even more obvious if we ask: “What is the environmentalist policy on providing jobs?” Virtually no one in the political
arena is supporting choice of work hours,160 though this social
policy could provide jobs in a way that slows economic growth,
reduces environmental problems, and lets us live more satisfying
lives. Instead, environmentalists usually say that we should create
more jobs by investing in green technologies, which shows that they
are not thinking about the deeper social change that we need:
shifting to a less consumerist, less workaholic society, where we can
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choose shorter hours, rather than promoting rapid growth to create
extra work.
Since the 1960s, American liberals have passed laws against
racism and sexism, an important social advance, but they have not
developed social policies that deal with the most destructive “ism”
of the twenty-first century—consumerism.
Instead, they still support the old progressive social policies of
one hundred years ago, in aggrandized form. A century ago,
progressives wanted to provide everyone with basic education and
economic security. Today, progressives want to begin early childhood education for infants as young as four months old.161 Then
they want all the toddlers in universal preschools. Then they want
all the children in after-school programs and summer programs.
Finally, they want all the adults to have the full-time jobs that have
given America the longest work hours of any of the developed
nations.
They think it would help people to have all these services, but it
would actually dominate our lives completely. They do not see that,
by demanding more preschools and after-school programs, they are
actually giving parents and children less time together. They do not
see that, by demanding more jobs, they are actually making us
spend longer hours at work.
They should be doing just the opposite: giving us the option of
downshifting, so we can have more free time to do for ourselves.

Taxes and Equality
Though poverty is no longer central to the American economy,
as it was a century ago, we must address this issue to develop a
vision of a better future shared by everyone.
As we will see, prosperity was widely shared among all income
groups during the post-war decades, but since 1980, most of the
increased income has gone to the rich. As a result, America now has
the worst inequality of all the developed nations. Our poverty rate
has actually increased during the last four decades of economic
growth.
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There are many things we must do to fight poverty. We need to
provide job training for the hardcore unemployed, to improve
education of low-income children, and to restore funding to public
colleges and universities, which have become less affordable to lowand moderate-income families. But the simplest thing that we can
do to reduce poverty immediately is reforming the tax system to
give everyone a share of our nation’s prosperity.
Historically, liberals supported a progressive income tax to
reduce inequality, but during the postwar decades, their emphasis
moved from equality to economic growth. Today, as we reach the
limits of growth, we need to return to the historical liberal position:
If we want everyone to be economically comfortable, we need to
give everyone a fair share of what the economy can produce
sustainably.
Under a progressive income tax system, there are higher tax
rates on higher incomes: For example, everyone might pay no tax
on the first $20,000 of income, pay a low tax on the second $20,000
of income, and keep paying higher taxes on higher increments of
income. The reason for progressive taxation is that low-income
people need all of their income for necessities such as food and
housing. As people’s incomes get higher, they spend a larger
portion of income on luxuries. If we made everyone pay the same
tax rate, the poor would sacrifice food and housing to pay their
taxes while the rich would sacrifice luxuries, and this would be
much more of a hardship for the poor. Progressive taxes are based
on the idea that the tax system should require a similar level of
sacrifice for everyone.
During the Depression, the Roosevelt administration created a
very progressive income tax system, and the highest tax rate
increased even further to finance World War II. From the end of the
war until 1963, the maximum marginal tax rate was 91% on income
above about $2 million a year in today’s dollars. Roosevelt raised
taxes at a time of economic hardship, when there was an obvious
need to give moderate-income people a decent share of the nation’s
wealth, and taxes were even higher during the 1950s and early
1960s, when there was widespread prosperity.162
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During the 1960s, though, liberals began to abandon their
historic support for progressive taxation. At a time of rapid
economic growth, it was tempting to avoid the political conflicts
caused by redistributing income and instead to rely on growth to
help lower income groups. The motto of the time was “a rising tide
lifts all boats,” the saying that John F. Kennedy used to defend his
tax cuts against criticisms that they would primarily benefit the rich.
Kennedy and Johnson lowered the maximum tax rate to 77%
and then to 70%. Kennedy said that, because he eliminated loopholes, the government could raise more revenue with this lower
rate, but he also said that lower rates for the rich would stimulate
faster economic growth.
These tax cuts helped to overheat the economic boom of the
1960s and cause inflation. During the 1970s, higher prices of oil plus
the inflation already built into the economy brought combination of
double-digit inflation and economic stagnation—the so-called
“stagflation” of the 1970s.
During the 1980s, Ronald Reagan promised to cure our problems
with supply-side economics, claiming that lowering taxes would
stimulate economic growth. Reagan pushed through a series of tax
cuts that ultimately reduced the maximum marginal income tax rate
to 28%—less than one-third of what it had been in the 1950s.
Republicans continue to fight for lower taxes on the rich. Clinton
raised the top rate to 39.5%, and contrary to supply-side theory, the
higher tax rate did not prevent the economic boom of the late 1990s.
Then Bush cut the rate to 35% in 2003, and contrary to supply-side
theory, the rest of the decade was a time when median income
declined. The Republicans’ deregulation of the economy ultimately
led to the worst economic crash since the 1930s, the “great
recession” that began in 2008.
Reagan supported lower taxes on the rich by claiming that they
would stimulate economic growth and that the benefits of growth
would “trickle down” to everyone, just as Kennedy had claimed
that “a rising tide lifts all boats.” But it should be clear that the benefits have not trickled down. Prosperity was widely shared before
1970, but most Americans have not gotten a fair share since then.
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Figure 16: Per Capita Median and Mean Household Incomes

163

Figure 16 compares median household income, which is the
income that 50% of all households earn less than, with mean
household income, which is the average that we get by adding all
household incomes and dividing by the number of households. The
median indicates how well the typical middle-income household is
doing, while the mean can be pulled up by a small minority of very
rich households. We can see the difference if we imagine a group of
100 people, with 99 earning $50,000 per year and with 1 earning
$100,000,000 per year. The median income for this group is $50,000,
which shows how well the typical middle-income person is doing.
The mean income is over $1,000,000, but that million-dollar mean
income does not show that the typical middle-income person is rich;
it just shows that one person in the group is super-rich and pulls up
the average.
In Figure 16, we can see that median and mean income grew at
about the same rate during the 1950s and early 1960s, when
prosperity was widely shared. During the late 1960s, mean income
began to grow a bit more quickly than the median income, and the
gap has widened considerably since then, as inequality increased
and the very rich got a bigger and bigger piece of the pie. If
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inequality had not increased, and median income had continued to
go up as quickly as mean income, the typical American’s income
would be about 15% higher than it is.164
The graph also shows that Reagan’s tax cuts did not bring faster
growth. On the contrary, income grew most quickly during the
1950s and 1960s, when we had a very progressive tax structure.
(Income also grew quickly during the dot-com boom of the late
1990s, but those gains were lost during the dot-com bust of the early
2000s and the great recession of the late 2000s, so median income in
2010 was actually less than in 2000.)

Figure 17: Increase in After-Tax Income from 1978 to 2007

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A recent study by the non-partisan Congressional Budget Office
found that the highest income groups have had the greatest gains,
by far, since Reagan’s tax cuts. This study compared after-tax
income in 1979 and 2007, because these two years were in about the
same place in the business cycle. As we can see in Figure 17, it
found that the top 1% had a huge income gain of 275% in those
three decades. The rest of the wealthiest 20% of Americans had a
sizable income gain of 65%. The Americans in the middle had a gain
of under 50%, with the gain decreasing as income got lower. Finally,
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the 20% of Americans with the lowest incomes had a gain of only
18% in three decades.
The chart shows that there was some income gain across the
board, even among the lowest 20%, but the lower your income was,
the less your gain was.
The poor, at the lower end of the lowest 20%, have actually lost
ground because of increased inequality. As we can see in Figure 18,
economic growth has not reduced poverty since the early 1970s.
Poverty declined dramatically in the 1950s and 1960s, when prosperity was widely shared. The poverty rate reached its historic low
of 11.1% in 1973. During the 1970s, the poverty rate stagnated
because of the two severe recessions of that decade. The poverty
rate went up a bit after 1980, thanks to Reagan’s policies, down a bit
during the dot-com boom of the 1990s, and up again during the
hard times of the 2000s. Overall, as Figure 18 shows, per capita GDP
has almost doubled since 1973, but the poverty rate has become
worse.

Figure 18: Despite GDP Growth, the Poverty Rate Is Higher than In 1973

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This figure should silence those who claim we need rapid
economic growth to help the poor: We have had four decades of
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growth that have not helped the poor at all. Economic growth is
obviously needed in developing nations to reduce poverty, but once
a nation is as wealthy as the United States, sharing income fairly
does much more to reduce poverty than promoting the most rapid
possible growth.
In the future, we need to move beyond the rising-tide, trickledown theory of how to help the poor. This theory tried to use faster
economic growth as a substitute for progressive taxation, but as we
reach the environmental limits of growth, more progressive taxes
and reduced inequality should become key items of the liberal
agenda once again.
Liberals should emphasize how much inequality has increased
since the Reagan revolution. In 1981, the United States ranked
thirteenth among 22 developed nations in income inequality. Today
we rank last, the most unequal country in the developed world.167
The top 10% of Americans now make 48.5% of all income, almost as
much as the remaining 90% of Americans.168
The United States also has less economic mobility than most
other developed nations. America has always thought of itself as a
place where anyone can live the Horatio Alger myth, rising from
poverty to wealth by working hard. But five large studies have
recently shown that people born poor are more likely to remain
poor in America than in most other developed nations. Though
Britain has long been famous for its rigid class system, only 30% of
men born in the lower fifth of incomes remain in the lower fifth as
adults, while 12% rise all the way to the upper fifth. By contrast,
42% of men born in the lower fifth remain in the lower fifth in
America, while only 8% rise to the upper fifth.169
Inequality is caused partly by larger economic trends—
globalization has eliminated most of the well-paying factory jobs
available to unskilled American workers decades ago—but changes
in our tax system have made inequality much worse than it needs to
be and much worse than it is in other industrial nations.
We can reduce inequality and poverty dramatically by returning
to a more progressive income tax system, similar to the system we
had before the 1980s. We should also tax capital gains at the same
rate as ordinary income; a recent study by the Congressional Budget
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Office found that lower taxes on capital gains do little to benefit the
economy.170 In addition, we should expand the Earned Income Tax
Credit for low and moderate income working people, so everyone
who works earns a living wage.
Whenever anyone talks about making the rich pay their fair
share of taxes, the Republicans accuse them of class warfare, but
there is an obvious answer: There is already a class war in America,
it has been going on since the Reagan presidency, and it is a war
against the vast majority of Americans on behalf of the wealthiest
Americans.
Liberals have begun to revive their traditional emphasis on
distributing income fairly, rather than relying on growth to raise
incomes. President Obama campaigned on the promise to eliminate
Bush’s tax cuts for the very rich. Since the Republicans took control
of the House of Representatives in 2010, there have been repeated
budget stalemates, as the Republicans have refused to raise taxes at
all, while the Democrats have called for a balanced approach to
eliminating the budget deficit, with both spending cuts and tax
increases on the rich.
I think the Democrats would benefit from sharpening this
contrast, when they can. For example, they have been supporting
Social Security cuts that are not as severe as the Republicans’ cuts,
but they would do better to say that we would not need any Social
Security cuts if the rich paid the Social Security tax on all their
income. Currently, this tax does not apply to income over $110,100
per year or to investment income, and there would be no need to
reduce benefits if all income were taxed. The Democrats would do
well politically by saying:
Today, the middle class pays 7.65% of income to Social Security,
but someone whose salary is $1 million per year pays less than 1%.
The Republicans want to cut your retirement income to save this
tax loophole for millionaires. We want to preserve your full
retirement income by taxing everyone equally.

