Earth: Too big to fail? Don’t be too sure.

Until the past few years, I had a vague idea that more economic activity was better than less, assuming inflation wasn’t a problem, and that by spending money, I was indirectly paying other people’s wages, helping them out. Most people overlook the straightforward reason that this is a dangerously simplistic economic model. For Earth Day, I’d like to tell you how I came to notice that reason.

Around 1999, I found myself at a surprisingly well-attended presentation in the big Midwestern physics graduate program I was drinking my way out of at that time. The topic of the talk was the Black-Scholes equation, which is used by financial professionals to price securities and manage risk. At one point, the speaker said, “The bank never loses money.” People around me laughed knowingly.

I may well have been the dimmest bulb in that room, but I felt an urge to protect my wallet: I’d been dealing with equations like Black-Scholes long enough to be able to smell right away the odor of an approximation.

One of the ways to make equations like Black-Scholes simpler is to pretend that some relevant quantities are either zero or infinity. I figured that the bank could run out of money to hedge its bets but that the talk was based on the premise of a bank with access to infinite credit. After all, no gambler goes bust if their bookie keeps running a tab.

One of the assumptions behind Black-Scholes is, in fact, “that money can always be lent and borrowed at a known, fixed, risk-free interest rate.” Why would people wager the entire system on faith in unlimited credit? One might as well ask why the Trojans accepted the gift from the Greeks. Who doesn’t want a big wooden horse? Surely having the big wooden horse is better than not having the big wooden horse. Whoever heard of a wooden horse causing trouble? If a small wooden horse is harmless, how could a big wooden horse be dangerous?

Various reasons might have been behind the laughter back then. Clever people can be taken in by intellectual fashions. It’s also conceivable that some of the other people in the room were clever enough to realize what would actually happen: Few large banks wound up losing money from the havoc of 2008, because the government propped up the system to stave off economic disaster.

In 2020, I finally finished a physics doctorate. It’s an unfashionable opinion, but I believe that the most important goal for people like me is to avoid becoming Dr. Frankenstein. I grew up with the movies “War Games,” “Repo Man,” “The Terminator,” “Real Genius” and “The Quiet Earth,” all of which warned kids like me not to build something that might hurt people. I paid attention. I’m happy to have built less than I might have, despite all the incentives to work hard.

Every system has its limits — and that includes both the economy and the planet we

depend on.

The year before I graduated, Steven Chu, the Nobel laureate in physics and former secretary of Energy, called unlimited economic growth a pyramid scheme.

These days, people use the term “overshoot” to describe the fact that our current consumption of resources is greater than Earth can sustain. To live comfortably, people pump groundwater profligately, depleting and fouling what makes their lives possible. The so-called “Green Revolution” that feeds us includes wholesale destruction of rainforest to provide farmland and pasture. We pave and sod as if we hated God’s creation.

Just as some struggle to explain how the failure of a few banks could take down the entire financial system, many don’t see how ecosystem collapse in Brazil or Indonesia could kill them personally. That’s why “overshoot” is a good term: At some point, the economic expansion will stop, and just like a mass on a spring that’s reached its maximum extension, our society will be pulled in the other direction. The farther we overshoot, the farther we’ll snap back. This is why working less and buying less are as important as decarbonizing our technologies.

Why don’t you hear this more often? According to Forbes, we’ve been treating our planet as infinite. That’s the perilous approximation you’ve been smelling.

Let’s be kind to Mother Earth, for our own sake. Treating Mom’s resources as infinite is foolish, once we grow too big.