Can economics be greened?

 

Stu Crawford

 

The planet is being destroyed by human activity.  About half of earth's land surface has been transformed by human activity, over half of assessable freshwater is used by humans, humans fix more nitrogen than all natural sources do, and there has been a 30% increase in atmospheric CO2 since the Industrial Revolution (Vitousek et al, 1997).  In 1986 Vitousek et al determined that 40% of the planet's net primary activity was used or destroyed by humans.  Since the human population has increased 26% since they did their study, I would extrapolate that now humans probably use or destroy over 50% of the net primary productivity of the planet.

This abuse of our planet is not sustainable.  In its 1998-99 report the World Resources Institute determined that the amount of energy that the world economy burns every day required the planet 10,000 days to produce.  The majority of humans do not wish to destroy themselves and yet they engage in activities where destruction is the inevitable result.  There is obviously something wrong with the decision-making process that humans use to determine their use of the environment.  Humans call this decision-making process 'economy'.  This 'economy' needs to be critically assessed.

There are several reasons why the use of 'economics' to make important decisions results in unsustainable resource management.  Clark (1973) presents one simple reason.  'Economics' creates a situation were money is worth something in and of itself and is capable of growth.  If money can grow faster than a sustainably harvested population 'economics' will determine that the population should be obliterated and changed into money.  See Fig 1 and Fig 2.

'Economics' might determine that the entire population should be liquidated even if it does grow faster than money.  The money now can be worth much more than the possibility of a sustainably harvested population in the future.  If there is uncertainty about the long-term prospects of harvesting a population (perhaps because the population may go extinct, or become protected by environmentalists) then it becomes much more profitable to liquidate the resource immediately and get the money.

Gordon's (1954) fishing model shows a further problem with using 'economics' to determine sustainable harvesting.  If there is more than one person harvesting a resource the end result can be unsustainable decisions even if the level of harvesting that is most 'economical' is ecologically sustainable.  As long as there is profit in fishing more people will start fishing and the fishing effort will increase up until the point were fishing is no longer profitable.  At this point the harvest may no longer be sustainable.  See Fig 3.

A final reason that 'economics' doesn't work for making intelligent resource management decisions is that an individual's actions often have wide spread effects.  'Economics' doesn't account for the widespread effects of environmental destruction caused by an individual's activities.  Unfortunately most forms of environmental destruction, such as deforestation, acid rain, nitrogen dumping, and ozone depletion, have widespread effects that the perpetuator is not forced to account for.

Many of the humans who benefit from the use of 'economics' try to claim that 'economics' is capable of making intelligent resource use decisions if it is used right.  Considerations on sustainability just have to be entered into the formula and the right decision will pop out the other end.  Ecosystem processes can be given monetary values and then the 'economics' algorithm can recognize them.

In an attempt to facilitate the pricing of our environment Constanza et al published a report in 1997 that tried to put a price tag on the value of basic ecosystem services.  This report synthesized results from more than 100 published studies and used a variety of evaluation methods to look at the value of 17 basic ecosystem services across the planet.  The report came up with the very conservative (see Pimm, 1997) estimate for the value of earth's ecosystem services of $33 trillion US.  For comparison the global GNP is about $18 trillion dollars.  This shows us that even within the framework of our 'economy' the environment is more important to us than our economy.

A similar effort is coming out of the Pembina Institute for Appropriate Development (Anialski et al, 2000).  A Genuine Progress Indicator (GPI) is being developed to replace the GDP.  Traditional measures of economic progress such as the GDP fail to account for the depletion and pollution of natural resources, the value of services provided by nature, and many benefits and costs to societal well-being.  Environmental and social disasters (such as the Exxon Valdez oil spill or the Montreal ice storm) actually increase the GDP.  The GPI is an attempt to have a real measure of prosperity.  The GPI considers social, economic, and environmental aspects of wealth, assigns them all a monetary value, and then roles them into one monetary figure that shows how well the nation is doing.  Beneficial activities such as volunteer service and caring for children are given monetary value while things like economic disparity, crime, greenhouse gas emissions, and environmental destruction are assigned a cost.