The Occupy movement was an encouraging sign, because its talk
about “the 99%” moved us back toward an older version of liberalism that represents the common interests of the great majority.
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A New Preservationist Politics
We need to go beyond reducing inequality to create a larger
vision of a better future. The shift from a scarcity economy to a
surplus economy during the last century requires a shift from
progressive politics to what could be called preservationist politics.
Through the mid-twentieth century, progressives believed in
building more dams, highways, and power plants to create more
prosperity for all. They were called progressives because they
believed in progress. In a scarcity economy, this focus was justified,
because growth was needed to allow everyone to become
economically comfortable.
But in the late twentieth century, this sort of “progress” no
longer seemed as attractive as it had in times of scarcity. The costs
of growth sometimes seemed to outweigh its benefits. There was a
strong movement to protect the environment by stopping dams,
highways, and power plants, which was called “preservationist”
because it wanted to preserve places threatened by growth.
Preservationists focused on the physical environment. At first,
they fought to preserve natural areas and old urban neighborhoods
threatened by development. Soon, they went a step further and saw
the need to preserve the earth itself from threats such as ozone
depletion and global warming.
This book has shown that preservationists should go even
further and look at ways we can limit growth to protect the social
environment. Just as it can overwhelm the physical environment,
growth can overwhelm the social environment by taking so much of
our time that we do not have enough free time left for ourselves, for
our families, and for our communities. To develop a new political
vision, we need to think about these social impacts of growth as
well as about the physical impacts of growth.
We should limit the economy so we have some room to breathe
and to do for ourselves. Instead of consuming more transportation,
we should build cities where we can walk on our own feet. Instead
of consuming more child care and education, we should take time
to raise our own children. Instead of consuming more health care,
we should take time to improve our own health through diet and
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exercise. Instead of consuming more jobs (and promoting growth to
provide jobs whether or not we want the products), we should take
control of our work hours, so we can choose to have enough income
to buy the things we want and also to have enough free time to live
satisfying lives.
Preservationists try to limit the economy to preserve nature. Just
as we protect some undeveloped land from the modern economy to
leave room for nature to thrive, we should also protect some of our
own time from the modern economy to leave room for human
nature to thrive.
Progressives wanted to promote growth during an era when
most people did not consume enough. Their vision was compelling
at a time of scarcity, when economic growth was needed to give
people decent housing, education, health care, and other basic
economic comforts.
Their vision is no longer compelling for most people in the
developed nations, now that we are already economically comfortable. Even if it were possible without ecological collapse, it is not
inspiring to contemplate a future where the trends of post-war
America continue, where we keep promoting the most rapid
possible growth so we can live in bigger suburban houses and drive
bigger SUVs on bigger freeways.
This does not mean that we should neglect the unfinished
business of the old progressive agenda. It is important to provide
health insurance to those who still do not have it, to reduce poverty,
and to distribute the national income fairly to those who do not
have enough. But this old agenda alone no longer offers a vision of
a better future.
Today, this vision must include enough prosperity to make us
economically comfortable, and it must also include enough free
time to spend with our families, to maintain our health, to be active
in our communities, to develop our talents, and to live fully human
lives.
The increased free time would require a new emphasis on
personal responsibility, so people use their time well. After you are
economically comfortable, the most important ways to improve
your life are things you do for yourself: exercising and eating a
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good diet, doing a good job of raising your children, walking
around your neighborhood rather than driving every time you
leave your house, making good use of your leisure time to develop
your talents.
Liberals do emphasize the importance of diet and exercise; in
fact, conservatives sometimes complain about the liberal “food
police.” Earlier chapters have suggested policies to encourage
people to take more responsibility for their diets and for raising
their children. We need to do the same for our lives generally.
People will benefit from having more free time, only if they take
responsibility for using that time to live well.
With this increased freedom and responsibility, there would be
less of a sense of dependency on the formal economy. Modern
Americans believe that they are dependent on the economic system
to provide them with transportation, housing, health care,
education, and jobs. Old-line progressives raise this dependency to
the level of principle and claim that there is a right to housing, a
right to education, a right to health care, and (most important) a
right to a job. They take our dependency so much for granted that
they do not realize that, when they demand more housing and
transportation, they are actually saying that the city planners should
decide what our neighborhoods look like, when they demand more
education and day care, they are actually saying that educators
should raise our children, and when they demand more jobs, they
are actually saying that the economists should make us do extra
work.
These sorts of demands made sense a century ago, when
Americans did need to consume more. They no longer make sense
now that we need to reduce destructive forms of consumption and
act more responsibly in order to live better lives. If we want more
livable cities, we need to consume less automobile transportation
and to spend more time getting around on our own power by
walking and bicycling. If we want better education, we need to
consume less entertainment media and to spend more time raising
our own children. If we want better health, we need to consume less
junk food and to spend more time exercising. If we want to live
more satisfying lives, we need to stop focusing so single-mindedly
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on consuming more stuff and to start making better use of our free
time.

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Chapter 8
Three Futures

Currently, America tries to promote more rapid economic growth
rather than shortening work time. This chapter will look at two
different scenarios for the future, one where the world follows this
policy and promotes rapid growth indefinitely, and another where
growth continues until people are economically comfortable and
then stops. These are not meant to be realistic possibilities for the
future. They are two extreme models that can help us understand
the issues that we face.
We will also look at a third scenario based on practical policies
that could actually be implemented to slow growth, which would
lead us to a future that is somewhere between these two extremes.

The Coming Century
The world has a chance of moving to a prosperous and
sustainable future in the coming century, because population
growth is slowing.
World population grew relatively slowly during the early stages
of the industrial revolution, less than doubling each century: from
790 million in 1750 to 1.26 billion in 1850 to 2.25 billion in 1950. Then
world population almost tripled in just a half century, from 2.25
billion in 1950 to 6.23 billion in 2000, as the developing nations
adopted modern methods of disease control and farming.
Now fertility is decreasing sharply in most of the world because
of modernization. Fertility in almost all the developed nations is
now below 2.1 children per woman (the “replacement level” at
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which population neither grows nor declines). Fertility is also
declining in most of the developing nations. Mexico is an extreme
example: Its fertility rate was almost 7 in the 1960s, but it is now
down to about 2.1.
The United Nations’ medium projection is that world population
will grow from the current 7 billion people to 9.6 billion in 2050 and
then will grow slowly to 10.9 billion at the end of the century.171
Population projections for Africa have increased sharply over the
last decade, and it is unlikely that these nations can produce enough
food and water to sustain projected populations.172
A more realistic projection would be 10 billion at the end of the
century. If present trends continue, we could reach that number
because populations of some countries are limited by famine. With
investments in family planning, we could reach that number
because fertility declines.
To see whether the world can move to a sustainable economy,
we must also ask how much each of these 10 billion people will
produce and consume.
It is striking to project world economic growth rates of the
second half of the twentieth century (Figure 19). Between 1950 and
2010, per capita Gross World Product (GWP) grew at a rate of about
2.3% a year, and between 1980 and 2010, per capita GWP grew at a
rate of about 1.88% per year. If it continues to grow at the slower
rate of 1980 to 2010:
■ Per capita GWP will be $18,849 in 2040, making the world
more prosperous than America in 1960, when the United
States began thinking of itself as the affluent society.
■ Per capita GWP will be $47,783 in 2090, making the world
more prosperous than America in 2010.173
This does not necessarily mean an end to world poverty, because
economic growth and affluence are distributed unevenly through
the world. Among the developing nations, parts of Asia are
growing rapidly and steadily, Latin America is growing more
erratically, and Africa is growing slowly. Because fertility has not
declined in parts of Africa, it may be much harder for Africa to
emerge from poverty than the rest of the world.
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174

Figure 19: Growth of Per Capita Gross World Product

Nevertheless, if growth could continue, prosperity would spread
to most of the world by the end of this century.
Many of the developing nations are now like Europe in the
nineteenth century, when workers lived in Dickensian urban slums
that were worse than rural subsistence economies. But wages went
up in America and Europe during the twentieth century, because
productivity kept growing while slower population growth
tightened the labor supply. In the twenty-first century, the same
thing could happen to the entire global economy: Because the
supply of capital will increase more quickly than the supply of
labor, the share of income that goes to labor should increase.
Incomes have already reached middle-class levels in Taiwan and
South Korea. Average incomes are still very low in China and India,
but both these countries have rising wages and a rapidly growing
middle class. China has already surpassed the United States as the
world’s largest market for most consumer goods, including cars,
refrigerators, washing machines, and desktop computers, and its
retail sales are growing by 13% a year.175
In the middle of the twenty-first century, wages in China and
India could be high enough that they will lose their labor-intensive
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industries to countries with lower wages;176 but at that point,
countries with low wages would start to become scarce. After India
and China emerged from poverty, about half of the people in the
world would be economically comfortable. By the end of the
twenty-first century, as industries seeking cheap labor move to the
remaining developing nations, wages could go up to decent levels
throughout most of the world—if world economic growth
continues, but that is a big “if.”
This projection assumes that ecological problems will not disrupt
economic growth. If people opt for shorter work hours and slower
growth after they reach a comfortable middle-class level, there is
clearly less chance of ecological disruption. If people work shorter
hours, labor will also be scarcer, so wages will go up more quickly.
To bring the choice that we face into focus, we will look at two
different scenarios that represent two extreme possibilities for the
future of the world economy. In the first scenario, the world tries to
continue rapid growth indefinitely. In the second scenario, growth
ends when people reach the point where further growth does not
significantly increase happiness.
These two scenarios are a thought experiment to clarify our
thinking about the benefits and dangers of economic growth.

