Climate change theory says that the public has to drastically reduce its consumption to save the environment, while Keynesian economics says that increasing consumption by the general public is the surest way to a prosperous economy. Despite the contradiction, the Western policy elite subscribe to both doctrines.
Can the elite not see the logical impossibility of policy action based on both climate change theory and Keynesian economics? Perhaps not, or perhaps there is a hidden coherence to the elites’ actions discoverable by examining the incentives underlying the mutually exclusive theories presented to the public.
The crux of Keynesian economics is that recessions occur because aggregate demand has fallen (i.e., consumers’ desire to spend less), and thus the only way to return to growth is for aggregate demand to be raised. Since private sentiment brought about the decrease in aggregate demand, the only force that can bring about its increase is government spending through subsidies, welfare, and make-work programs, financed by deficit spending.
Contrary to “traditional,” or Austrian, economics, Keynesians disregard concepts such as capital structure, time preference, and malinvestment. The crucial factor is to boost short-term public consumption, as per Keynes famous aphorism “in the long run we are all dead.”
In his words:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the banknotes up again … there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
In contrast, the chief demand in terms of political economy from the climate change lobby is that the public must have its consumption forcibly restricted, as in their opinion our current lifestyle depletes the Earth’s resources and pollutes its atmosphere at an unacceptable rate. Increasingly, they think that the median standard of living warrants little concern as they believe our lives to be in greater danger. One of the boldest proponents of the drive to reduce consumption is writer George Monbiot.