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Economics and the Ecosystem

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A collection of papers previously published in Real-world Economics Review highlighting the most serious shortcomings of current economic theory, and how they contribute to unsustainable policies
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Issue no. 87:
Economics and the Ecosystem
19 March 2019
Introduction: Economics and civilization in ecological crisis
Jamie Morgan and Edward Fullbrook
2
Growthism: its ecological, economic and ethical limits
Herman Daly
9
Producing ecological economy
Katharine N. Farrell
23
Economics 101: Dog barking, overgrazing and ecological collapse
Edward Fullbrook
33
Addressing meta-externalities: investments in restoring the Earth
Neva Goodwin
36
Degrowth: a theory of radical abundance
Jason Hickel
54
Environmental financialization: what could go wrong?
Eric Kemp-Benedict and Sivan Kartha
69
Elements of a political economy of the postgrowth era
Max Koch
90
Victim of success: civilisation is at risk
Peter McManners
106
Economism and the Econocene: a coevolutionary interpretation
Richard B. Norgaard
114
End game: the economy as eco-catastrophe and what needs to change
William E. Rees
132
An ecosocialist path to limiting global temperature rise to 1.5°C
Richard Smith
149
Toward sustainable development: democracy-oriented economics
Peter Söderbaum
181
Like blending chalk and cheese the impact of standard economics in IPCC scenarios
Joachim H. Spangenberg
and Lia Polotzek
196
Of ecosystems and economies: re-connecting economics with reality
Clive L. Spash and Tone Smith
213
How to achieve the Sustainable Development Goals within planetary boundaries by 2050
Per Espen Stoknes
231
The simpler way: envisioning a sustainable society in an age of limits
Ted Trainer and Samuel Alexander
247
Board of Editors, past contributors, submissions, etc.
261
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Introduction: Economics and civilization in ecological
crisis
Jamie Morgan and Edward Fullbrook [Leeds Becket University, UK; University of the West of
England, UK]
Copyright: Jamie Morgan and Edward Fullbrook 2019
You may post comments on this paper at
https://rwer.wordpress.com/comments-on-rwer-issue-no-87/
What is the problem?
The essays collected here grapple with different aspects of what, if natural scientists are to be
believed, is the most profound set of issues humanity has ever faced. The United Nations
Framework Convention on Climate Change (UNFCCC) was created in 1992. Article 2 of the
Convention, states its goal as the “stabilization of greenhouse gas concentrations in the
atmosphere at a level that would prevent dangerous anthropogenic interference with the
climate system” (UNFCCC, 1992: p. 4). The subsequent “Conference of the Parties” process
is formally supposed to achieve this. However, during the period since then, despite the Kyoto
Protocols signed at COP 3 in 1997, and the subsequent 2015 Paris Agreement, which will
come into force in the new decade, annual global greenhouse gas (GHG) emissions have
increased massively (UNFCCC, 2015; Morgan, 2016). The rate of increase of carbon
emissions has markedly reduced in recent years, but the absolute annual figure remains
huge. In 2017 total annual gigatonnes of CO2 equivalent emissions reached a record high of
53.5 (UNEP, 2018). This is important because emissions remain in the atmosphere for long
periods - CO2 can remain in the atmosphere for well over a century. As the cumulative parts
per million (ppm) in the atmosphere increase, then the warming effect created by the gases
also increases which leads to positive feedbacks and the increased chance of a global
ecosystem collapse.
The estimated pre-industrial revolution atmospheric carbon level ranged at considerably less
than 300ppm over several hundred thousand years. In 2013 it exceeded 400ppm for the first
time in human history and as of 2019 is averaging over 407ppm. Standard models collated by
the Inter-Governmental Panel on Climate Change (IPCC) use 450ppm as the trigger level for
a 20C average warming. As a “carbon budget”, this has translated into total cumulative
emissions at the lower end of 3,000+ GtC02 to achieve the target of remaining below 20C
warming. Since the industrial revolution began we have already produced more than 2,000
GtC02. More recent work and observations by climate scientists indicate that prior standard
models have likely underestimated the subsequent rate of warming and the thresholds at
which positive feedback effects might begin and which could become irreversible. This
resulted in the inclusion in the Paris Agreement of an “aspiration” to restrict warming to 1.50C
involving a further restriction of the remaining carbon budget. However, it is also the case that
even this target is no guarantee that “Hothouse Earth” irreversible effects can be avoided (see
Steffen et al, 2018; Hansen et al, 2017). And yet the current emissions trends and country
commitments stated as “Nationally Determined Contributions” (NDCs) to reductions under the
Paris Agreement look set to exceed the 3000 target in a matter of a few short years and this
leads, even under previous standard models, to estimated warming between upper 2 and
over 40C over the second half of this century and into the next. This entire range is extremely
serious in terms of its consequences for our species.
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As the NASA global temperature database makes clear, almost all the hottest years on record
have occurred since the beginning of the twenty-first century, and erratic weather effects are
observably increasing around the world.1
Earth temperature differential 2018
Data source: NASA/GISS Credit: NASA Scientific Visualization Studio
The identified consequences include: heatwaves, droughts, flooding, loss of landmass,
inability of species to adapt exacerbating extinction rates, falling yields and rising crop
failures, food and water insecurity, famine, loss of life from “natural” disaster, increasing
poverty and escalating problems of induced safety-seeking mass migration. So, adverse
climate change is already here and we seem to be sleepwalking towards catastrophe. The
needed changes were stated quite starkly by the IPCC in October 2018 and in the UNEP 9th
Emissions Gap Report in the following month:
Current commitments expressed in the NDCs are inadequate to bridge the
emissions gap in 2030. Technically, it is still possible to bridge the gap to
ensure global warming stays well below 2°C and 1.5°C, but if NDC ambitions
are not increased before 2030, exceeding the 1.5°C goal can no longer be
avoided. Now more than ever, unprecedented and urgent action is
required by all nations. The assessment of actions by the G20 countries
indicates that this is yet to happen; in fact, global CO2 emissions increased
in 2017 after three years of stagnation. (UNEP, 2018, p. xiv) Global
greenhouse gas emissions show no signs of peaking. Global CO2 emissions
from energy and industry increased in 2017, following a three-year period of
stabilization. Total annual greenhouse gases emissions, including from land-
use change, reached a record high of 53.5 GtCO2e in 2017, an increase of
0.7 GtCO2e compared with 2016. In contrast, global GHG emissions in
2030 need to be approximately 25 percent and 55 percent lower than in
2017 to put the world on a least-cost pathway to limiting global warming to
2°C and 1.5°C respectively…. Global peaking of emissions by 2020 is
1 https://climate.nasa.gov/vital-signs/global-temperature/
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crucial for achieving the temperature targets of the Paris Agreement(UNEP,
2018, p. xv; bold added).
To be clear, our best estimates based on the scientific consensus is that emissions must fall
to 55% of their current level by 2030 and then (if one reads both reports) reduce further to net
zero by mid-century.
IPCC, 2018: p. 8
As has started to become obvious, this is a deep problem of political economy. Mayer Hillman
and others have previously stated and the IPCC now confirms that the problem seemingly
requires a fundamental reorientation of how we organize and live based on mass mobilization
to an extent never previously seen outside of a war setting.