Scenario: Growth Continues Indefinitely
In the first scenario, there is no move toward shorter work hours
or choice of work hours. Instead, people continue to believe that the
only way to avoid unemployment is by promoting rapid economic
growth and convincing people to consume everything that is
produced. The entire world decides that it must stimulate demand
to create standard full-time jobs for all, as the United States has
done since the end of World War II. Politicians realize that they will
not be reelected if there is high unemployment, so when there are
conflicts between jobs and the environment, they favor jobs.
If the world could somehow avoid ecological collapse and
continue historical rates of economic growth indefinitely, it would
have to make heroic efforts to promote more consumption and
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create needed demand. Environmentalists often say that continuing
growth will strain ecological limits, but let’s look at the other side of
the coin: This growth rate would also strain people’s ability to
consume.
1950

2000

2050

2100

2150

2200

2250

2300

2350

Growth

2,756

8,529

22,703

57,554

145,908

369,902

937,765

2,377,395

6,027,104

Comfort

2,756

8,529

23,500

23,500

23,500

23,500

23,500

23,500

23,500

Figure 20: Per Capita GWP in the two Scenarios (2010 PPP dollars)

177

The upper line of Figure 20 projects per capita Gross World
Product (GWP) if the world continues growing at the rate of the
second half of the twentieth century. In 2200, per capita GWP would
be over $350,000 (in constant 2010 dollars). In 2300, it would be over
$2,350,000, and in 2350, it would be over $6 million. It is hard to
believe that the world could invent enough new consumerist habits
to absorb this huge increase in purchasing power.
Post-war America absorbed excess purchasing power by
promoting automobile use, but what would the world do after
everyone had a car? As the next step, they might promote
helicopters. At first, helicopters would be a luxury for the rich, as
automobiles initially were: People who owned them could live out
in the country and work in the city, and they could go on vacation
in unspoiled wilderness areas that other people could not get to. But
once helicopters become more common, they would become a
necessity, as automobiles are for most Americans today. Factories
and offices would locate on cheap land in the Nevada desert,
knowing that employees from California could commute by
helicopter. Married couples would take jobs hundreds of miles
apart, so they could not live together without commuting by
helicopter. New housing would be built where residents could not
go shopping without a helicopter. All of the wilderness areas in the
world would fill up with campers in recreational helicopters. To
avoid accidents, the helicopters would have to be guided by
centralized computer systems, so all those long helicopter rides
would be very boring—but that would provide another marketing
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opportunity: virtual-reality video games built into helicopters,
which people could play to pass the time.
It does not make sense in human terms for consumption to keep
growing indefinitely. Even if we convinced people to consume new
products that cost as much as the entire GWP, these new products
would only fuel economic growth for one doubling time—which
currently takes about thirty-three years.178 In order to absorb
purchasing power for the next doubling time, the world would have
to spend twice as much on new products as they did during the
previous doubling time.
It is not ecologically sustainable to consume so much. In reality,
long before we reached the extravagant income levels in the
projection, we would run up against the two main ecological
constraints on economic growth: limits on the earth’s ability to
provide natural resources and to absorb pollution.
We can use ecological footprint studies to estimate how far the
world’s resource use would exceed the Earth’s capacity in this
scenario. These studies calculate how much land it would require to
sustainably provide people in different countries with the resources
that they consume.
Americans currently have an ecological footprint of 8.0 global
hectares of land each.179 The Earth has a capacity of 12 billion global
hectares of land, so it would require six and two-thirds Earths to
give America’s current level of resource consumption to 10 billion
people.
It is possible to reduce our ecological footprint by doing things
like recycling and shifting to renewable sources of energy, as
environmentalists often say, but in this scenario, it is likely that
growth will outrun our ability to increase resource efficiency. It
would be a huge challenge to develop new technologies quickly
enough to keep up with the strain on resource supplies and on the
global environment if rapid growth continues indefinitely. We
would need a series of fundamental technological breakthroughs,
which might occur in time to prevent ecological disruption, but
might not.
There would be a constant race against the problems caused by
growth—endless crash programs to develop technologies that could
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provide more raw materials, provide more energy, mitigate
pollution, and manage ecological breakdown. The faster the growth
rate, the more likely that we would lose this race and that there
would be ecological collapse and dieback—like the dieback that
happened after Easter Island was deforested, but on a world-wide
scale.
If the entire world continues to promote the most rapid possible
growth, as the United States has done since the end of World War
II, we can expect a series of economic crises caused by sudden
increases in resource prices, and we can expect mass movements of
climate refugees fleeing from famine, flooding, and desertification.
Pockets of uneasy affluence would remain in the United States,
Europe, and parts of Asia, where people would live in gated
suburbs and drive their electric cars every time they leave their
homes.

Scenario: Growth Ends in Comfort
In the second scenario, we imagine that people decide they have
enough at the economic level of the United States in the 1960s—the
time when American social critics began to say that our economy
was so affluent that it was geared to waste. This scenario is also a
thought experiment that looks at the extreme case where growth
stops at this level: It assumes that, when income reaches the level of
1960s America, nations all make the political decisions needed to
limit wasteful consumption and individuals all chose more free time
rather than more income—an unrealistic assumption but useful to
clarify the issues involved.
This income level could let everyone in the world live in middleclass comfort. It is true that in the 1960s, many Americans were
poor, and many more did not have their full share of the country’s
affluence. But at the same time, we were promoting waste in many
ways: The Federal government was building freeways, developers
were paving over the countryside with sprawl, and the automobile
manufacturers were building oversized cars with tail fins to absorb
consumers’ excess purchasing power.
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The same per capita income would be enough to let everyone
live comfortably, if there were less waste and less inequality.
Children could get a good education. People could have needed
medical care. Families could own their own homes in walkable
streetcar suburbs (though some people and some cultures prefer
denser cities).
America’s per capita income in the late 1960s was about half of
what it is now. We have seen that city planners were already saying
that Americans relied too much on cars in the 1960s, though we
drove half as much as we do now, and that international
comparisons show that spending more no longer improves
education, health care, or self-reported happiness after you reach
half of America’s current level. People in this scenario would have
enough income to be just about as well off as you can be purely
because of your income.
In this scenario, the world would avoid the excesses of
consumerism that Americans have come to take for granted during
recent decades. For example, people would not live in neighborhoods where they have to drive every time they leave their
homes. People would use canoes and sail boats for recreation rather
than jet skis and powerboats. Shopping till you drop would not
become the world’s favorite hobby. This sort of consumerism adds
little or nothing to our happiness.
After growth ended, the economy would not be stagnant. There
would still be technological change, so existing products would
continue to be replaced by new ones. For example, even in a nogrowth economy, computers would have been invented, so word
processing would have replaced typewriters, email would have
replaced ordinary mail for many uses, and so on. The difference is
that, in this scenario, people would adopt new technologies if they
were useful. We would not stimulate demand for new gadgets
purely to create more jobs.
In this scenario, growth of the world economy would slow
initially, as growth ended in the developed nations and continued
in the developing nations. Slower growth would make it easier to
control the immediate ecological threats posed by global warming
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and resource shortages. Ultimately, growth would end entirely after
the world became economically comfortable.
With limits on emissions and resource consumption, the world
could transition to a sustainable economy relatively easily. As we
have seen, ecological footprint studies show that, if a world
population of 10 billion people consumed resources at America’s
current level, they would require six and two-thirds earths, but in
this scenario, where growth ends at half of America’s current per
capita income, they would require three and one-third earths. There
is evidence we can increase resource productivity four-fold using
technologies that are currently available,180 so a rough calculation
shows that we could support a 1960s level of affluence for 10 billion
people, even if the world’s biocapacity decreased somewhat before
we controlled global warming.
This is not an austere future. When America’s per capita GDP
reached this level in the 1960s, the nation was calling itself “the
affluent society.” The world could aim at a future with the same
affluence and with much more free time, leaving people better off
than Americans were in the 1960s.
What would people do with their free time? They would have
enough time for the basics of a good life, which many Americans
now lack, such as time to spend with their children. They would
also have enough time to pursue their own interests.
Of course, there are some successful CEOs, architects, writers,
musicians, and the like, who would not reduce their hours, because
they get more satisfaction from their work than they could get from
any other activity, but people like these are relatively rare. Even
among people whose jobs are satisfying, most would be happier
doing less of their routine work and spending more time on
independent activities that enrich their work. Most college
professors would be happier with a lighter workload and more time
for research and study. Most doctors would be happier with a
lighter workload and more time to keep up with developments in
their field—and we would be better off if doctors did this rather
than relying on drug-company advertising.
Most people, from accountants to computer programmers to
electricians to middle managers, work for income and not for the
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intrinsic satisfaction that they get from doing their jobs. If they did
not need the money, they would gladly work shorter hours.
Though we can project productivity growth indefinitely, there is
probably a limit to how much productivity can actually increase
and work hours can decline. There is generally slower productivity
growth for services than for goods, and there seems to be a limit to
how far productivity in services can increase. As the economist
William Baumol pointed out in the 1960s, the quality of cars does
not depend on how many workers produce them, but the quality of
education does depend on the student-teacher ratio. It is possible to
increase the productivity of many services: for example, Automated
Teller Machines eliminate the need for bank tellers completely for
most transactions, and one supermarket chain now uses only selfservice checkout, eliminating the need for checkers. But it seems
that some services will never be fully automated: We will always
want people (not robots with artificial intelligence) teaching our
children, producing our art and literature, and making our laws.
Yet productivity could increase enough to reduce work hours
substantially. All through history, most people have been tightly
constrained by economic necessity, devoting their lives to work.
Because of increased productivity, there could be a fundamental
shift from necessity to freedom. People would work short hours and
would have to make a deliberate decision about what to do with the
bulk of their time.
Most obviously, people could use their free time do the things
that improve their own well-being. People could spend more time
exercising to improve their own health, more time raising their own
children, more time working in community groups to improve their
own neighborhoods.
In addition, people could use their free time to do the work they
love, even if it pays little or nothing. Some would have small
businesses after hours: They could earn their living by working in
the mainstream economy part-time, and they could spend most of
their time on computer art, handicrafts, or some other work that
they do because they enjoy it, even if it earns them only a few cents
an hour. Others would spend most of their time on unpaid work,
for example, on study, local politics, art, sports, or music.
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There are already people who try to do this but who are limited
by their work schedules. For example, Vince works as a policeman,
but he devotes weekends to his hobby of carving wooden doors. He
began by carving a door for his own house, and it looked so good
that a few neighbors asked him to do the same for them. Soon he
had so many people asking for his doors than he could not keep up
with demand, but he earns less than a dollar an hour carving doors,
so this work could never support him. He looks forward to
retirement, so he can spend more time on this hobby.
Susan worked as an administrator at a university. After her
children were grown, she began volunteering with neighborhood
groups, and after a decade of volunteer work, she was elected to the
city council. At that point, she essentially had two full-time jobs: an
administrator during workdays, and a councilmember virtually
every evening and weekend—a pace that most people could not
maintain. When she finally retired from the job where she earned
her income, her work as councilmember still took up more time
than most jobs.
Imagine how different our culture would be if Americans spent
less time making money and buying stuff, and instead spent their
time doing work that they were dedicated to. People could do the
work they loved without quitting their day jobs, because their jobs
would not take much time.
This sort of voluntary work can provide the feelings of
accomplishment and the social contacts that most people get from
their jobs today. Yet this is work that people do freely, because they
feel it is interesting and important, rather than work that they do
just because they need the paycheck.
Education would have to change. Today, schools focus on
teaching skills that are needed to get jobs. Of course, schools would
keep teaching job skills, but they would also teach people how to
make good use of their free time.
There would be many classes teaching activities that are
satisfying in themselves: Children would learn skills that they
might want to pursue when they grew up, such as playing musical
instruments, and adult education classes would become much more
popular. There would be a proliferation of community orchestras,
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community theaters, independent filmmakers, crafts studios, neighborhood improvement groups, arts, local political groups, and the
like. People would also have more time to spend with their
children, families, and friends. With the proper education, there
could be an unprecedented flourishing of human talent.
To teach children how important it is to do for yourself, schools
might have history lessons that show children how much better off
they are than Americans were at the beginning of the twenty-first
century. Back then, the children would learn, Americans spent so
much on medical care that the costs threatened to bankrupt the
federal budget, but there was also an epidemic of obesity; now we
spend less on health care but we are healthier because we have free
time to exercise. Back then, Americans moved to sprawl suburbs for
the sake of their children, but they had to work so much to support
their suburban way of life that they did not have enough time to
spend with their children.
College economics texts would note that Aristotle said growth
should not increase indefinitely, because it makes sense for wealth
to increase only to the extent that is needed to promote human
flourishing. They will wonder how economists forgot this obvious
point during the second half of the twentieth century. How could
economists have considered the production of wealth to be an end
in itself, rather than a means to the end of living a good life? This
attitude may have been useful when the majority were poor, the
texts would say, but now we can see that Aristotle was right to say:
“One form of property-getting, namely getting a livelihood, is in
accordance with nature ... For the amount of property of this kind
which would give financial independence adequate for a good life
is not limitless .... Wealth is a tool, and there are limits to its uses as
to the tools of any craft; both in size and in number there are limits
of usefulness ... but there is another kind of property-getting, to
which the term money-making is generally and quite rightly
applied; and it is due to this that there is thought to be no limit to
wealth or acquisition .... Indeed, wealth is often regarded as
consisting in a pile of money, since the aim of money-making and
of trade is to make such a pile ....”181

