John Kroencke: Environmentalism, Degrowth, and the Moral Case for Economic Growth

Those following the news in the U.S. and U.K. have strained to find much of intellectual interest in contemporary policy debates. Sure, there are ever-widening cultural battles and an array of topics on which one can admire the slogan-jousting of a few hired hands, but there is a seemingly small market for reasoned discussion about the nuts and bolts of policy. Even worse, there is little desire to think beyond direct, intended consequences. In this context, Ezra Klein’s recent article in the New York Times about supply-side thinking was a breath of fresh air. In the article, Klein argues that the American Left should concern itself more with economic growth and supply side issues rather than just redistribution or subsidies for those with low incomes. He sees in both federal and state policies a nascent transformation that he dubs “supply-side progressivism.”

It is worth quoting his argument:

progressives are often uninterested in the creation of the goods and services they want everyone to have. This creates a problem and misses an opportunity. The problem is that if you subsidize the cost of something that there isn’t enough of, you’ll raise prices or force rationing. You can see the poisoned fruit of those mistakes in higher education and housing. But it also misses the opportunity to pull the technologies of the future progressives want into the present they inhabit. That requires a movement that takes innovation as seriously as it takes affordability.

While Klein presents an optimistic case for a pragmatic left, there are many worrying trends. For one, some on the political left are drifting towards dangerously radical environmental thinking seen in groups like Extinction Rebellion. These individuals damage their purported cause by diverting attention from appropriate responses to the challenges of environmental degradation. While the dangers of environmental damage including climate change are obviously real (and the precise nature of some of the tail risks are difficult to calculate), the carbon-intensive economy is not something that can just be abandoned without consequences. Trade-offs exist and must be navigated. Innovation is needed to find the supply-side alternatives to damaging fuel sources.

While extreme ideas like degrowth may provide an attractive cause for many on the environmental left it is a clear example of a scenario where the medicine is far worse than the disease. Advocates often fail to deal with obvious problems in their moral thinking. As Kelsey Piper writes in a piece evaluating degrowth and prominent proponent Jason Hinkel, “The things degrowthers care about — leisure time, health care, life expectancy — are strongly correlated with societal wealth. The generosity of a welfare state and the availability of transfers to a state’s poorest people are also strongly correlated with societal wealth. Innovation, discovery, invention, and medical technology improvements are also strongly correlated with societal wealth.” The standard pro-market moral case against redistribution or other interventions that may threaten future growth, is that they are more morally complicated that advocates think because they risk future gains for the intended beneficiaries. This argument is even more important in the case of degrowth where the purported moral case is focused directly and explicitly not just reducing the rate of future economic gains, but on reducing the size of the economy and the myriad benefits it brings.

Almost as troubling as the core proposals of degrowthers are their critiques of other widely held benefits of a dynamic, forward-looking, enterprise economy. For instance, while the role of innovation in contributing to better outcomes including reducing climate change and mitigating its effects may seem obvious, many committed degrowthers decry “solutionism” or the idea that technology offers a way out of the problems. This concept allows them to discount any proposal short of their extreme ideas, sometimes with clear negative effects on their purported cause. For instance, a former member of Extinction Rebellion Zion Lights emphasizes the anti-nuclear mindset among other things that led her to leave the group, recognizing that to deal with climate change might entail embracing nuclear. Even Angela Merkel, a physics Ph.D., was persuaded to end nuclear power in Germany in the wake of the Fukushima meltdown. The consequence of this decision was that one of the most environmentally-minded countries emitted more greenhouse gasses.

While I’ve mostly written about the political left it is worth stressing that many of the same critiques apply to the contemporary right. The government under Boris Johnson has shown little interest in thinking about serious reforms to the underperforming National Health Service or other types of regulatory changes that led many on the right to support Brexit. Instead, governments and politicians both here and in the US are interested in a politics of increased spending, borrowing, and taxes. Many across the political spectrum are unhappy with the performance of the status quo and desire a return to supply-side thinking. I hope they all succeed.

 


John Kroencke is a Research Fellow at the Centre for Enterprise, Markets and Ethics. For more information about John please click here.