However, as the essays set out here address. The very form and function of our political
economies resists recognizing the seriousness of the situation and resists translating any
recognition into concrete and immediate action. Events and published progress at COP 24 in
Katowice, Poland, confirm this (see UNFCCC, 2018). We have rhetoric and some limited
changes… We have had decades of global agreements such as Kyoto, discourse concerning
sustainable development, education for environmental awareness, recycling and policies
focused on carbon trading and efficiency enhancing innovations. At the same time, our
economies as currently operative have been and are dependent on material expansion and
growth, and remain configured to foster continual expansion and diffusion of industrialisation
and consumption. The planet is deaf to good intention, it responds only to what we actually
do, rather than merely what we say. Moreover, we have been socialised to conflate larger
economies with necessarily better economies and to consider expansionary economies as a
predicate of technological solutions to induced problems of economic activity. At the same
time, we have been discouraged from thinking about the basic incompatibly of an ever-
expanding material economy within a finite world.
The essays collected here serve to confirm various insights. There has never been a zero-
carbon industrial-consumption economy, and we are now in a situation where we must really
recognise that (as Meadows et al stated years ago) there are limits to growth and that one
cannot blithely hope expansion + technologies is a simple source of salvation that requires no
sacrifice. We are also in a situation where we must realise that our economies have powerful
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actors of one kind or another, so markets are currently not “free”, and yet there is no single
centre of decision making that has demonstrated it is currently capable of dictating what
needs to be done to solve a global problem: states and corporations are resisting recognition
or action based on the true scale of the problem, and many of the citizenry remain unaware of
the true nature of the problem. This is extraordinary. Moreover, climate change based on
carbon emissions is merely one consequence of a broader set of changes induced by the way
we are changing the planet.
Emissions are a by-product of our socio-economic practices. It is these broader practices that
account for cumulative consequences that have been catalogued in (so far) five Global
Environmental Outlook Reports from the UNEP. Those practices and consequences include:
deforestation, extension of intensive agriculture, industrial scale fishing, extraction of
minerals, gas and oil, the proliferation of energy production, transportation, and
manufacturing, and consumption patterns that treat our environment as a bottomless disposal
site for plastics, pesticides, cosmetics, fertilizers, food waste, heavy metals, medicines and
more, cumulatively resulting in, in addition to global warming, water table depletion,
desertification, eutrophication and rising toxicities in soil and air, sea level rises, rapid species
extinction and general loss of biodiversity on land and sea, ultimately creating pressure on
food chains and culminating in progressive ecosystem collapse (UNEP, 2012). The global
population has increased from about 1.6 billion in 1900 to over 7.5 billion in 2018. The global
economy has increased from about US$1.1 trillion in 1900 to over US$80 trillion in 2018.
Along with these changes has come amazing transformations in the way we live, but the
issue is not whether there are aspects of the way (some of us) live that we like, the real issue
is whether our design for life is survivable.
The situation, then, is ultra-serious. With this in mind, Real-World Economics Review has
invited a range of experts to consider how we arrived in our current predicament and to what
degree there is scope to address the challenges now confronted.
The essays
The essays collected here are predominantly informed by an ecological economics
perspective. As such, they are implicitly or explicitly critical of the theory and role of both
mainstream economics, in its general neglect of environmental issues, and environmental
economics in so far as it has operated as a sub-discipline in ways highly constrained by
mainstream economic concepts that have been antithetical to a more realistic approach to
recognizing environmental limits and remaining within them. A primary concern is that
economics has contributed to complacency and has helped to limit the collective imagination
or proper context for solutions that might (starting far earlier than today) have steered
humanity along a different path. This, for example, is basic in different ways to the essays by
Herman Daly, Max Koch, Peter Söderbaum, Ted Trainer and Samuel Alexander, Clive Spash
and Tone Smith, and Richard Smith. Each builds on well-established prior work (see, for
example, Smith, 2016; Daly, 2014; Söderbaum, 2018; Spash, 2017; Koch, 2012). This basic
commitment is, in many ways, a sub-set of a general theme that contributors to the Real-
World Economics Review have repeatedly expressed. That is, though mainstream economics
frequently celebrates its use of data and statistical analysis, the trajectory of mainstream
economics has typically been pseudo-scientific and antithetical to progress in both normative-
ethical terms and realistic theory terms (and these are in fact aspects of the same issue in so
far as social reality is normatively informed). By contrast the goals of humanity might better be
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fostered by a pluralistic and realistically founded economics (see Fullbrook, 2016, 2009,
2008).
In general, ecological economics recognizes that an economy is a materially significant
activity (Georgescu-Roegen, 1971). It is embedded in an environment of physical and
biological processes that create limits. Fundamentally, one must recognize that economic
activity is a processing of “throughput” that involves energy use, resource transformation and
depletion, waste creation and an underlying entropy. It may be possible to produce more with
less, it may be possible to recycle, but there are limits to the degree of circularity and of
energy (re)use, resource use and scale. An economy is not an isolated system that can be
treated as a mere circular flow of ever-expanding output and values. It is a component in a
social system that is dependent on and causally related to the environment it is operative
within. Ultimately the whole is an open system with path dependent characteristics. No
reasonable vision of the future can neglect this (for example, Morgan, 2017). The adverse
evidence from the IPCC and UNEP is making this ever clearer. Positive feedback, thresholds
of transition and irreversibility of consequences all apply in the real world and there is no
reason to think that an economic system is better suited than science to identifying points of
no return and rowing back from them, not least because all of the individual incentive
structures in an economic context of decision making are against this.
As all the contributors are aware, from an open system point of view, it is deeply concerning
that conventional economics does not begin from material processes and real limits, but
rather notional concepts in models of subjective values of goods and services in idealised
market equilibrating situations. Issues of the environment are delegated to sub-discipline
specialists to grapple with as and when markets “fail”. This foundational position has by
default committed economic theory to reckless expansion, and, as a consequence
(unintended or otherwise), limited the scope of solutions, since solutions have tacitly been
required to take expansion as given. Within this framing, solutions only become relevant
where markets fail in terms of pricing structures. Solutions mainly orient on correcting market
failures, applying state intervention as a limited last resort. By elimination, prohibition is thus a
thought that is mainly prevented. This framing takes it as given that corrected markets mainly
solve the problems they create, as the system as a whole inexorably expands… The very
idea of limits is, therefore, peripheralized.
Of course, at the same time, common sense tells economists of all hues, as it does all other
citizens, that everything has its limit. And yet, economics as an ideational resource has
worked against common sense. In mainstream economics, some applications have limits but
there is always scope to substitute and transfer to other market situations of exploitation and
development. In working against common sense, mainstream economics has followed a
direction of travel of convenient compatibility that has been convergent with the concerns of
corporations to expand and profit, and with the overriding competitive interest of countries to
grow and materially develop. As citizens of wealthy countries, we have collectively been
mainly ok with this because it has been easy to accept the logic of least cost future
adaptations based mainly on solutions (efficiencies of innovation and technology) simply
emerging from market processes (perhaps with some behavioural nudging, a few minor tax
changes and seed investment for new transformative markets). For most of us this has
become a rather dull somnambulant-inducing and eminently ignorable concern with
externalities, discount rates, backstop resources and matters of marginal abatement and
mitigation.