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Accumulating the limited amount of wealth that is adequate for
a good life is “in accordance with nature”—by which Aristotle
means that it promotes the full development of human nature—but
trying to accumulate an unlimited pile of money wastes time that
could be better spent.
Until the nineteenth century, it seemed that only a small number
of aristocrats would have the free time needed to live a fully human
life, and that most people would always have to toil for long hours
just to produce necessities (unless, Aristotle says in one passage, the
old myth came true and machines began to move themselves, so
masters had no need for slaves182). Now, it has become possible for
most people to move from the realm of necessity to the realm of
freedom, spending some of their time on necessary work but having
enough free time to develop their talents fully and to live fully
human lives.

Thought Experiments and Practical Policies
We have done a thought experiment comparing two extreme
possibilities for the future. In one scenario, people do not reduce
work hours at all, and instead use all productivity growth to
increase consumption. In the other scenario, people do not increase
consumption at all after they are economically comfortable, and
instead use all productivity growth to shorten work hours. These
two extremes are meant to clarify the actual choice that we face
today:
■ If we continue growth as usual, if we refuse to cap
emissions or resource consumption because caps might
slow growth enough to cause unemployment, then we will
move toward a future of empty consumerism that goes far
beyond what is needed to live well, that gives us resource
shortages and a less livable earth.
■ If we slow growth and live more simply, and if we move
decisively to cap emissions and resource consumption at
sustainable levels, we could move toward a future where
the world emerges from poverty during this century, a
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future where people are economically comfortable and have
free time for their communities, their families, and their
own interests.
These two extreme alternatives should also make us consider
that we in the United States are at one of the extremes. The United
States has not reduced work time since the end of World War II, a
striking contrast to the United States between 1840 and 1930, when
work hours went down steadily, and to west European countries,
which have continued to reduce work hours during recent decades.
These two alternatives are a thought experiment, because there
are no practical policies that could end growth when people are
economically comfortable. Even if we give people the option of
downshifting, most people would want to take advantage of
increased productivity to have both more money and more time,
rather taking all increased productivity in the form of more free
time after they are comfortable.

Figure 21: Work Hours in the United States, Germany and France since 1950

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We can look to Europe for a realistic alternative with both
shorter work time and increased consumption. In Figure 21, we can
see that work hours have declined steadily in France and Germany
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since 1950 (as in other west European nations) but have hardly
declined at all in the United States. Both France and Germany had
much longer work hours than the United States in 1950, when they
had to work hard to rebuild after the devastation of World War II,
but their work hours declined by about one-third between 1950 and
2010. France is known for its short work hours because of its
political battles over the 35 hour week, but Germany actually has
shorter work hours than France. The average American work week
was much shorter than theirs in 1950, but the chart shows that we
now work much longer hours than they do.
It is interesting to contrast the United States and Germany,
because their work hours account for almost all of their difference in
per capita output. The average German worker works 83% as many
hours as the average American worker, and Germany’s per capita
GDP is 81% of America’s.
If economic growth measured well-being, then Germans would
be better off working as much and making as much money as
Americans, but Germans seem to believe that they are better off
having extra time rather than extra money. They seem to enjoy the
paid four-week vacations that their laws guarantee; by contrast,
29% of American workers have no paid vacations, and those who
do get paid vacations average just over one week per year.184
According to most measures of economic success (apart from per
capita GDP), Germans are better off than Americans, as we can see
in Figure 22. Germany has lower unemployment than we do during
the current hard economic times, in part because they have a policy
called kurzarbeit (short work), which provides subsidies to
employers who cut workers to part time rather than laying workers
off. Germany has a lower national debt and a much higher household savings rate than we do: It seems that our work-and-spend
economy leaves us less able to save than they are, even though we
make more money. Germany also has perennial trade surpluses
(over $184 billion in 2010), while we have perennial trade deficits
(over $470 billion in 2010), showing that shorter work hours and
choice of work hours do not make a country less competitive.
According to common measures of social welfare, Germany is
also better off than the United States. Though they spend only 57%
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as much on health care as we do, they have higher life expectancy
and much lower infant mortality. Though they spend only 60% as
much per pupil, they have higher educational achievement.

Per Capita GDP (2010 PPP Dollars)
Annual Hours per Worker

Germany

USA

$37,366.57

$46,697.35

1,408

1,695

National Debt (% of GDP, 2010)

83.96%

94.36%

Household Savings Rate (20072010)

11.3%

4.8%

Unemployment (2010)

7.2%

9.6%

184,693 surplus

470,898 deficit

$3,628

$6,350

Life Expectancy at Birth

80

78

Infant Mortality (Deaths per 1000
live births)

4

7

Per Pupil Public Spending on
Education (2007 Dollars)

$9,879

$16,441

Educational Achievement (PISA
Science Score, 2000)

515.6

488.9

Ecological Footprint (Global
Hectares per Person)

5.08

8.00

Trade Balance (Millions of 2010
Dollars)
Per Capita Health Care Spending
(2005 Dollars)

Figure 22: Germany and the United States

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Germans can live better with lower incomes, because they do not
have our level of compulsory consumption. Though it is famous for
its autobahns, Germany has compact, walkable cities. It also has
controlled its medical expenses: We spend $2,722 more than they do
on health care, which accounts for about 30% of our higher per
capita GDP, but that extra spending does not seem to do us much
good, since our health is worse than theirs.
Despite our higher per capita GDP, it seems that Americans are
not as well off as the Germans, according to every available
measure of well-being.
America’s more consumerist way of life is also much more
environmentally destructive than the German way of life. The
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ecological footprint of the average American is 8 global hectares,
while the ecological footprint of the average German is 5.08 global
hectares. Their footprint will become smaller, because they plan to
generate all of their electricity using renewable sources of energy by
2050. Though Germany is famous for its laws promoting clean
energy and recycling, their shorter work hours and lower per capita
GDP currently contribute about as much as their cleaner economy
to their smaller ecological footprint.
Yet the developing nations seem to want to imitate the American
model: They are growing as quickly as possible, they are building
freeways in their cities, and they are beginning to move to
American-style suburbs. There is even a gated suburb of Beijing
named Orange County, after the suburban county outside of Los
Angeles, which markets itself as an imitation of a California suburb.
It is a 45-minute drive on the freeway from downtown Beijing, with
no connection by transit.
The world will obviously have a much better chance of avoiding
ecological disruption if the developing nations imitate the European
model instead of imitating the American model. They should build
new neighborhoods that work for transit, bicycles and pedestrians
as well as for cars. After they have grown enough to have a comfortable standard of living, they should shorten the work week and
allow choice of work hours, so they can take some of the benefit of
their rising productivity in the form of more free time.

