Question: Professor Smulders, you study environmental, energy and resource economics as well as the theory and history of economic growth. Nowadays, a reflective person can’t help but wonder whether growth in economic output is possible, or even desirable, considering the impact it has on our environment. From an economist’s point of view, is the often-discussed antagonism between economy and environment traceable and can it be resolved?
Professor Sjak Smulders: Our concern is for the environment, so our aim should be to address environmental problems in the first place. It would be a mistake to start reducing economic growth for the sake of the environment. What we need is a different form of economic growth, less polluting and less based on the extraction of resources. In my research I see no compelling reasons why this new form of growth is unrealistic. Modern economic growth has always been driven mainly by innovation, technical change and shifts in consumption patterns. In our economies, the average worker is becoming more productive. We even produce more per unit of resource input. The only thing we need to do is to speed up this clean innovation. Emission caps and carbon prices will redirect innovation from polluting to clean technologies. So far this innovation has been slow, with the result that growth in the past has been accompanied by increases in our footprint. But our environmental policies have been quite lax as well. If we dare to impose more stringent policies, economic growth might slow a bit. But as long as our economies keep using the talents and skills of people for innovation, the economy will be greener without losing too much growth. The alternative policy of directly reducing growth is likely to stifle innovation and make a green economy more difficult – a counterproductive policy. This is important because many countries in the world and groups in society cannot be denied improvements in living standards.
Among others, you advise the World Bank and the Kiel Institute for the World Economy on the topics of resource economy and economic basics in climate and environmental policy. Never has politics seemed more in need of scientific advice, considering the complexity of the many economic challenges it faces. Is the voice of science being heard?
It is amazing to see how much research is going on in the field of climate change. Social sciences are very much interested. At the same time, policymakers are only just starting to involve scientists in their decision-making on climate policy. It is not surprising that this takes time. But a lot more is happening than is visible. There is a whole web of connections through which the voice of science is being heard. Scientific reports are picked up by policy institutes, which talk to ministries, from where the information finally reaches the higher policy-making levels. Communication and dissemination have never been faster. Not only through new social media. The IPCC reports are a great example of how science is summarised and translated to inform policy.
It was no coincidence that your inaugural lecture on 17 October took place at the Alte Handelsbörse and was complemented by baroque chamber music. As a musicologist and connoisseur of baroque music and organ-playing, you study the Reformation and Johann Sebastian Bach as part of your economic research. What interests you about the Reformation?
It seems a big step from economics of growth to Luther’s Reformation. However, there is a close connection. Economic growth and improvements in living standards require a good organisation of society. Investors should be assured of good infrastructure, the rule of law, and not face the threat of expropriation. Economists call this “good institutions”. The question is why in history some regions in the world introduced institutions conducive to economic growth. There are many answers, but we think that the changes in religion coincided with changes in institutions. We find that regions in current-day Germany that were comparatively poor but had relatively fertile land were more likely to break with the Church of Rome. By embracing Luther’s ideas about the organisation of church and state, local authorities (beginning, of course, with the Duke of Saxony) gained more independence so that they could start better using the untapped potential of their lands.
Do you see a link between the musical and economic history of the baroque period?
For current-day economies to be successful and responsive to challenges, labour has to be very mobile, and eager to move to other cities where new opportunities arise and innovation takes place. We wanted to see whether such a mechanism was also present in baroque-era Germany. From my own collection of baroque music I already knew how many composers were active at the time. Where did all those composers come from? We found that there was a lot of mobility and indeed, the richest cities were better able to attract the musicians from far away and who had been educated in Italy.
Which musical institutions have you already discovered in Leipzig?
I discover new music events every day I am in Leipzig. It is amazing how much is going on. I have also had the privilege to play the new organ of the University’s church.
As Leibniz Professor you emphasise the support of young scientists. How did you guide Leipzig’s students and doctoral candidates during your stay here?
In my courses for PhD and MSc students, I teach on my research topics. I discuss the recent literature. Doctoral students show their papers and a discussion easily starts. Young people come up with new ideas and we find out together how these connect to existing research. This prevents us from reinventing the wheel and facilitates the selection of effective research methodology. They directly invest in the frontier methods and advance our current knowledge.
Another focus of the Leibniz Professorship is on interdisciplinary exchange. During your inaugural lecture, we learned that you have already established an impressive network at our university. How in particular do you implement scientific dialogue?
I take every chance to engage in interdisciplinary projects and presentations, because I know how rare these opportunities still are despite all pleas in favour of them. While communication with researchers from other disciplines is not always easy, I always learn so much. When talking to non-economists, I try to point out that there are always economic principles behind seemingly unrelated issues (like lifestyles, religion, music), that economics is not about how to make money, but about how to choose between conflicting goals (e.g. jobs versus the environment). When talking to my fellow economists, I always play devil’s advocate and show that other disciplines typically have richer explanations that we as economists should take seriously and incorporate into our thinking. When I talk to economists, I therefore point out the dangers of advocating carbon taxes as the solution to everything, but when talking to ecologists I am happy to point out how beautifully carbon taxes can give proper incentives for companies to reduce emissions.
Thank you for the interview. The questions were asked by Katrin Henneberg and Viola Gründemann
Event tip: on Monday, 18 March, Leibniz Professor Smulders will discuss the following topic with his guests at the Science Café: ‘Geoengineering – Can we save the climate by tinkering with it?’ He will be joined on the panel by Professor Juan Moreno-Cruz from the University of Waterloo, Canada, Professor Wilfried Rickels from Kiel University as well as Professor Martin Quaas of Leipzig University. The event starts at 8pm at the Café Alibi (Bibliotheca Albertina) and is open to all.