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And so here we are, now requiring solutions that begin from a 55% cut in emissions by 2030
and a fall to net zero by the middle of the century. The challenge is great. However, the
essays collected here provide insight and points of departure for the problem. Many, for
example, will find inspiration in Richard Smith’s work that takes the idea of the Green New
Deal forward.2 Others will see value in Ted Trainer and Samuel Alexander’s anarcho-
syndicalism, with its practical localism. It is to be hoped that all readers will respond with a
sense that they need to take personal responsibility for their (our) own actions, and for the
actions of those who claim to represent us. If there is one outcome we cannot currently afford
it is a sense that the problem is overwhelming. Doing something is liable to initiate a sense
that it is not enough and that every (in)action involves some degree of hypocrisy. However,
perhaps the more we are sensitized to this, the more we are progressively prone to practical
reorientation.
Conclusion
History is replete with harbingers of apocalyptic civilizational crisis. The very fact there is
history to attest to this indicates that vocal dread has typically been ill-founded. However, we
have now entered a phase where we have truly placed ourselves in jeopardy. The
overwhelming weight of evidence regarding our collective environmental consequences as a
species suggests that the common sense of the last forty years is now forced to confront its
own complacency. “Extinction Rebellion” and other new civil society and expert activist
movements have begun to appear.3 Encouragingly the young seem particularly attuned to the
scale of the problem they have been bequeathed. A call to sanity has been initiated. Are we
sufficiently rational as a species to respond?
References
Daly, H. (2014) Beyond Growth: The Economics of Sustainable Development. Boston: Beacon Press.
Fullbrook, E. (2016) Narrative Fixation in Economics. Bristol: World Economics Association Books.
Fullbrook, E. (Ed.) (2009) Ontology and Economics. London: Routledge.
Fullbrook, E. (Ed.) (2008) Pluralist Economics. London: Zed Books.
Georgescu-Roegen, N. (1971) The Entropy Law and the Economic Process. Cambridge and London:
Harvard University Press.
Hansen, J. et al. (2017)Young people’s burden: requirement of negative CO2 emissions.Earth System
Dynamics, 8, pp. 577-616.
IPCC (2018) Global Warming of 1.50C: Summary for policymakers. Geneva: Author.
Koch, M. (2012) Capitalism and Climate Change. Theoretical Discussion, Historical Development and
Policy Responses. London: Palgrave Macmillan.
Morgan, J. (2017) Piketty and the growth dilemma revisited in the context of ecological economics.
Ecological Economics, 136, pp. 169-177.
Morgan, J. (2016)Paris COP21: Power that speaks the truth?Globalizations 13(6), pp. 943-951.
Smith, R. (2016) Green Capitalism: The God that failed. Bristol: World Economics Association Books.
2 https://en.wikipedia.org/wiki/Green_New_Deal, https://www.greennewdealgroup.org.
3 https://rebellion.earth, https://www.sunrisemovement.org/%20
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Söderbaum, P. (2018) Economics, ideological orientation and democracy for sustainable development,
Bristol: World Economics Association Books, second edition.
Spash, C. (2017)Social Ecological Economics.” In Spash, C. (Ed.) Routledge Handbook of Ecological
Economics: Nature and Society. New York: Routledge, pp. 3-16.
Steffen, W. et al. (2018) Trajectories of the Earth System in the Anthropocene.PNAS, pp. 1-8.
UNEP (2018) Emissions Gap Report 2018 (9th edition), November. New York: Author.
UNEP (2012) Global Environmental Outlook Report 5: Environment for the Future We Want. New York:
Author.
UNFCCC (1992) United Nations Framework Convention on Climate Change. May 9. New York: Author.
UNFCCC (2015) Adoption of the Paris agreement and annex: Paris agreement. December 12. Paris:
Author.
UNFCCC (2018) Katowice texts. December 14. Katowice: Author.
Author contact: J.A.Morgan@leedsmet.ac.uk and edward.fullbrook@btinternet.com
___________________________
SUGGESTED CITATION:
Morgan, Jamie and Edward Fullbrook (2019)Introduction: Economics and civilization in ecological crisis
real-world economics review, issue no. 87, 19 March, pp. 2-8,
http://www.paecon.net/PAEReview/issue87/MorganFullbrook87.pdf
You may post and read comments on this paper at https://rwer.wordpress.com/comments-on-rwer-issue-no-87/
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Growthism: its ecological, economic and ethical limits
Herman Daly [University of Maryland, USA]
Copyright: Herman Daly 2019
You may post comments on this paper at
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We have many problems poverty, unemployment, environmental
destruction, climate change, financial instability, etc. but only one solution
for everything, namely economic growth. We believe that growth is the
costless, win-win solution to all problems, or at least the necessary
precondition for any solution. This is growthism. It now creates more
problems than it solves.
A journey of no return, not a circular economy
The economic process is not a mechanical analog that can be run forward and backward, nor
a circular process that can return to any previous state. Rather it is an irreversible and
irrevocable process moving in the direction of time’s arrow of increasing entropy.1 Finitude
and entropy guarantee that the economic life of our species will be a journey of no return.
Therefore even a stationary economy, in the classical sense of constant population and
constant capital stock, is ultimately a journey of no return, because the metabolic throughput
of matter and energy required to maintain constant stocks of people and physical capital, in
the face of depreciation and death, is an entropic flow from ever less concentrated sources to
ever filling sinks and both sources and sinks are finite. Consequently, technology must
change qualitatively to adapt to entropy increase, to depletion and pollution of the
environment, even in the stationary, or steady-state economyas it has been more recently
called. Relative to the growth economy the steady-state economy is a slower journey of no
return, one that values longevity with sufficiency, and seeks qualitative improvement rather
than quantitative increase. The many advantages of a slower journey were emphasized by
John Stuart Mill2, the champion of the classical stationary state:
I know not why it should be a matter of congratulation that persons who are
already richer than anyone needs to be, should have doubled their means of
consuming things which give little or no pleasure except as representative of
wealth….
The density of population necessary to enable mankind to obtain in the
greatest degree, all the advantages both of cooperation and of social
intercourse, has, in all the most populous countries been attained….
It is scarcely necessary to remark that a stationary condition of capital and
population implies no stationary state of human improvement. There would
be as much scope as ever for all kinds of mental culture, and moral and
social progress; as much room for improving the Art of Living and much more
likelihood of its being improved, when minds cease to be engrossed by the
art of getting on.
1 Nicholas Georgescu-Roegen (1972)The Entropy Law and the Economic Process, Harvard University
Press.
2 John Stuart Mill (1857) Principles of Political Economy, vol. 2 (London: John W. Parker), pp. 320-326,
with omissions.
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In contrast to Mill’s vision of the steady state, the reality of today’s growthist economy is one
of harried drivenness, of frantic adaptation to the unforeseen, unwilled, and out of control
consequences of maximized, subsidized growth, pushed by ever larger scale and more
dangerous technologies. Such growth is now threatening the capacity of earth to support life.
Many are not content with a slower more careful journey of no return. They want a so-called
circular economythat can presumably live, and continue to grow, by ingesting only its own
waste products. They assume that what they consider desirable must therefore be possible.
For anyone who has taken the first course in economics the recently revived term circular
economycalls to mind the famous diagram of the circular flow of exchange value between
firms and households found in the first pages of the standard textbooks. That diagram shows
goods and factors of production flowing in a closed circle between firms and households with
money flowing in the opposite direction. The economy is represented as an isolated system
nothing enters from the outside, nothing exits to the outside. There are no natural resources
entering from the ecosphere, no wastes exiting back to the ecosphere. Indeed there is no
ecosphere, no containing and constraining environment of any kind. This abstract vision is
useful for studying exchange (supply, demand, prices, and national income), but worthless for
studying environmental costs of economic growth because there is no finite environment to
constrain growth.