GPIs have been developed for the USA and a few other countries and preliminary work has been done in Canada.  The Pembina Institute hopes that the GPI will become accepted and then after we can move away from rolling wealth into one lump sum and look at individual aspects of progress (Amy Taylor, personal communication).  Then, by working within the corporate framework already in place, incentives could be provided for 'green' corporations over 'brown' corporations.  With the incentives in place corporations would listen to environmentalists on how to improve themselves (Rob McIntosh, personal communication)[1].

It appears that we could alter our 'economic' decision making model enough to get intelligent decisions out of it if we put in the right costs.  But this doesn't mean that 'economics' will result in sustainable human activity.  The whole cost accounting necessary for reforming 'economics' is not possible.  There is a problem with the very idea of 'economics'.

Humans have been given the noble lie of economics.  Humans have been told that 'Economics' is the all-powerful and all-important entity that controls them.  They live in an era of economic fascism.  An individual's well-being doesn't matter, all that matters is that 'Economics' is doing well.  Everything is sacrificed for the sake of 'Economics'.  Because humans worship 'Economics' very strange decisions are made.  The following mistakes resulting from the 'economic' decision-making algorithm were pointed out by Whatmough (1972), as quoted in Peacock (1996):  Increased technology is used for increased production to increase the wealth of rich, instead of being used to make peoples lives easier.  Humans find short-lived ways of cashing in accumulated wealth in their environment in the belief that this is progress.  The money that humans use to facilitate trading becomes something other that a representation of the value of human effort and its value becomes in the money's exchange and intrinsic to it.  And humans encourage secondary industry to become dominated by corporate chains that form false industries.  These false industries take control of their own market, push out effective small businesses, maintain themselves through a supply driven market, and produce huge excesses of inferior products.

This obsession with 'economics' and the resulting ignorant decisions are not necessary.  Examples can be taken from the least developed nations of the world as to the direction human resource management can take.  In the least developed nations of the world, corporate driven globalization is forcing dependence and environmental destruction.  But localization has been found to be an effective solution.  Sustainable communities are developed that trade only for luxury items.  Communities can put together programs to help themselves outside of the 'economic' system without government or corporate aid by working at the local level.  This pre-corporate pre-capitalist (as opposed to post-corporate anti-capitalist) organization could serve as a model for an effective decision making algorithm for the rest of the world (Amory Starr, personal communication)[2].

The more advanced humans of the developed nations make ridiculous decisions because they think that they should maximize the growth of the 'Economics' entity.  ýWe have survived so far only because our world was so incredibly rich with resources when we began this insane policy.ţ[3]  If a plethora of adjustments to the 'economics' entity were made it is theoretically possible that 'economics' could be adjusted so that maximizing its health would actually result in intelligent decisions, but it seems very unlikely that humans could do this.  The perfected 'economics' model would need to be perfectly designed and perfectly followed before it would work.  But humans do not have complete knowledge, and even if they did they would not always use that knowledge.  Thus the 'economics' model that they are using cannot and will not be perfectly adjusted.  And humans do not always act in the exact way that the 'economics' model would have them act.  Humans are animals and are subject to many irrationalities in their behaviour that result in them not always doing exactly what their externally enforced decision making algorithm would tell them to do. 

It does not seem possible that humans will use this perfected 'economics' model (even if it is theoretically possible) with the accuracy that would be necessary for its use to actually result in intelligent decisions.  If humans are in the frame of mind that what they are trying to do is maximize 'economics' they will not instinctively make the right decisions.  If humans act to maximize the health of 'economics' they will end up doing only that.  Humans will increase production, exchange of money, and the number of working hours available to themselves.  If humans are to make decisions that will result in the maximization of the things that they actually care about, such as their own well being and the well being of the life around them, they need to be maximizing something else besides 'economics'.