Scenario: A Possible Future
Now, let’s look at a third scenario that speculates about a future
that is realistically possible. This scenario assumes that work-time
choice and other policies give us slower growth and more free time,
more like the European model of work time than the post-war
American model. It assumes that effective cap-and-trade systems
keep pollution and resource consumption at sustainable levels. And
it assumes that the tax system is used to reduce inequality. The
result would be a future that is somewhere between the two
extreme scenarios in our thought experiment.
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If we lived in a world of philosophers and sages, people might
choose to stop consuming more when they had enough to live
comfortably; they would take all productivity gains in the form of
more free time, which they would use to develop their capabilities
fully. But in the real world, people with choice would use
productivity gains both to increase their income and to increase
their free time, as west Europeans have. If people in the developed
nations chose to cut their work hours as rapidly as Germany did in
the last two decades, average work hours would decline by more
than one-third in a century186—and hours could decline even more
rapidly if there is a movement toward simpler living. We could
move from necessity toward freedom, toward the point where what
people do with their own time is more important than what they do
at their jobs.
Though the economy would keep growing, cap-and-trade
systems would prevent it from exceeding ecological limits.
Emissions and renewable resources would be capped as each
approached critical levels. Until the middle of this century, these
caps would not have much of an effect on the rate of economic
growth. They would just change the direction of growth so it is
cleaner and more resource efficient. We have seen, for example, that
the Congressional Budget Office found that a cap-and-trade system
controlling greenhouse gases would not slow growth significantly
and that our GDP would still more than double by 2050;187 in this
case, cap-and-trade would encourage energy conservation and shift
the economy from dirty energy to clean energy. Likewise, other
caps on resource use would not slow growth significantly at first.
Based on ecological footprint studies and a four-fold increase in
resource efficiency, we can estimate that cap-and-trade systems
would not slow growth significantly until somewhere around the
middle of this century, but the estimate is very rough for several
reasons. First, global footprint looks at the earth’s total capacity, but
there could be shortages of individual resources before there was a
general shortage, and we cannot predict how easy it would be to
develop substitutes for the scarcest resources. Second, our projections are based on recent rates of growth, but one economic crisis
or another might cause growth rates to change, as the recent
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financial crisis has. Third, we assume a factor-four increase in
efficiency, but this is just a rough estimate of how much we can
increase resource efficiency with current technologies.
Though it is approximate for all these reasons, this estimate
makes a key point about what a sustainable future would be like:
Currently, we can reduce emissions and increase resource efficiency
at low cost, but as we picked the low-hanging fruit and the law of
diminishing returns took effect, it would become more difficult to
increase efficiency.
At some time, probably around the middle of the century, capand-trade systems would begin to slow growth, as it became harder
to increase resource efficiency further. There will undoubtedly be
new technologies that will let us move beyond a four-fold increase
in resource efficiency, because cap-and-trade would encourage
investment in developing them, but technological breakthroughs
that might not come as quickly as the world wants them.
Resource scarcity might make it harder for the remaining
developing nations to emerge from poverty. We saw that there
would be enough resources for everyone to have America’s 1960s
standard of living with a four-fold increase in resource productivity,
but in this more realistic scenario, the developed nations would
grow far beyond this point, pushing up resource prices and making
it harder for the remaining developing nations to grow. No doubt,
international cap-and-trade agreements would cap the developing
nations less strictly than the developed nations, following the
approach to controlling global warming sketched at Copenhagen in
2009. There might be political or religious movements calling on
people in the developed nations to live more simply so everyone in
the world has a fair share of resources; these movements would
probably have limited influence, but it is conceivable that people in
the developed nations would realize that consuming more is not
improving their lives and would shift to much slower growth.
Most likely, the remaining developing nations would grow
slowly because of resource scarcity. Their progress to a comfortable
standard of living would probably be delayed for many decades,
but ultimately they would emerge from poverty, as new
technologies to increase resource productivity were finally
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developed. Individual nations might remain poor because they
cannot control population growth or their governments are corrupt,
but ecological disruption is the only thing that can prevent the
world generally from emerging from poverty. If cap-and-trade
systems keep resource consumption and emissions at sustainable
levels, then by definition, they would prevent ecological disruption.
In the developed nations, caps on resource use would ultimately
make people increase their consumption of some luxuries more
slowly. It is plausible that people’s desires are unlimited, as many
economists say, so that caps on resource use would prevent people
from satisfying some of their most extravagant desires.
For example, Virgin Galactic, a company related to Virgin
Airlines, is planning to offer suborbital space flights at a cost of
$200,000 each, and it already has people lined up waiting to buy
tickets. Another company, SpaceX, claims it will send tourists to
Mars within 20 years.188
Currently, only a few very rich people can afford this sort of
tourism, but if incomes kept growing at their historical pace,
weekend vacations on the moon could become popular by the end
of this century. It would be fascinating to see the full earth in the
sky, much larger than a full moon, and to feel what it is like to walk
around in the moon’s low gravity. It is easy to imagine a domed
amusement park on the moon, which would take advantage of the
low gravity to give people experiences that they could not have on
earth.
But it is not easy to imagine that there will be enough clean
energy by the end of this century to support large-scale space
tourism. A cap-and-trade system for energy would put this sort of
energy-intensive amusement beyond the reach of all except the very
rich. In fact, it would be best to have a luxury tax to discourage the
wealthy few from consuming so much energy on amusements that
they drive up prices for everyone else.
Because of cap-and-trade, people in the developed nations
would have to give up on their vacations on the moon (at least, until
fusion energy becomes feasible). These vacations are an extreme
example that makes a general point: As the economies of the
developed nations continued to grow during the second half of this
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century, caps on resource consumption and emissions would
prevent people from consuming all of the luxuries that they might
want to buy with their increased incomes. Instead of buying some
of the most resource-intensive luxuries, they would either buy
different luxuries or cut their work hours.
This does not seem like much of a sacrifice to make to preserve a
livable planet. It is certainly much less of a burden than what we
can expect if we do not cap resource use and pollution at
sustainable levels: periodic resource shortages that cause recessions
and widespread unemployment, and global warming that turns the
American heartland into a dustbowl and causes famine in the
developing nations.

An American Tradition
Because the United States is a model for developing nations, we
can help to change the direction of the world if we begin to live
more simply. There are proven policies that can give Americans the
option of downshifting economically, such as the choice of work
hours pioneered in the Netherlands and the city planning policies
that have made Portland, Oregon, less automobile dependent.
America adopted its current economic policies after World War
II, but before then, we had a long history of support for simpler
living.
During the earliest decades of our republic, the Hamiltonians
supported rapid economic growth, but the Jeffersonians believed
that democracy required a nation of small farmers and small
businessmen, so they deliberately tried to slow growth and
discourage manufacturing. Through the age of Jackson, Democrats
opposed a national bank, hoping that tight money would slow
growth.
Many of our early writers had a similar bias. Emerson was
critical of the industrial revolution, and he wrote:
Machinery is aggressive. The weaver becomes a web, the
machinist a machine. If you do not use the tools, they use you....
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What have these arts done for the character, for the worth of
mankind? Are men better? ‘Tis sometimes questioned whether
morals have not declined as the arts have ascended. Here are great
arts and little men.....189

Emerson’s follower, Thoreau, became famous for dropping out of
the economy to pursue an extreme form of simple living at Walden
Pond.
Even during the age of rapid economic growth that followed the
Civil War, the labor movement continued to insist that workers get
both higher wages and shorter work hours, and the workweek
declined steadily. William Green, president of the American
Federation of Labor, showed that labor still had some of that old
Emersonian spirit in 1926, when he wrote, “The human values of
leisure are even greater than its economic significance,” because
leisure is needed “for the higher development of spiritual and
intellectual powers.”190
In the mid-twentieth century, this vision of a more leisured and
more high-minded future was so widespread that President
Eisenhower mentioned it when he accepted the presidential
nomination at the 1956 Republican convention:
Science and technology, labor-saving methods, management, labor
organization, education, medicine—and not least, politics and
government. All these have brought within our grasp a world in
which backbreaking toil and longer hours will not be necessary. …
Leisure, together with educational and recreational facilities, will
be abundant, so that all can develop the life of the spirit, of
reflection, of religion, of the arts, of the full realization of the good
things of the world.191

It is hard to imagine a president saying anything like that today.
Americans have no more leisure now than during the Eisenhower
era. Our inflexible work hours have pushed us toward the extreme
scenario where all of our productivity gains go to more income, and
where we need rapid economic growth purely in order to avoid
unemployment.
It is time to moderate the post-war focus on economic growth,
by reviving the Jeffersonian and Emersonian tradition of simple
living and idealistic thinking.
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In the coming century, as people see how much damage
consumerism is causing, there could be a movement toward simpler
living that is as powerful as the civil rights movement and feminist
movement were in the twentieth century. If this movement becomes
widespread, it would make it much easier to control global
warming and other ecological problems. But this movement cannot
become widespread as long as people do not have even have the
option of consuming less and working less.

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Chapter 9
To Live Wisely and Agreeably and Well

The economy has reached the point where we can choose our
standard of living. Throughout history, most people lived at a
subsistence level: Rapid economic growth was obviously a good
thing when most people worried about having enough food and
decent housing. But now, our most important needs are satisfied, so
we can make a deliberate decision about what standard of living we
want, rather than focusing exclusively on promoting growth, as we
have since the end of World War II.
Some radical environmentalists overreact to the failings of
growth and look to primitive or preindustrial societies as models.
This sort of thinking obviously is not a basis for practical economic
policy. Going back to a homestead and living on the land may
sound romantic to some people in New York or Los Angeles—but
not in the developing nations, where most people still have this
hard life.
Rather than criticizing modernization, environmentalists should
see that slower growth is a natural result of modernization. When a
nation reaches the point where economic needs are satisfied, growth
can slow, so people have both a higher standard of living and more
free time than they had in the past.