This picture however is not what most advocates today mean by circular economy, but it has
a similar name of long standing, and is a source of confusion. By circular economy they
mean an economy that recycles material natural resources to a high degree, and increases
product lifetimes, and uses mainly renewable resources all good policies, but destined to fall
short of their goal of sustainable growth. It might better have been called a recycling
economy or an economy that maximizes natural resource productivity rather than labor or
capital productivity. Increased resource efficiency is also referred to as decoupling as in
disconnecting the output of goods and services from the throughput of resources. In the limit
a totally decoupled economy would take us back to the neo classical circular flow
representation of the economy as an isolated system. For this reason I prefer to avoid this
reborn notion of circular economy,and the related term decoupling becausethey greatly
overstate the degree of separability of production from resource throughput, further
encouraging the unrealistic quest for sustainable growthin physical scale of the economic
subsystem relative to the biosphere.
The heavy emphasis on circularity casts a deep shadow over the more basic fact that the
metabolic throughput is fundamentally a linear one-way entropic flow. Yes, the overall linear
flow can contain important countercurrents and reverse eddies of recycling, and it is important
to take advantage of that. But the river itself flows from the mountains to the sea, and never
backwards True, the hydrologic cycle powered by the sun, can evaporate the water to rain
again in the mountains, but that happens in the ecosphere, outside the economy. If the
circular economyrelies on natural biophysical cycles powered by the sun, and does not
grow in scale beyond the regenerative and absorptive capacities of the containing biosphere,
then it approximates a steady-state economynot a sustainable growth economy. In addition
to a circulatory subsystem (recognized since the Physiocratsanalogy with blood circulation)
the economy also has a digestive tract that ties it to its environment at both ends. That
second more basic metabolic analogy has been neglected in economic theory.
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Recycling is limited, first because it costs energy to carry out the recycle of materials; and
second because energy itself is not subject to recycling (entropy means that it always takes
more energy to effect the recycle than the amount of energy recycledregardless of the price
of energy!). The extra energy for the recycling also requires material instruments, trucks etc.
So materials can be reduced, but at the cost of an increase in energy (and material)
throughput, which after some number of cycles (how many?) becomes prohibitive, as
remaining materials are ever more dispersed. Even expensive metals like gold, silver, and
copper are currently only about one-third recycled and two-thirds newly depleted. Writers who
expound the circular economy seem to be aware of this fact, but do not give it sufficient
emphasis. Also it is important to distinguish prompt materials recycling that is internal to the
economic subsystem, from long run external recycling through the containing ecosphere.
While increased reliance on renewable resources is a good feature of the circular economy,
one must remember that, when exploited beyond sustainable yield, renewable resources
effectively become nonrenewable. There is always a scale limit to a sustainable economic
subsystem, beyond which growth, even in a circular economy, breaks down and
sustainability requires a steady-state economy.
The basic issue of limits to growth that the Club of Rome did so much to emphasize in the
early 1970s needs to remain front and center, with recycling considered as a useful
accommodation to that limit, but not a path by which the growth economy can continue. Well
before becoming physically impossible the growth of the economic subsystem becomes
uneconomic in the sense that it costs more in terms of sacrificed ecosystem services than it is
worth in terms of extra production. That richer is better than poorer is a truism. No dispute
there. But is growth in GDP in wealthy countries really making us richer by any inclusive
measure of wealth? That is the question. I think it is likely making us poorer by increasing
unmeasured illthfaster than measured wealth. Even a steady-state economy can be too big
relative to the ecosphere. The neoclassical circular flow picture can never be too big by virtue
of its being an isolated system. However, neoclassical economists do recognize that the
economy can grow too fast (over-allocation of resources to investment relative to
consumption), even though its scale can never be too big.
Inevitably national growth economies reach a point where many citizens begin to suspect that
growth is no longer worth the cost of excessively rapid adaptation to an accelerating economy
of no return that so-called economic growth has in reality become uneconomic growth. John
Stuart Mill recognized that long ago. Why have not more recognized it? Why is growth still the
summum bonum of economists and politicians? Probably because growth is our substitute for
sharing as a cure for poverty. And because our national accounts (GDP) are incapable of
even registering uneconomic growth because they count only value added by labor and
capital, and omit entirely the cost of using up that to which value is added, namely the
entropic flow of natural resources, the very sap of life and wealth.
Globalization as an extension of growthism
Those of us old enough to remember the Cold War know that it was basically a contest
between Socialism and Capitalism to see who could grow faster, and thereby accumulate
more wealth and military power. The audience was the uncommitted countries of the world
who would supposedly adopt the economic system of the winner of the growth race. What
happened? Basically, Socialism collapsed, and Capitalism won by default. The losers
(Russia, China, Eastern Europe) got back in the growth race by adopting State Capitalism,
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and China has become the growth champion. The present system of world growthism, in the
broadly capitalist mode, is triumphant. But growthism itself has turned out to be a false god
because growth in our finite and entropic world now increases ecological and social costs
faster than production benefits, making us poorer, not richer (except for the top few percent).
Recognition of this reversal is obscured by the fact that our national accounts (GDP), do not
subtract the costs of growth, but effectively add them by counting the expenditures incurred to
defend ourselves from the un-subtracted costs of growth. Even more egregiously, GDP
counts the consumption of natural capital as income. Growthism is consuming the life support
capacity of the biosphere for the benefit of a small minority of the present generation, while
shifting the real but uncounted costs on to the poor, future generations, and other species.3
As national economies confront limits to their growth aspirations imposed by the carrying
capacity of their territory and the extent of their national markets, they strive, by globalization,
to grow into the ecological and economic space of all other countries, as well as into the
remaining global commons. While this certainly provides extra degrees of freedom for
individual nations to continue growing for a while, it does not remove global limits. It simply
ensures that those limits will be met more simultaneously and less sequentially. Consequently
there will be less opportunity for one country to learn from the experience of others in
adapting to limits. Furthermore, the ability of nations to enact independent policies for coming
to terms with limits is undercut, because the net result of globalization is to convert many
difficult, but tractable, national problems into one simultaneous intractable global problem, by
speeding up and generalizing the economic journey of no return. At the same time, however,
increasing energy costs will raise the cost of transport which acts as a general tariff on
international trade and will promote national and local production, thereby weakening
somewhat long distance trade and globalization.
The key to understanding globalization, I believe, is to clearly distinguish it from
internationalization:
Internationalization refers to the increasing importance of relations between nations:
international trade, international treaties, alliances, protocols, etc. The basic unit of community
and policy remains the nation, even as relations among nations, and among individuals in
different nations, become increasingly necessary and important.
Globalization refers to global economic integration of many formerly national economies into
one global economy, by free trade, especially by free capital mobility, and also more recently
by easy or uncontrolled migration. Globalization is the effective erasure of national boundaries
for economic purposes. National boundaries become totally porous with respect to goods
and capital, and increasingly porous with respect to people, viewed in this context as cheap
labor, or in some cases cheap human capital.