This paradigm shift requires a new noble lie.  The noble lie of economics works so well because people do not have complete knowledge, and they do not even like to use all of the knowledge that they have.  Decision-making is extremely complex if all effects are considered.  Decision-making needs to be simplified, as it is when humans just act to maximize 'economics'.  It seems to work well for humans to act in subservience to a noble lie such as economics but economics is the wrong lie.  Humans don't need a noble lie that allows for a framework that makes intelligent decisions possible.  Humans need a noble lie that makes these decisions inevitable.  Gaia (Lovelock, 1987) could be the appropriate noble lie if humans could develop a concept of Gaia that included their own well being by placing humans within Gaia in a symbiosis with the rest of the biosphere.  Belief of this noble lie seems possible.  Cultures have existed in the past that held very similar concepts to Gaia.  And the acceptance of the noble lie of Gaia could be the only salvation for humanity.

 


 

Figure 1.  The growth of the population being harvested compared to the growth of money.  K is the carrying capacity for that population.  Maintaining the population at size c is the most economical strategy.  Adapted from Lande et al., ýOptimal harvesting, economic discounting and extinction risk in fluctuating populationsţ, Nature, Vol. 372 (1994), 88.




Figure 2.  The growth of the population being harvested compared to the growth of money, under conditions of a slow growing resource and high interest rates.  K is the carrying capacity for that population.  Maintaining the population at size 0 is the most economical strategy.  Adapted from Lande et al., ýOptimal harvesting, economic discounting and extinction risk in fluctuating populationsţ, Nature, Vol. 372 (1994), 88.




Figure 3.  The cost-benefit of fishing compared to the amount of effort put into fishing.  As fishing effort increases the cost of this effort increases linearly but there is decreasing returns on this effort.  Maximum profit is achieved at point max, but new fishermen continue to enter into the business until point c were there is no longer any profit.

 

 

 

References cited

 

Anialski, M., A. Taylor, M. Griffiths, B. Campbell, D. Pollock, S. Wilson, and J. Wilson.  2000.  The Alberta Genuine Progress Indicator (GPI) Accounts:  A Blueprint for the way we really live.  A publication of the Pembina Institute for Appropiate Development, Drayton Valley, AB.

 

Clark, C. W.  1973.  The economics of overexploitation:  Severe depletion of renewable resources may result from high discount rates used by private exploiters.  Science, 181 : 630 ˝ 634.

 

Costanza, R., R. d'Arge, R. de Groot, S. Farber, M. Grasso, B. Hannon, K. Limburg, S. Naeem, R. V. O'Neill, J. Paruelo, R. G. Raskin, P. Sutton, and M. Belt.  1997.  The value of the world's ecosystem services and natural capital.  Nature, 387 : 253 - 260.

 

Gordon, H.S. 1954. The economic theory of a common property resource: the

fishery. Journal of Political Economics 62 : 124 - 142.

 

Kent, P. A.  1996.  Living with the Earth:  An introduction to environmental philosophy.  Harcourt Brace & Company Canada, Ltd., Toronto, Ontario.

 

Lovelock, J. E.  1987.  Gaia: A New Look at Life on Earth.  Oxford University Press, Oxford NewYork.

 

Pimm, S. L.  1997.  The value of everything.  Nature, 387 : 231 ˝ 232.

 

Vitousek, P. M., P. R. Ehrlich, A. H. Ehrlich, and P. A. Matson.  1986.  Human appropiation of the products of photosynthesis.  BioScience, 36 : 368 ˝ 373.

 

Vitousek, P. M., H. A. Mooney, J. Lubchenco, and J. M. Melillo.  1997.  Human domination of earth's ecosystems.  Science, 277 : 494 ˝ 499.

           

Whatmough, G. A.  1976.  Money, Machines, Energy, and Wealth.  Unpublished paper, pp 1-13, copyright 1976 Grant A. Whatmough.



[1] Senior Strategic Advisor of the Pembina Institute for Appropriate Development.

[2] Assistant Professor of Sociology at Colorado State University and author of  Naming the Enemy: Anti-Corporate Social Movements Confront Globalization.

[3] Whatmough (1972) cited in Peacock (1996) pg 361.