Possibilities for Our Grandchildren
During most of the twentieth century, it seemed that we would
choose to have more free time as we moved beyond scarcity.
In his 1930 essay “Economic Possibilities for our Grandchildren,”
the great economist John Maynard Keynes looked at how
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technology would affect his generation’s grandchildren, one
hundred years after he wrote, and he foresaw a society where more
leisure would give humanity freedom to live well.
All through recorded history, Keynes said, there had not been
any great economic improvement. There were ups and downs, but
there was not any general trend toward greater prosperity. “From
the earliest times of which we have record—back, say, to two
thousand years before Christ—down to the beginning of the
eighteenth century, there was no very great change in the standard
of life of the average man living in the civilized centers of the
earth.”
But during recent centuries, there has been continuing economic
progress, because new technologies have made production more
efficient, and because capital invested in those technologies has
accumulated compound interest. As a result, Keynes said,
“mankind is solving its economic problem.”
In the past, “the economic problem, the struggle for subsistence,
always has been ... the primary, most pressing problem of the
human race—not only of the human race but of the whole biological
kingdom from the beginnings of life.” But in the future, “a point
may soon be reached, much sooner perhaps than we are all aware
of, when these needs are satisfied in the sense that we prefer to
devote our further energies to non-economic purposes.”
When that time comes, “man will be faced with his real, his
permanent problem—how to use his freedom from pressing
economic cares, how to occupy the leisure which science and
compound interest will have won for him, to live wisely and
agreeably and well.”
But, in Keynes’ mind, this future was so remote that it did not
influence current economic policies. In the same essay, when he
looked at increased free time as a current issue, Keynes had a very
different attitude toward it: He called it “technological unemployment ... unemployment due to our discovery of means of
economising the use of labour outrunning the pace at which we can
find new uses for labour.” 192
Instead of giving us leisure and freedom, increased productivity
gives us the problem of unemployment, which we must solve by
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creating more jobs. Yet we obviously will never have more leisure
as long as we believe (as Keynes said) that we must fight
technological unemployment by finding new uses for labor just as
quickly as we economize the use of labor.
After World War II, we used just the methods that Keynes
recommended to “find new uses for labour”: Government built
roads, promoted suburban housing, and used deficit spending to
stimulate the economy. At the same time, advertising persuaded
people to buy more. We were so successful at finding new uses for
labor that the workweek has not gotten any shorter since then.
A couple of decades from now, we will reach the hundred year
mark when Keynes predicted we would have lives of leisure. Yet no
one today is saying that our work hours will be shorter in the
foreseeable future.
If we are ever going to have more free time, we need current
economic policies that offer us shorter work hours or choice of work
hours. We cannot continue to believe, like Keynes, that leisure and
freedom are economic possibilities for our grandchildren, but that
we must create jobs so quickly that our generation does not have
more leisure.
Keynes’s essay is reminiscent of the school in Alice in Wonderland
where the rule was to give the students jam tomorrow but never to
give them jam today. No matter how much time passes, it is always
today, so the children never get any jam. Likewise, if we always
create jobs quickly enough that we do not have more free time now,
we will never get the leisure promised in the future.
Keynes’ prediction of more leisure made sense in 1930: Writing
at a time when work hours had been getting shorter since the
beginning of the industrial revolution, Keynes naturally expected
more of the same. But today things look different: The American
work week stopped decreasing after Keynes wrote, because the
postwar economy deliberately promoted consumerism to provide
everyone with 40-hour-a-week jobs.
Today, we can see that increased leisure is not inevitable, as
Keynes assumed. We can promote economic growth rapid enough
to provide 40-hour-a-week jobs, or we can move toward shorter
work hours. We must make a deliberate choice between those two
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options, and the sort of world that we create during the twenty-first
century depends on the choice we make.
In retrospect, we would have been better off if we had given
Americans choice of work hours during the post-war period,
instead of fighting “technological unemployment” by “finding new
uses for labor.” We could have reduced work hours gradually
during the post-war decades, with both higher earnings and more
free time, instead of building freeways, encouraging sprawl, and
promoting consumerism, so that we could keep the 40-hour work
week of the 1930s into the twenty-first century.
Keynes name was associated with the policies used to stimulate
growth during the post-war period, but we should also remember
that he believed shorter work hours were the ultimate answer to
unemployment. In 1945, Keynes wrote:
...the full employment policy by means of investment is only one
particular application of an intellectual theorem. You can produce
the result just as well by consuming more or working less.
Personally I regard the investment policy as first aid. … Less work
is the ultimate solution ….193

Population, Technology, Affluence
Mainstream environmentalists focus on two of the three pillars
of ecological sustainability.
Sustainability depends on what is sometimes called the “IPAT
equation,” because it says that our Impact on the environment is a
function of Population, Affluence, and the Technology used (which
determines the impact of each unit of output).194 We can state it
more precisely as follows:
Impact = population x impact per unit of output x units of output per person
To make our economy sustainable, we must deal with all three
of these factors.
Population is an issue that most people understand and that the
modern environmental movement has focused on since its
inception. Population growth has declined dramatically during the
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last few decades, as we have seen, but it now has begun to increase
a bit in some places.
We should continue to work on limiting population growth. It is
estimated that $15 billion per year is needed for family planning
programs in the developing nations,195 which would be a
worthwhile investment purely because of its environmental
benefits, even apart from the benefits to the people who would be
helped.
Technology that reduces the impact of each unit of output has
been the focus of plenty of talk but of relatively little action until
recently. Now, we have begun to take some steps toward promoting
a shift to solar, wind, and other forms of clean energy to control
global warming. There are other things we should do, such as
requiring products to be designed so they are more easily recycled,
moving toward more resource-efficient farming, and so on.
This is an issue that environmentalists understand and that
governments are beginning to act on. The world desperately needs
to do more: To avoid the worst effects of global warming, we need
an international agreement to limit carbon emissions, which would
lead to a massive world-wide effort to develop and deploy clean
energy technology.
Output per person (affluence), the third key factor in sustainability, has been the focus of relatively little talk and virtually no
government action, a sharp contrast to all the attention paid to
population and clean technology. Some people are thinking about
these issues, but they have not even been introduced into the
mainstream discussion of economic policy.
Not a single elected official is advocating choice of work hours
as a way of slowing economic growth and improving our lives. Yet
we have seen that it will become impossible to sustain the current
rapid rate of economic growth, just as it would have been
impossible to sustain the 1960s’ rapid rate of world population
growth.
These three factors are all important, and we cannot afford to
overlook one of them.
We can create a sustainable world economy with enough for
everyone to live a comfortable middle-class life if we choose a less
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consumerist future. The more we do to promote simpler living, the
better chance we have of creating a future where growth slows
because all the nations of the world have risen out of poverty—
rather than slowing because of ecological crisis. Yet the debate on
global development has ignored the key question: How much
income does a person need to live well?
If we had begun a transition to simpler living and cleaner
technology in the 1970s, when ecological limits to growth were first
widely recognized, we could have moved to a sustainable economy
without doing damage to the global environment. This smooth
transition is no longer possible: Global warming has already begun,
and it will do some damage, but we can avoid its worst effects if the
world acts soon. This looming ecological crisis is all the more reason
to act decisively.

A Convenient Truth
Unlike most mainstream environmentalists, some radical environmentalists do talk about simpler living, but their prescriptions
tend to be so harsh that they could never be politically successful.
For example, one article agonizes over environmentalists who
use paper napkins, who use plastic bags for the fruit they buy at the
farmer’s market, and so on, and then it finally gives this ideal
example of an environmentalist who really lives the changes that
we need:
she … began to live on the land in a tent. She farms six acres
without tillage or chemicals of any kind. … She built a rough
house by raiding dumpsters for building supplies and trading
labor with friends. … What attracted me to her talk was its title:
“Creating a Farm and Homestead on Marginal Land (While
Penniless).” [She] was the most inspiring person I’d seen in a long
time.196