In sum, globalization is the economic integration of the globe. But exactly what is
integration? The word derives from integer, meaning one, complete, or whole. Integration
means much more than interdependenceit is the act of combining separate albeit related
units into a single whole. Interdependence is to integration as friendship is to marriage. Since
there can be only one whole, only one unity with reference to which parts are integrated, it
follows that global economic integration logically implies national economic disintegration
parts are torn out of their national context (dis-integrated), presumably to be re-integrated into
the new whole, the globalized economy. As the saying goes, to make an omelette you have to
3 For more see www.greattransition.org/publication/economics-for-a-full-world.
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break some eggs. The disintegration of the national egg is necessary to integrate the global
omelette. The benefits of global integration are extolled while the costs of national
disintegration are neglected.
Of course globalization is far from complete, but the tendency is well advanced. What we
have now is a collection of disintegrating national economies whose policies regarding
international trade, capital mobility, and migration are taken over by monopoly global
corporations, giant international banks, and a free-for-all of illegal migration of both cheap
labor and human capital.
All that I have just said was expressed with admirable clarity, honesty, and brevity by Renato
Ruggiero4, former director-general of WTO: “We are no longer writing the rules of interaction
among separate national economies. We are writing the constitution of a single global
economy.” This is a clear affirmation of globalization and rejection of internationalization as
just defined. It is also a radical subversion of the Bretton Woods Charter. Internationalization
is what the Bretton Woods Institutions were designed for, not globalization.
Everyone recognizes the desirability of community for the world as a whole-- but we have two
very different models of world community: (1) a federated community of real national
communities (internationalization), versus (2) a cosmopolitan direct membership of individuals
in a single global abstract community (globalization).
If the IMF-WB-WTO are no longer serving the interests of their member nations as per their
charter, then whose interests are they serving? The interests of the integrated global
economywe are told. But what concrete reality lies behind that grand abstraction? Not real
individual workers, peasants, or small businessmen, but rather giant pseudo-individuals, the
transnational corporations.
Consequences of growth-driven globalization
Consider a few pattern-changing consequences of globalization, of the erasure of national
boundaries for economic purposes. Briefly, they include: (1) standards-lowering competition
to externalize social and environmental costs to achieve a competitive price advantage--a
race to the bottom in terms of both efficiency in cost accounting and equity in income
distribution; (2) increased tolerance of mergers and monopoly power in domestic markets in
order to be big enough to compete internationally; (3) more intense national (regional)
specialization according to the dictates of competitive advantage, with the consequence of
reducing the range of choice of ways to earn a livelihood, and increasing dependence on
other countries. Free trade and intense specialization negate the freedom not to trade; (4)
world-wide enforcement of a muddled and self-serving doctrine of trade-related intellectual
property rightsin direct contradiction to Thomas Jefferson’s dictum that knowledge is the
common property of mankind. Let us look at each of these in a bit more detail.
1. Standards lowering competition
The country that does the poorest job of internalizing all social and environmental costs of
production into its prices gets a competitive advantage in international trade. More of world
4 From a speech to the United Nations Conference on Trade and Development (UNCTAD) October,
1996.
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production shifts to countries that do the poorest job of counting costs-- a sure recipe for
reducing the efficiency of global production. As uncounted, externalized costs increase, the
positive correlation between GDP growth and welfare disappears, or even becomes negative.
Another dimension of the race to the bottom is the increasing inequality in the distribution of
income in high-wage countries, such as the US, fostered by globalization. In the US there has
been an implicit social contract established to ameliorate industrial strife between labor and
capital. Specifically, a just distribution of income between labor and capital has been taken to
be one that is more equal within the US than it is for the world as a whole. Global integration
of markets necessarily abrogates that social contract. US wages will fall drastically because
labor is relatively much more abundant globally than nationally. It also means that returns to
capital in the US will increase because capital is relatively scarcer globally than nationally. US
distribution of income then tends to the more unequal global distribution, thus breaking the
implicit social contract.
Free trade, and by extension globalization, is often defended by appeal to Ricardian
comparative advantage. The logic of comparative advantage assumes that factors of
production, especially capital, are immobile between nations. Only products are traded.5 With
capital mobility now the major defining feature of globalization we have left the world of
comparative advantage and entered a regime of absolute advantage, which guarantees gains
from trade to the world as a whole, but does not guarantee that each nation will share in those
gains, as was the case under comparative advantage. Global gains under absolute
advantage are theoretically greater than under comparative advantage, but there is no reason
to expect these gains to be shared by all trading partners. Mutual gain could be restored
under absolute advantage by redistributing some of the global gains from trade. But I have
never heard that idea discussed by globalization advocates. Often they appeal, quite
illogically, to the doctrine of comparative advantage as a guarantee of mutual benefit,
conveniently forgetting that the logic of comparative advantage requires immobile capital, and
that capital is not immobile.6 Indeed, some even argue for free capital mobility by extension of
the comparative advantage argument if free trade in goods is mutually beneficial then why
not also have free trade in capital? However, one cannot use the conclusion of an argument
to abolish one of the premises upon which the argument is based! Similar illogical arguments
are made in defense of free labor mobility between nations.
2. Tolerance of corporate power
Fostering global competitive advantage is used as an excuse for tolerance of corporate
mergers and monopoly in national markets so that domestic firms are big enough to compete
globally (we now depend on international trade as a substitute for domestic trust busting to
maintain competition). It is ironic that this is done in name of deregulation and the free market.
Chicago School economist and Nobel laureate Ronald Coase7 said Firms are islands of
central planning in a sea of market relationships. The islands of central planning become
larger and larger relative to the remaining sea of market relationships as a result of merger.
More and more resources are allocated by within-firm central planning, and less by between-
firm market relationships. And this is hailed as a victory for markets! It is no such thing. It is a
5 For a discussion see Chapter 18 in H. Daly and J. Farley (2011) Ecological Economics, Second
Edition, Island Press, Washington D. C.
6 To be clear, this refers primarily to the financial sense of capital; capital in the sense of already existing
produced means of production can be highly immobile and is often destroyed by mobile “capital” (as the
problems of the American rustbelt illustrate).
7 Ronald Coase (1937)The Nature of the Firm, Economica, 4(16), pp. 386-405.
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victory for corporations relative to national governments, which are no longer strong enough
to regulate corporate capital and maintain competitive markets in the public interest. Of the
100 largest economic organizations roughly 52 are corporations and 48 are nations.
Approximately one-third of the commerce that crosses national boundaries does not cross a
corporate boundary, i.e. is an intra-firm, non-market transfer. The distribution of income within
these centrally planned corporations has become much more concentrated. The ratio of
salary of the Chief Executive Officer to low-level employees has passed 500 on its way to
infinity--what else can we expect when central planners set their own salaries!
3. Intensified specialization
Free trade and free capital mobility increase pressures for specialization according to both
comparative and absolute advantage. Therefore the range of choice of ways to earn a
livelihood becomes greatly narrowed. In Uruguay, for example, everyone would have to be
either a shepherd or a cowboy in conformity with the specialization dictated by competitive
advantage in the global market. Everything else should be imported in exchange for beef,
mutton, wool, and leather. Any Uruguayan who wants to play in a symphony orchestra or be
an airline pilot should emigrate. Uruguayans have sensibly resisted such excessive
specialization.
Most people derive as much satisfaction from how they earn their income as from how they
spend it. Narrowing that range of choice is a welfare loss uncounted by trade theorists.