John Kroencke: Mutually Beneficial Solutions to the Housing Crisis

Housing reform efforts in both Britain and the United States have tended to get caught in the quagmire of fractious politics. For years, figures on the left have called for below market rate or social housing. Those in the free-market camp have called for easier private market development rights. Renters have emphasized the outsized returns that homeowners have benefited from over the last decades. Homeowners have emphasized their rights (perceived and real) to control the nature of local new development. The sound and fury of competing claims has meant that the status quo has continued to rule the day and every year the total shortage is exasperated as fewer housing units are built than they would be under less restrictive rules. Despite these familiar arguments there are in fact many reforms which both allow new housing and benefit existing homeowners.

Accessory Dwelling Unit Reforms in the United States

In the United States— where land use planning is done at the municipal and state level- multiple accessory dwelling unit reforms have passed in recent years. Under these rules homeowners can build an additional unit in their back garden, convert a garage, or subdivide an existing home into two or more units. While the laws impose limits on things like the size of the units and their distance from neighboring plots of land, they have been a huge improvement on the status quo.

Data from recent years in California shows that thousands of homeowners have taken advantage of this change with about half of them retaining the living space for their private use and the other half renting the newly created spaces out on the market. Additionally, many of those who choose not to rent out the space on the market use it for elder relatives, siblings, children, or friends.

The housing shortage means that as more and more people desire to live in places with little ability to build, the prices are bid up above the construction cost. Because of this, newly permitted space can be incredibly profitable for homeowners both as a stream of new revenue for those who choose to rent out the space but also in the resale value of the home.

Potential Reforms in the United Kingdom

While there haven’t been reforms of exactly this type in the UK, there is great potential for mutually beneficial reform. Unlike much of California, London and other cities in the UK were developed far before top-down planning systems emerged. As such, one useful starting point for thinking about these types of reforms is to look around at the type of development that was allowed in past decades before researching which factors stop current contemporary markets from responding in similar ways.

In a recent briefing paper for Create Streets, Dr. Samuel Hughes does just this for mansard roof storeys. Mansard roof storeys are distinct from a standard loft conversion because they feature a roof line with two slopes. The steep lower slope of the roof allows most of the added interior space to be unrestricted in height while the shallow upper slope limits the added height to the exterior. The general effect of this ingenious architectural feature is to provide the most increased interior volume within the smallest envelope.

While in the Georgian, Victorian, and Edwardian eras it was entirely natural for residents to add additional space as land prices rose, this practice has been stopped by subsequent regulations. With these changes some streets were ossified in transition: some terrace homes had already built mansard roof storeys while others hadn’t, leaving what Hughes calls a sawtooth effect. Hughes proposes that residents on streets already exhibiting this sawtooth effect should have the right to add mansards of their own. Perhaps more importantly he proposes a rule that would allow the residents of parapeted houses built between 1700 and 1918 decide by simple majority at the street level if they wish allow mansards on their street. As part of the proposal, Hughes provides a basic design guide that would limit the pitch, height, and other aesthetic aspects of any mansards allowed by the two mechanisms.

While this proposal would make new mansards much easier, the system does occasionally allow them. For instance, as Hugh Graham describes in the Times the residents of Fitzroy Road in leafy Primrose Hill London were allowed to eliminate the existing sawtooth effect on their street in the last decade. The additions were only approved in joint- every one of the remaining eleven freeholds had to agree to build additions matching the preexisting mansard on the twelfth terrace house.

As a result of this permission, thousands of square feet were created in an expensive part of London with no downside. For places like Primrose Hill where the floor space is valued so highly, the construction costs of the additions yielded a return of around one thousand per cent.

This recent briefing paper follows up on a February 2021 Policy Exchange proposal from Hughes and Ben Southwood which allow even more street level based bottom-up planning for post-1918 structures.

While the oppositional politics of housing reform dominates the pages of newspapers, there is great hope for mutually beneficial housing reform in both the US and the UK. 

 


John joined the Centre in 2021 after finishing his Ph.D. in Economics at George Mason University. He spent the 2020-21 academic year as a Final Year Fellow at the Center for the History of Political Economy at Duke University.

His role involves research on family business as part of the Centre’s Ethics and Theology project and contributions to the wider work of the Centre. As part of this, he will complete research on the role of the great estates in the private provision of land planning and other work on the role of markets in housing and environmental issues. John’s past research has focused mainly on the history of economics and housing.

A native of California, John looks forward to travelling around the U.K. and Europe.