Needless to say, most people in the world are not going to be
inspired by this idea of doing hard manual labor to scrape out a
subsistence living—particular not people in the developing nations,
who are trying to escape from this sort of impoverished life.
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Of all the radical environmentalist factions, the most politically
futile is the peak-oil movement, which claims that imminent energy
shortages will destroy the mainstream economy and force a shift to
local subsistence production. Predictions of a peak-oil apocalypse
are wrong, as the battle over the Keystone XL pipeline shows. Bill
McKibben points out that the world needs to emit no more than 565
more gigatons of carbon dioxide to hold warming down to 2
degrees centigrade, but proven reserves of fossil fuels would emit
2,795 gigatons of carbon dioxide.197 Tar sands can already substitute
for petroleum, and liquid coal will also be able to substitute for
petroleum when gasoline prices go up a bit further. We need to act
politically to limit greenhouse gas emissions, and the peak-oil vision
could never succeed politically. If the public hears the peak-oil
crowd saying that we are heading toward economic collapse and
hears conservatives saying that we can maintain our current
standard of living if we just slash environmental regulations and
“drill, baby, drill,” the public will obviously go with the
conservatives.
The idea that simpler living means more sacrifice and more
drudgery is the biggest obstacle to our political success. Environmentalists’ fascination with hanging out your wash on clotheslines
is a prime example of simple living as drudgery. The New York
Times featured the story of a woman who said she was following
“energy-saving tips from Al Gore, who says that when you have
time, you should use a clothesline to dry your clothes instead of the
dryer.” When she tried it, “I briefly gave up—the dryer was so
much easier—but then tried again.” She finally got in the habit of
doing all this extra work, but she found that her electric bill was
“still too high, so we’re about to try fluorescent bulbs.”198
Doing your laundry with a tub and washboard and then
hanging it out to dry was one of the most hated of women’s
traditional tasks: Monday was usually wash day, and the work was
so hard that women called the day “blue Monday.” Do
environmentalists really believe that they can attract wide public
support by saying we should go back to this sort of drudgery?
If we imply that simpler living involves a harder way of life, we
are just pushing the public toward the “drill, baby, drill” crowd.
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Instead, we should call for simpler living that reduces work and
make our lives more satisfying.
For example, we have seen that the average American drives
twice as much now as in the 1960s, because we have built so much
urban sprawl. There is no real benefit to spending all this time on
the freeways, but there is the real stress of doing the extra driving,
the real economic burden of paying for it, the real environmental
damage done by the emissions. New Urbanists are designing
walkable neighborhoods, and most people can see that these
neighborhoods are better places to live than sprawl suburbs, even
apart from environmental issues.
New Urbanist neighborhoods are a model for a politics of simple
living that could attract widespread public support. They have
become popular because they are more attractive and more
convenient than conventional sprawl suburbs—and their residents
also happen to consume less land and less gasoline.
A politics of simple living should take a similar approach to the
entire economy. Many people would find their lives easier and
more pleasant if they had the option of downshifting economically
by working shorter hours, if they had the option of living in
walkable neighborhoods rather than in sprawl suburbs, and if they
had the option of taking care of their own children rather than using
child-care.
This, as economist Dan Aronson says, is the “convenient truth”
that could help us deal with the inconvenient truth of global
warming. We can save the earth by working less and having easier
lives with more free time.
The threat of global warming has become so severe that even
some mainstream environmentalists are beginning to say that we
need to shift from our current economy, with its single-minded
focus on growth, to a new economy that focuses on promoting
human flourishing while avoiding ecological crisis. Yet at this point,
they seem to be providing a vision of how the economy should be
transformed rather than in providing practical polices that could
actually change the economy. They talk about a utopian
transformation of the economy, including changes such as a shift
from a global production dominated by corporations to a local
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production that relies primarily on small businesses and worker
cooperatives.
Instead of a general vision of economic transformation, this book
focuses on policies that are politically feasible and that will
transform our economy from its current focus on growth above all
else, to a focus on ecological sustainability and widespread human
flourishing. Let’s look once again at the three key policies needed
for this transformation.
The first policy is to use cap-and-trade (or similar systems) to
limit pollution and resource consumption to sustainable levels. This
policy seems to be feasible, since we have already done this with
acid rain, and the world came very close to agreeing to do this with
greenhouse gas emissions in Copenhagen in 2009. Regardless of
anything else that happens to the economy, this sort of policy is
essential to avoiding ecological disruption and the widespread
suffering it would cause.
The second policy is to allow choice of work time. The policy
seems to be feasible, because it has already been adopted in the
Netherlands and Germany and has caused little controversy there.
It would shift us to slower growth, as people take some of their
higher productivity in the form of more free time, rather than taking
it all in the form of more income. It would allow greater human
flourishing, now that we have reached a point where consuming
more does not improve our well-being as much as having time to
do more for ourselves.
The third policy is to overhaul the tax system to reduce
inequality, with higher taxes on the rich, lower taxes on middleincome families, and a higher earned income tax credit for lowincome families. This policy will be difficult to implement, but it
seems we can move in the right direction, as Democrats are now
pushing for higher taxes on the rich. This policy would allow
prosperity to be widespread, so everyone who works has an income
high enough to allow them to flourish.
These three policies would cause major social and economic
changes. Business undoubtedly will fight against slower economic
growth, just as business fought during the 1930s against a shorter
work week and for a “new gospel of consumption.” The difference
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is that no one saw the dangers of economic growth during the
1930s, but now global warming and resource shortages have led to
widespread skepticism about growth.
As it becomes more and more clear that economic growth no
longer improves our well-being and instead threatens our survival,
there could be a powerful political movement to shift us to an
economy that aims at human flourishing, rather than an economy
that maximizes growth and fails to provide a good life. This
movement must be based on policies that are realistically possible.
This book is a first attempt to develop practical policies needed
by a politics of simple living. It undoubtedly is not perfect, but it
does show the direction we should be taking. It is the opposite
direction from the conventional idea that we need more growth
purely to create jobs, but it is also the opposite direction from the
idea that we need more drudgery, such as hanging out your
laundry on the line.
It is the opposite of both of these because it involves less work,
not more. We should do less work producing stuff we do not really
want to have, so we can have more time for the things we really
want to do.
Cynics object to the politics of simple living by saying that
people will never change and will always want to consume more.
Yet from the beginning of the industrial revolution until the
Depression, Americans used increased productivity in a balanced
way, which gave them more free time as well as more income.
Western Europeans still have this balanced approach, so they now
work less and consume less than Americans.
The vicious circle of endless work and endless consumption is
the result of policies that the American government adopted during
the Great Depression and the postwar period. There will probably
have to be a crisis before we adopt different policies. This crisis may
come sooner than we think. The question is how much damage we
do before we are willing to change.
Environmentalists are absolutely right that we must avoid
ecological disaster, but predictions of doom, without an optimistic
alternative, are unlikely to attract broad public support. We will do
much better politically if we not only prophesy disaster but also
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offer a vision of a better future—a future where we are not only
economically comfortable but also have abundant free time for our
families, our communities, and our own interests.
Now is the time for us to advance practical policies that would
create this better future. As we move into the age of global warming
and resource scarcity, we must develop a new politics of simple
living.

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Appendix
Counterproductive Growth

This appendix is an economic analysis of counterproductivity. We
have seen in earlier chapters of this book that, after people have
enough to live comfortably, economic growth can be counterproductive, as increased output provides benefits that are less than
its environmental and social costs. To analyze it more precisely, we
will use two basic economic principles: “the law of diminishing
marginal utility” and the idea of “external costs” or “externalities.”

Diminishing Marginal Utility
The law of diminishing marginal utility says that, as consumers
buy more of any product, they get less satisfaction from each
additional unit of the product that they buy. Economists use the
word “marginal” to mean additional.
Imagine that people have a mental checklist of all their possible
uses of a product, arranged in order of importance. As they get
more of that product, they move down the list to less important
uses. For example, if you can only afford a small amount of coffee,
you might just drink a cup at breakfast, when you need it most. If
you have more coffee, you might drink a cup at lunch as well—not
as important but still very satisfying. If you have even more coffee,
you can drink it any time, even when you do not want it very much.
If you keep getting more coffee, you might finally start using bags
of coffee beans as paperweights and doorstops. At this point, the
coffee you drink at breakfast is still very satisfying, but you do not

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want any additional coffee: The marginal utility of coffee is
essentially zero.
The law of diminishing marginal utility is central to modern
economic theory,199 which applies it to individual products.
It obviously also applies to products in general: As people
become wealthier, they buy products they need less urgently. The
poorest people might have bread or rice to eat and a crude oneroom shelter to live in, things that are necessary to survive. When
people become a bit more prosperous, they can afford more
nourishing food and sturdier homes—still extremely important but
not as urgent as survival. When they become even more
prosperous, they can buy bicycles, radios, and so on—still very
useful. Finally, when they become prosperous enough to buy
sports-utility vehicles rather than ordinary cars and to fly to Hawaii
for their vacations rather than going to the local beaches, the
products that they buy with the last addition to their income have
relatively little utility.
Historically, most economists have said that the marginal utility
of products in general will never reach zero. They say that
consumers have unlimited appetites and will continue to demand
more products indefinitely to satisfy their “psychological needs,”
even after all of their physical needs have been satisfied. Economists
have always emphasized the unlimited psychological need for
status, and today’s consumers seem to have an unlimited appetite
for high-tech amusements.
But even if demand is insatiable, products in general still have
diminishing marginal utility. The psychological need for status or
for high-tech amusement is not as urgent as the need for food and
shelter. In addition to being less important than necessities and
conveniences, products you buy as status symbols or amusements
have diminishing marginal utility themselves: The first diamond
ring that you buy as a status symbol gives you more satisfaction
than one you buy after you already own a hundred diamonds, and
the first off-road vehicle you buy gives you more of a thrill than you
get from buying jet skis after you already own a powerboat, a
snowmobile and an off-road motorcycle.
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Counterproductivity can still occur, even if consumers have
insatiable “psychological needs.” Consumers may want to drive
gas-guzzling SUVs as status symbols, and if SUVs became common,
they might want even bigger vehicles as the battle of status symbols
escalates, but displaying your status gives you a minor
psychological satisfaction that is outweighed by your gas-guzzler’s
contribution to the major problems of global warming and resource
depletion.

Undiminished Externalities
Economists use the terms “externalized diseconomies” or
“externalities” to describe harmful side-effects of economic activity.
Externalities are costs borne by third parties, who are not part of the
market exchange between the businesses that make products and
the consumers who buy them, so the market does not take these
external costs into account.
For example, a factory can make products more cheaply if it
dumps wastes in the river rather than treating them. Consumers
will buy these cheap products rather than more expensive ones
made by a factory that handles its wastes safely. Dumping wastes in
the river may create medical costs that are much greater than cost of
disposing of the wastes safely, but these medical costs are ignored
by the factory’s owners and the consumers of its products. They are
“external” to their transaction, borne by third parties who live
downstream.
In a pure market economy, any manufacturer who pays extra to
treat his wastes safely will be driven out of business by competitors
who can sell cheaper products because they dump wastes in the
river. A totally unregulated market economy will poison everyone’s
water and air in order to lower the cost of factory products by a few
percent. Everyone suffers because a pure market economy does not
weigh all the costs of a product against its benefits; it ignores the
external costs.
Environmental problems, such as water pollution, are the most
familiar examples of externalities, but this term lets us think more
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generally about the costs of growth. For example, the effects of
media on education, discussed in an earlier chapter, are not what
we would usually consider an environmental issue, but they are an
external cost of our entertainment industry.

Counterproductivity: A Graphic Analysis
Using these concepts, we can analyze counterproductivity
graphically.
In Figure 23, the UU' curve represents the total utility of an
economy’s output as per capita consumption increases. Because of
the law of diminishing marginal utility, consumers get less
additional satisfaction from each addition to production, so this
curve climbs less steeply as output increases. If we accept the idea
that consumers’ appetites are insatiable, then marginal utility will
never reach zero, but it will approach zero, as consumption
increases indefinitely.

Figure 23: Total Utility and Total Externalities as Consumption Increases

The EE' curve in this figure represents the total external costs of
an economy’s output as consumption increases. It is a straight line
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because the graph assumes that each unit of output creates similar
external costs, regardless of the level of total output. (Technically,
an economist could say that this curve does not just include externalities, because it might also include pollution whose costs are
internalized through a tax, but we are calling it total externalities to
make it easier for a general audience to understand.)
The EE' curve is a simplification. External costs might actually
vary, depending on what products people consume and what
technologies they use. As consumption increases, this curve might
jog upward if we needed to use less benign technologies to meet
demand—for example, if we used more coal because we did not
have enough natural gas to meet demand. It might jog either up or
down as people bought different things with their extra income:
They might want more personal services, which create relatively
low external costs, or they might want to buy more recreational
vehicles, which create high external costs. (We will look at the effect
of technological change in a moment.) Despite these jogs along the
way, however, externalities do tend to increase indefinitely: There is
no law of diminishing externalities. In fact, economists generally
assume that marginal externalities increase as output increases, so if
anything, the straight-line EE' curve understates the problem.
The vertical distance of the UU' curve above the EE' curve
represents the net utility that the economy provides. Increasing
consumption continues to make people better off as long as this
distance is expanding. Counterproductivity sets in at the point
where the slope of the UU' curve is equal to the slope of the EE'
curve, the Maximum Utility line on the graph. To the left of this
line, increasing output widens the distance between the two curves,
but to its right, the UU' curve climbs less quickly than the EE' curve,
so increased output narrows the distance between the two. To its
left, increasing output increases well-being, but to its right, increasing output decreases well-being by bringing more problems
than benefits. This is the point where utility is greatest, assuming
that there are no policies that shift the curves, such as policies to
control externalities.
Further to the right, it seems that the EE' curve, which extends
upward indefinitely, will ultimately cross the UU' curve, which
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approaches some upper limit. This is the point where the total
external costs of the economy are greater than the total benefits of
the economy, which probably happen when there is large-scale
ecological collapse.