Globalization assumes either that emigration and immigration are costless, or that narrowing
the range of occupational choice within a nation is costless. Both assumptions are false.
While trade theorists ignore the range of choice in earning one’s income, the range of choice
in spending one’s income receives exaggerated emphasis. For example, the US imports
Danish butter cookies and Denmark imports US butter cookies. The cookies cross each other
somewhere over the North Atlantic. Although the gains from trading such similar commodities
cannot be great, trade theorists insist that expanding the range of consumer choice to the limit
increases the welfare of cookie connoisseurs. Perhaps, but could not those gains be had
more cheaply by simply trading recipes? One might think so, but recipes (trade related
intellectual property rights) are the thing that free traders most want to protect.
4. The inconsistencies of intellectual property
Of all things knowledge is that which should be most freely shared, because in sharing it is
multiplied rather than divided. Knowledge is a non-rival good and should be also non
excludable. Yet, as already noted, our trade theorists have rejected Thomas Jefferson’s
dictum that Knowledge is the common property of mankind in exchange for a muddled
doctrine of trade related intellectual property rightsby which they are willing to grant private
corporations monopoly ownership of the very basis of life itself--patents to seeds (including
the patent-protecting, life-denying terminator gene) and to knowledge of basic genetic
structures.
The argument offered to support this enclosure of the knowledge commons is that, unless we
provide the economic incentive of monopoly ownership for a significant period of time, little
new knowledge and innovation will be forthcoming. Yet, as far as I know, James Watson and
Francis Crick, who discovered the structure of DNA, do not share in the patent royalties
reaped by the second rate gene-jockeys who are profiting from their monumental discovery.
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Nor of course did Gregor Mendel get any royalties but then he was a monk motivated by
mere curiosity about how Creation works! Nor did Jonas Salk try to patent the polio vaccine.
He thought it would be like trying to patent the sun.
Once knowledge exists, its proper allocative price is the marginal opportunity cost of sharing
it, which is close to zero, since nothing is lost by sharing it. Yes, of course you do lose the
monopoly on the knowledge, but then economists have traditionally argued that monopoly is
inefficient as well as unjust because it creates an artificial scarcity of the monopolized item.
Furthermore, the main input to the production of new knowledge is existing knowledge, and
keeping the latter artificially expensive is bound to slow down the production of the former.
Of course the cost of production of new knowledge is not zero, even though the cost of
sharing it is. This allows biotech corporations to claim that they deserve a fifteen or twenty
year monopoly for the expenses they incur in research and development, even though they
spend more on advertising than research. Of course they deserve a profit on their efforts, but
not on Watson and Crick’s contribution without which they could do nothing, nor on the
contributions of Gregor Mendel, and all the great scientists of the past who made the
fundamental discoveries.8 As economist Joseph Schumpeter emphasized, being the first with
an innovation already gives one a temporary monopoly. In his view these recurring temporary
monopolies were the source of profit in a competitive economy whose theoretical tendency is
to compete excess profits down to zero.
As the great Swiss economist, Sismondi, argued long ago, not all new knowledge is a benefit
to mankind. We need a social and ethical filter to select out the beneficial knowledge.
Motivating the search for knowledge by the purpose of benefiting mankind rather than by
securing monopoly profit provides a better filter. Perhaps the greatest virtue of the steady-
state economy is that because it is a slow rather than a fast journey of no return, we would
have time to evaluate and experiment with new technologies, rather than blindly accepting
anything in order to keep growth from slowing.
This is not to say that we should abolish all intellectual property rights that would create
more problems than it would solve. But we should certainly begin restricting the domain and
length of patent monopolies rather than increasing them so rapidly and recklessly. And we
should become much more willing to share knowledge. Shared knowledge increases the
productivity of all labor, capital, and resources. International development aid should consist
far more of freely shared knowledge, and far less of foreign investment and interest-bearing
loans.
John Maynard Keynes,9 one of the founders of the recently subverted Bretton Woods
Institutions, recommended the following pattern for our international economy:
“I sympathize therefore, with those who would minimize, rather than those
who would maximize, economic entanglement between nations. Ideas,
knowledge, art, hospitality, travelthese are the things which should of their
8 Similarly, it radically under-estimates the role of the state; its many contributions become invisible in
much of mainstream economic theory; see the Real-World Economics Review special issue number 84:
The public economy and a new public economics
http://www.paecon.net/PAEReview/issue84/whole84.pdf
9 J. M. Keynes (1933)National Self-Sufficiency, in D. Muggeridge , ed., The Collected Writings of John
Maynard Keynes, vol. 21, London: Macmillan and Cambridge University Press.
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nature be international. But let goods be homespun whenever it is reasonably
and conveniently possible; and, above all, let finance be primarily national.”
Growth-driven globalization will maximize economic entanglement between nations in pursuit
of trading advantage, of monopoly power, of privatizing the remaining commons, especially
that of knowledge, and of concentrating income to an extreme degree. These are the patterns
that growthism solves for by way of globalization. Globalism is not the realization of world
community. Rather it is individualism writ large corporate feudalism in a global open-access
commons.
On the importance of boundaries in life and logic
John Lennon asked us to imagine a world without boundaries, singing wistfully imagine
theres no countries, and we all know what he meanta world of human solidarity, peace,
and cooperation. Conflicts and war usually involve disputes over borders. So why not just get
rid of these troublesome boundaries? Let's have globalization deregulated trade, capital
mobility, and migrationonly let’s bless them each with the adjective freerather than
deregulated”.
Neoclassical economists assure us that this will lead to peace and prosperity among rational
utility-maximizing individuals, minimally governed by a benevolent World Democracy,
dedicated to the post-modern values of scientific materialism, eloquently communicated in
Esperanto. This vision has its serious appeal to many, but not so much to me, as the reader
will by now have guessed.
Economic and political boundaries are necessary to achieve both national community, and a
global federation of national communities living in peace and ecological sustainability.
Boundaries are both biologically and logically necessary. Skin and membranes are organic
boundaries. Within-skin versus outside-skin is a basic boundary condition for life. The skin
boundary must be permeable, but not too permeable. If nothing enters or exits the organism it
will soon die. If everything enters and exits, then the organism is already dead and decaying.
Life requires boundaries that are neither completely closed nor completely open. A nation's
borders are in many ways very different from the skin of an organism, yet neither permits
complete closure or complete openness. Both must be qualitatively and quantitatively
selective in what they admit and expel, if their separate existence is to continue rather than be
dissolved into entropic equilibrium with its environment.
Logically boundaries imply both inclusion and exclusion. A world without boundaries includes
everything and is often therefore thought to be warm and friendly. But everythingmust
include the cold and the unfriendly as well, or it is not everything. Also, without boundaries, B
can be both A and non-A, which makes definition, contradiction, and analytical reasoning
impossible. So both life and logical thinking require boundaries. While a world without
boundariesmay be a poetic expression of a desired unity, and while it is possible to reason
dialectically with overlapping boundaries, it is a major delusion to think that boundaries are
not necessary.
It is understandable, yet ironic, that the most fundamental and dramatic boundary of allthat
separating the earth from outer spacemade clear in the iconic photo of the earth from the
moon seems to have led to a reaction against the very concept of boundaries on our
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spherical planet, since it is so obviously one whole and unified thing. Yet that beautiful and
powerful vision of overall unity hides a world of diversity and difference. And we live on the
earth, within that complex living diversity, not on the dead moon with no need for life-defining
boundaries.
