30 June 2016

I think there is an interesting correlation between being frugal and caring for and improving the natural environment. Thinking about this correlation led me to describe the wealth equation in my previous post

Lets be clear. The wealth equation is not an absolute or accurate truth. It is simply a model of the consequences of our actions. I made up this model to give me a framework to think about which actions would improve my well-being in the future. In that framework, I need consider all included variables, but there could be more, hidden variables that I haven’t figured out yet.

With that disclaimer, lets jump in.

A frugal person is a person who tries to minimize the monetary cost of their actions, and still trying to keep it lower than their useful need. For example, they might decide that they need nutrition, and buy rice and beans and eggs in bulk in order to keep the cost per meal miniscule.

A frugal person might go further and when comparing their options for which brand of rice and which brand of beans to buy, they might simply go with the cheapest option. There could be multiple explanations of why a given brand is cheaper than another.

First, the seller profit might be different. By buying the brand with less seller profit, the frugal person helps reinforce market dynamics and to make the product more of a commodity.

Then, there could be different fair prices for the natural resources. Imagine one brand claims that their product is of higher quality than the other. In that case, the frugal person determines the difference in useful need satisfied by both products and will select the cheaper product, unless the more expensive one really satisfies a lot more useful need.

Or, there could be a case where two competing of the same quality with the same seller profit cost differently, because in the production of the cheaper one, the manufacturer cut corners and dumped their dirty water without filtering it out, or used itself a supplier who cut corners. As a result the end product’s price will be lower, and it will be almost impossible for the consumer to determine the reason. In this case, a frugal consumer would buy the monetarily cheaper option but might incur some hidden environment cost.

In the last case, a well-meaning frugal person might get tricked into harming the environment.

Does that mean that being frugal hurts the environment? Not necessarily. I will argue that actually, being frugal correlates with being nicer to the environment.

My first argument is that the level of consumption of a frugal person is significantly lower than that a typical consumer. This generally means fewer chances to incur hidden environment cost. Even if the actions of a frugal person are on average more harmful, they under the upper bound of the useful need of that person. Heavy consumers on the other hand would buy a lot of items that they barely use, thus spending a lot more than their useful need, and being much more likely to have a higher environment impact.

Another argument is that as the frugal person focuses on reducing the monetary cost, they constantly re-evaluate and reduce their perception of useful need. They realize they can easily go without certain comforts and still have a life that is as good as before. So the total perceived need for them is much lower than the perceived need of the consumer. This further strengthens the previous argument.

Yet another supporting argument is that everything has at least some hidden environment cost, so more consumption always means more environment effect. I will consider a piece of fruit’s fair price to be at a fair price, if the cost covers all the resources required to produce the fruit, and then all the resources required to return the land to wilderness. Of course, most farmers don’t actually return their land to the wild. The piece of fruit will contain at least some hidden environment cost.

My conclusion is that frugality generally harms the environment less than spending does. It is not necessarily beneficial, and it can reduce overall wealth when frugal people buy products which harm the environment. Still, it is a small thing to ask of people - to minimize their spending. People cannot be thinking about all possible environment impacts when buying toilet paper. Looking at the price and quality is what all of us do when we buy stuff. The hidden environment cost is something to be dealt with separately. Just like we currently have “certified organic” and “certified fair trade” we can have “certified carbon neutral” or “certified wilderness neutral”.

Right now the closest we have is the “local” label. But that is bullshit. It means that less fuel was used to transporting this good. But we need to add up all environment cost, not just the gasoline cost. It is a Luddite fallacy.

As consumers we can push for products which reduce the hidden cost. It won’t be the most frugal thing to do, as the early producers will be able to gather up more of seller profit. But eventually, the production level will increase and the environmentally friendlier products will become a commodity, meaning that the seller profit will decrease.

So here is a dilemma. Do we opt for being frugal, or do we opt for getting the most environment friendly product? I don’t have a clear answer, but my preference would be optimizing for being frugal. It is the steady state situation if we ever eliminate the hidden environment cost. It is also self-serving, so we don’t always need to face internal conflict of whether to buy the cost effective option or the “certified pure nature” one. And I believe that frugality generally induces warmer feeling towards nature. So with the extra wealth we can gain from frugality, we can spend it on what we feel like - and we can spend more on improving the environment.