The Effect of Technological Change
The graph makes it seem that counterproductivity must occur if
economic growth continues: It seems that the distance between the
UU' curve and the EE' curve must decrease after per capita
consumption reaches a certain point, because marginal utility
diminishes, while marginal externalities do not.
Yet this graph leaves out technological change. It assumes that
the consumers always have the same products to choose from: As
their incomes increase, they just move down the “checklist” and
buy less useful products.
In reality, technological innovation can have two different effects
on the products people buy, which could shift the utility curve up
or down. Some new technologies cheapen existing products:
Today’s radios are cheaper than old vacuum-tube radios, for
example, and we can download music over the Internet for less than
it costs to buy a CD at the music store. On the other hand, some new
technologies introduce new products that consumers want, such as
polio vaccinations and camcorders.
Innovations that cheapen existing products would shift the UU'
curve downward, because consumers with any given income could
get further down the “checklist” to less useful products. Innovation
that introduce useful new products would shift the UU' curve
upward, because consumers with any income would not get as far
down in the “checklist” after these new products were inserted in
the list.
In the long run, the effect of these two types of innovation on the
UU' curve might balance each other, as they more-or-less have in
the computer industry. Today, our personal computers have (for
example) thousands of times as much disk space as computers did
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decades ago, but the costs of disk space and of other components
have gone down so much that computers are no more expensive
now than they were decades ago. Technological change gives us
new features we want and also lowers the costs of producing them,
so we buy much better computers for about the same cost.
Technological changes can also affect the EE' curve by shifting it
upward or downward. For example, the change from coal to natural
gas for home heating meant less pollution per unit of output, but a
shift from petroleum to tar sands or liquid coal would mean more
pollution per unit of output. It is possible to adopt policies that
make the economy develop technologies with lower external
costs—for example, by using a cap-and-trade system to shift to
clean energy—and these policies would shift the EE' curve
downward.

Where We Stand Today
Since the 1970s, America seems to have been in the range where
net utility stops growing and begins decreasing slowly, and today
we seem to be entering the range where net utility begins
decreasing more rapidly
Americans seem to sense that economic growth is no longer
giving us a better life. In the 1910s, Americans generally realized
that they were hard pressed by economic scarcity and would benefit
from economic growth. In the 1960s, Americans generally realized
that they were more affluent than Americans fifty years earlier; they
had reaped many of the benefits of growth, and they expected to
reap greater benefits in the future. But in the 2010s, Americans
generally do not think they are better off than Americans were fifty
years earlier, and many expect things to become worse in the future.
For example, Americans in the 1960s felt affluent because they
owned cars with flashy tail fins, something that their parents and
grandparents did not have, but Americans today do not feel better
off because they drive twice as much as fifty years ago.
Studies have confirmed that we are not as well off as we were
decades ago. The best known is the Genuine Progress Indicator,
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created by an organization named Redefining Progress, which
corrects the Gross Domestic Product by subtracting the estimated
money value of resource depletion and environmental damage and
also subtracting the extra spending on health care, education,
commuting, and urbanization that is necessary only to deal with the
costs of growth (which economists call “defensive expenditures”). It
also corrects for the value of housework and other productive
activities outside of the market, for income inequality, and for other
variables. This index shows that, though America’s per capita GDP
has risen fairly steadily, our actual economic well-being rose until
the early 1970s and then began to decline.
The main defect of the Genuine Progress Indicator is that it
begins with the GDP and then corrects it. In a scarcity economy, it
was important to produce more output, and so the GDP could be
used as a rough measure of economic well-being. But it no longer
makes sense to use the GDP (or a corrected index based on the
GDP) to measure economic well-being, now that we have reached
the point of diminishing marginal utility where we can spend more
on health care without increasing average life expectancy, spend
more on education without children learning more, and spend more
on housing and transportation without making our cities more
livable.
The Genuine Progress Indicator does not correct for the
diminishing marginal utility of output generally. It does correct for
inequality, and this correction is actually based on the law of
diminishing marginal utility. Greater inequality reduces total wellbeing because gaining an extra $1,000 helps a rich person less than
losing $1,000 hurts a poor person: the rich person spends the money
on luxuries, while the poor person sacrifices necessities. But if this is
true of rich and poor individuals, then it is also true that the United
States as a whole benefited more from economic growth in 1910
than in 2010, because the United States was richer in 2010, and the
study does not correct for this fact. It is easy to divide the GDP by
an inequality index to correct for increasing inequality, but there is
no obvious way to correct the GDP to account for the diminishing
marginal utility of products generally.
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The GDP measures total economic output. Now that more
output no longer means more well-being, we should measure
progress by using indexes that measure well-being directly, such as
figures on life expectancy, infant mortality, educational achievement, and the like. In earlier chapters, we have looked at these sorts
of indicators, and we have seen some signs that well-being has
declined in recent decades. Education achievement is lower than it
was in 1960, though we spend much more on education. Children’s
health is worse than it was in 1960, because of a massive increase in
obesity, though our immense spending on health care is still
increasing our life expectancy.
So far, the decline in well-being has been so gradual that we
have hardly noticed it. There is not a general feeling that life has
gotten much better or much worse since the late 1960s, though our
per capita GDP has doubled. Americans have been running as fast
as they can just to stay in the same place.
Now, however, we seem to be entering a period where life has
begun to become significantly worse. High world demand for
energy drove up gasoline prices dramatically at the end of the last
economic expansion, an economic burden on Americans. Most
climatologists believe that global warming contributed to the
severity of Hurricane Katrina and Hurricane Sandy, which
devastated two major American cities, and to the current drought in
the mid-west. Cattle drives from Texas are a legendary part of
American history, but now ranchers in Texas are slaughtering their
cattle because drought has driven up the price of hay so much that
they cannot afford to feed the animals. Forty years from now,
conditions in states stretching from Kansas to California could be as
bad as the Oklahoma dustbowl of the 1930s, if we continue business
as usual.200
During the last few decades, Americans have been running as
fast as they could in order to stay in the same place. If we continue
business as usual during the next few decades, we will run as fast as
we can but will fall behind. Unless we change course very soon,
global warming and resource shortages will make it all too clear
that we are not as well off we used to be, that counterproductivity
has set in.
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In 1977, economist Herman Daly already suspected that we had
reached the point where growth was diminishing our well-being,
and he wrote:
Once we have gone beyond the optimum, and marginal costs
exceed marginal benefits, growth will make us worse off. Will we
then cease growing? On the contrary, our experience of diminished well-being will be blamed on the traditional heavy hand of
product scarcity, and the only way the orthodox paradigm knows
to deal with increased scarcity is to advocate increased growth—
this will make us even less well off and will lead to the advocacy
of still more growth! Sometimes I suspect that we are already on
this ‘other side of the looking glass,’ where images are inverted
and the faster we run, the ‘behinder’ we get.201

If global warming turns large areas of the United States into a
dustbowl, if we begin to evacuate neighborhoods permanently
because of hurricanes and flooding, it will become clear to everyone
that we have reached the point where we are falling behind—but
let’s hope it becomes clear before things get so bad.

Implications for Policy
This graphic analysis of counterproductivity shows that we need
three policies to make our lives better rather than worse in the
coming decades.
The first policy is to reduce the external costs our economy
causes, shifting the EE' curve downward. To do this, we should
limit forms of production and consumption that cause more costs
than benefits, reducing our overall well-being. It is most important
to control major environmental problems, such as global warming,
before they reach tipping points that shift the EE' curve upward
dramatically. But the analysis shows that we should also limit other
forms of consumption that bring a net loss because their external
costs are greater than their benefits, ranging from major problems
such as urban sprawl to minor nuisances such as noise.
Conventional economists are leery of these limits and say we
should trade off some environmental quality for the sake of faster
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growth. This sort of thinking makes sense in scarcity economies
(such as the United States a century ago and the developing nations
today), where growth brings significant benefits. It no longer makes
sense in the United States today, where the law of diminishing
marginal utility has set in and growth does not bring significant
benefits.
Our goal should be the best possible quality of life rather than
the fastest possible economic growth.
The second policy is to increase the benefits our economy
provides, shifting the UU' curve upward. The most readily available
way to do this is to reduce inequality of income by making our tax
system more progressive. When we reduce inequality, we are
shifting income from rich people who spend their incomes on
products with low utility to low- and middle-income people who
spend their incomes on products with higher utility.
Conservatives say that we should lower taxes on the rich in
order to promote faster growth by increasing incentives to work
and invest. It is probably not true that these incentives are needed to
promote growth, since the economy grew more rapidly in the 1950s
and 1960s than it has since tax rates were lowered. But even if it
were true, the goal of promoting faster growth would be a mistake,
now that the United States has reached the point where growth
brings significant costs and minor benefits.
Our goal should be widely shared prosperity rather than the
fastest possible economic growth.
As these two policies shifted the EE' curve downward and the
UU' curve upward, the Maximum Utility line would shift to the
right, allowing more growth before counterproductivity sets in.
However, it might be difficult to move Maximum Utility rightward
quickly enough to keep up with the actual rate of economic growth.
The faster growth is, the more likely it is that we will fail and
growth will become counterproductive—and the more likely it is
that we will reach ecological tipping points that reduce our wellbeing drastically.
Thus, the third policy we need is to slow growth by giving
people the option of choosing their work hours and other options
that let them downshift economically. We need to abandon the
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policy that America has had since the end of World War II, the
policy of stimulating demand artificially, convincing people to buy
products with very little utility, in order to promote growth and
provide jobs. Instead, we need a politics of simple living that helps
to avoid counterproductivity by letting people cut down on
purchases of products that have little or no utility. This change
would also give people time for high-utility activities that they now
are too busy for, such as caring for their own preschool children.
Initially, choice of work hours should be enough to slow growth; in
the long run, it will also be necessary to cut the standard work
week.
We could reverse the current decline in well-being and build a
better future with these three policies: limiting externalities to
improve the quality of life, reducing inequality to share prosperity
widely, and giving people the choice of downshifting economically
so they have more time to do for themselves.

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Notes

Notes are not available in this internet preview of the book.

The complete book is available on amazon.com

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