The illth of nations and the weakness of policy
Our traditional economic problems (poverty, overpopulation, unemployment, unjust
distribution) have all been thought to have a common solutionnamely an increase in wealth.
All problems are easier if we are richer. The way to get richer has been thought to be by
economic growth, usually as measured by GDP. I do not here question the first proposition
that richer is better than poorer, other things equal. But I do question whether what we
persuasively label economic growthis any longer making us richer. I suggest that physical
throughput growth is, at the present margin and in the aggregate, increasing illth faster than
wealth, thus making us poorer rather than richer. Consequently our traditional economic
problems become more difficult with further growth. The correlation between throughput
growth and GDP growth is sufficiently strong historically so that in the absence of
countervailing policies even GDP growth increases illth faster than wealth.
What we conventionally call economic growthin the sense of growth of the economyhas
ironically become uneconomic growthin the literal sense of growth that increases costs by
more than it increases benefits. I am thinking here of the North rather than the South,
because in many poor countries where the majority lives close to subsistence the benefits of
production growth, even if badly distributed, justify incurring large costs. But since the South
is striving, with encouragement from the IMF and World Bank, to become like the North, I am
not really neglecting the South by focusing on the North, but rather raising a caution for the
South.
One will surely ask how do I know that growth has become uneconomic for many Northern
countries? Some empirical evidence is referenced below.10 But more convincing to me is the
simple argument that as the scale of the human subsystem (the economy) expands relative to
the fixed dimensions of the containing and sustaining ecosphere, we necessarily encroach
upon that system and must pay the opportunity cost of lost ecosystem services as we enjoy
the extra benefit of increased human scale. As rational beings we presumably satisfy our
most pressing wants first, so that each increase in scale yields a diminishing marginal benefit.
Likewise, we presumably would sequence our takeovers of the ecosystem so as to sacrifice
first the least important natural services. Obviously we have not yet begun to do this because
we are just now recognizing that natural services are scarce. But let me credit us with
10 For critical discussion and the latest revision of the ISEW, see, Clifford W. Cobb and John B. Cobb,
Jr., et al., The Green National Product, University Press of America, New York, 1994. For a presentation
of the ISEW see Appendix of For the Common Good, H. Daly and J. Cobb, Boston: Beacon Press,
1989; second edition 1994. See also Clifford W. Cobb, et al., “If the GDP is Up, Why is America Down?,
Atlantic Monthly, October, 1995. See also Manfred Max-Neef, Economic Growth and Quality of Life: A
Threshold Hypothesis, Ecological Economics, 15, (1995), pp. 115-118. More recently the Lancet
medical journal (NYT, Oct. 19, 2017) finds that the financial costs from pollution are some $4.6 trillion
annually, about 6.2% of the global economy. If annual growth in Gross World Product is around 2.2%,
and cost due to pollution is 6.2%, then with reasonable accounting we would have a net financial decline
of some 4% annually. If that financial decline represents welfare loss, and it surely does since we are
talking about reduced health and life expectancy, then the benefits of production growth are being more
than cancelled out by the costs of the pollution generated by that growth. In other words, so-called
“economic” growth has become uneconomic. That seems to have escaped the notice of economists.
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capacity to learn. Even so, that means that increasing marginal costs and decreasing
marginal benefits will accompany increasing human scale. The optimum scale, from the
human perspective, occurs when marginal cost equals marginal benefit. Beyond that point
growth becomes uneconomic in the literal sense of costing more than it is worth.
It is interesting to know empirically if we have reached that point (I think we have, both
globally and in many countries), but even if we have not, it is obvious that continued growth of
a dependent subsystem relative to a finite sustaining total system will inevitably reach such an
optimal scale. If we add to the limit of finitude of the total system the additional limits of
entropy and complexity of ecological interdependence, then it is clear that the optimal scale
will be encountered sooner rather than later. Additionally, if we expand our anthropocentric
view of the optimum scale to a more biocentric view, by which I mean one that attributes not
only instrumental but also intrinsic value to other species, then it is clear that the scale of the
human presence should be further limited by the duty to reserve a place in the sun for other
species, even beyond what they pay for in terms of their instrumental value to us. And of
course the whole idea of sustainabilityis that the optimal scale should exist for a very long
time, not just a few generations. Clearly a sustainable scale will be smaller than an
unsustainable scale. For all these reasons I think that for policy purposes we do not need
exact empirical measures of the optimal scale. If one jumps from an airplane it may be nice to
have an altimeter, but what one really needs is a parachute.
So what policies constitute a parachute? Briefly, they are policies that limit aggregate
throughput, while allowing the market to allocate that limited throughput assuming the
market is competitive and confined to some limited degree of inequality in the distribution of
wealth and income. Such policy instruments are evolving now e.g., cap-auction-trade
systems for extraction rights, pollution emission rights, fishing rights, etc. Also ecological tax
reform limits throughput by making it more expensive. It shifts the tax base from value added
(something we want more of) on to that to which value is added, namely the resource
throughput (something we want to use less of). In differing ways each of the above
parachuteswould limit throughput and expansion of the scale of the economy into the
ecosystem, and also provide public revenue. I will not discuss their relative merits, having to
do with price versus quantity interventions in the market, but rather emphasize the advantage
that both have over the currently favored strategy. The currently favored strategy might be
called efficiency first in distinction to the frugality firstprinciple embodied in both of the
throughput-limiting mechanisms mentioned above, but more stringently in the second.
Efficiency firstsounds good, especially when referred to as win-winstrategies, or more
picturesquely as picking the low-hanging fruit. But the problem of efficiency firstis with what
comes second. An improvement in efficiency by itself is equivalent to having a larger supply of
the factor whose efficiency increased. The price of that factor will decline. More uses for the
now cheaper factor will be found. We may end up consuming more of the resource than before,
albeit more efficiently. Scale continues to grow. This is sometimes called the Jevons effect. A
policy of frugality first, however, induces efficiency as a secondary consequence; efficiency
first” does not induce frugality it makes frugality less necessary, nor does it give rise to a
scarcity rent that can be captured and redistributed by tax or auction.
So far I have briefly outlined what I take to be the problem of the illth of nations(apologies to
both Adam Smith and John Ruskin), and indicated some policy guidelines for avoiding the
uneconomic growth that increases illth faster than wealth. These views do not find favor with
mainstream economists. The concepts of throughput, of entropy, and even of optimal scale of
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the macroeconomy are foreign to them. The last is especially odd since in microeconomics the
concept of the optimal scale of each micro activity is central. Yet the sum of all micro activities,
the macro economy, is not thought to have an optimal scale relative to its sustaining
ecosystem. Probably this is because macroeconomists think of the macroeconomy as the
Whole, not as a Part of some larger Whole. For them nature is not a containing envelope, but
just a sector of the macroeconomy mines, wells, croplands, pastures, and fisheries. When the
Whole grows it expands into the Void encroaching on nothing and incurring no opportunity cost.
But of course the real economy is a Part and it grows not into the Void, but into the rest of the
biosphere, and really does incur opportunity costs. I have long considered this Whole versus
Part difference to reflect different pre-analytic visions (Schumpeter) or different paradigms
(Kuhn). Different pre-analytic visions cannot, of course, be reconciled by further analysis, and
they have different policy implications.
Presuppositions of policy
Even if we could agree on the right pre-analytic vision of the basic way the world is, would we
then be able to enact and follow effective policies? So far, our capacity to enact policies of
frugality firstseems very weak. Indeed, even efficiency firstpolicies are still resisted. So let
us turn our attention to the question of policy in general, and policy fecklessness in particular.
What are the presuppositions we must make before we can reasonably and seriously discuss
policy policy of any kind? There are two that I can see.
First we must believe that there are real alternatives among which to choose. If there are no
alternatives, if everything is determined, then it hardly makes sense to discuss policy--what
will be will be. No options, no responsibility, no need to think.
Second, even if there were real alternatives, policy dialogue would still make no sense unless
there was a real criterion of value by which to choose from among the alternatives. Unless we
can distinguish better from worse states of the world then it makes no sense to try to achieve
one state of the world rather than another. No value criterion, no responsibility, no need to
think.
In sum, serious policy must presuppose: (1) nondeterminism that the world is not totally
determined, that there is an element of freedom which offers us real alternatives; and (2)
nonnihilism that there is a real criterion of value to guide our choices, however vaguely we
may perceive it.
To be sure, not every conceivable alternative is a real alternative. Many things really are
impossible. But the number of viable possibilities permitted by physical law and past history
is seldom reduced to only one. Through our choices, value and purpose lure the physical
world in one direction rather than the other. Purpose is independently causative in the world.
This seems pretty obvious to common sense so what is the point of stating the obvious?
The point is that many members of the intelligentsia deny one or both presuppositions, and
yet want to engage in policy dialogue. I don’t mean that we disagree on exactly what our
alternatives are in a particular instance, or about just what our value criterion implies for a
concrete case. That is part of the reasonable policy dialogue. I mean that determinists who
deny the effective existence of alternatives, and nihilists or relativists who deny the existence
of value beyond the level of subjective personal tastes, have no right to engage in policy
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dialogue and yet they do! This is my cordial invitation to them to shut up at least about
policy.
Who are these people? In the sciences I am thinking about the materialist neo-Darwinists and
socio-biologists; in the humanities, the post-modern deconstructionists; and in the social
sciences, those economists who reduce value to subjective individual tastes any one of which
is as good as another.
No one can in practice live by the creed of determinism or nihilism. In this sense no one takes
them seriously, so we tend to discount any effect on policy of these doctrines. We tend to
dismiss them as academic posturings. However, we may halfway suspect that the many
learned people who publicly proclaim these frequently unopposed views might be right--and
that is sometimes enough to enfeeble policy. For example, many people tell me that
globalization is inevitable; any attempt to counter global economic integration is futile, or on
the wrong side of history, etc. If I manage to convince them that globalization is the result of
past policy choices, and therefore might not be inevitable, the next line of defense is, how do
we know that globalization will be any worse than the alternative? We cannot tell, we don’t
really know that globalization won’t be good for us (because we don’t know what is good in
the first place), so there is no point in opposing it. Either it is inevitable, or if not then we can
have no reason to believe that any alternative would be better. Forget policy, go back to
sleep.
Perhaps I can clarify this controversial point by distinguishing four categories based on
acceptance or non-acceptance of each of the two presuppositions identified.
(1) The traditional Judeo-Christian view there exist real alternatives from which to
choose by reference to objective criteria of value.
(2) Criterionless choice alternatives are real options, but there is no objective criterion
for choosing among them. (Existentialist angst)
(3) Providential determinism there are no real options, but there is an objective
criterion of value by which to choose, if only we had a choice. Fortunately providence
has chosen for us according to the objective criterion, which we would not be wise or
good enough to have followed on our own. (Theological predestination; technological
providentialism)
(4) Criterionless determinismthere are no real alternatives to choose from, and even
if there were, there is no objective criterion of value by which to choose. All is
mechanismrandom variation and natural selection, as claimed by the neo-Darwinist
materialists.
People engaged in policy, yet holding to positions (2), (3), or (4) are in the grip of a severe
and debilitating inconsistency. Their participation in policy dialogue should be subject to the
injunction of estoppel a legal restraint to prevent witnesses from contradicting their own
testimony. It should be applied in academia as well as in the courtroom!
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Some conclusions
Avoiding the uneconomic growth that is increasing the illth of nations will require clear and
forceful policy to limit growth. All policy, especially such a radical one, requires a belief in both
objective value and real alternatives. The fact that many people engaged in discussing and
making policy reject one or both of these presuppositions is, in A. N. Whitehead’s term,11the
lurking inconsistency, a contradiction at the basis of the modern worldview which enfeebles
thought and renders action feckless. If we even halfway believe that purpose is an illusion
foisted on us by our genes to somehow make us more efficient at procreation, or that one
state of the world is, for all we can tell, as good as another, then it is hard to get serious about
policy. Whitehead noted, “Scientists animated by the purpose of proving that they are
purposeless constitute an interesting subject for study”. He went on to say that, “It is not
popular to dwell on the absolute contradiction here involved”.
I think, 85 years later, that it is high time we dwelt on this absolute contradiction. We pay a
price for ignoring contradictions in this case the price is feebleness of purpose and half-
heartedness in policy. Citizens really must affirm that the world offers more than one
possibility to choose from, and that some choices really are better than others. Determinists
and nihilists have a right to exist, but an obligation to remain silent on policy!
This willful neglect has allowed the lurking inconsistency to metastasize into the marrow of
modernity. The Enlightenment, with its rejection of teleology, certainly illuminated some
hidden recesses of superstition in the so-called Dark Ages. But the angle of its cold light has
also cast a deep shadow forward into the modern world, obscuring the reality of purpose. To
conserve Creation we will first have to reclaim purpose from that darkness. I say Creation with
a capital “C” advisedly, and certainly not in denial of the established facts of evolution. If our
world and our lives are not in some sense a Creation, but just a purposeless happenstance
a random statistical fluke of multiplying infinitesimal probabilities by an infinite number of trials
then it is hard to see from where we will get the will and inspiration to care for it.
Indeed, our decision-making elites may already tacitly understand that growth has become
uneconomic. But apparently they have also figured out how to keep the dwindling extra
benefits for themselves, while sharing the exploding extra costs with the poor, the future,
and other species. Why not, if it is all just a purposeless happenstance? The elite-owned
media, the corporate-funded think tanks, the kept economists of high academia, and the
World Bank not to mention Goldman-Sachs and Wall Street all sing hymns to growth in
harmony with class interest and greed. The public is bamboozled by technical obfuscation,
and by the false promise of growthism that one day we will all be rich. Intellectual confusion is
real, but moral nihilism, abetted by naturalistic scientism, is the more basic problem. Such
nihilism is hard to counter without strong appeal to the idea of purpose, of telos, and without
raising its cosmic and religious implications. Many policies are being offered. But until the
presuppositions of policy have been met they will remain just academic exercises.
Author contact: hdaly@umd.edu
___________________________
SUGGESTED CITATION:
Daly, Herman (2019) “Growthism: its ecological, economic and ethical limits.” real-world economics review, issue no.
87, 19 March, pp. 9-22, http://www.paecon.net/PAEReview/issue87/Daly87.pdf
You may post and read comments on this paper at https://rwer.wordpress.com/comments-on-rwer-issue-no-87/
11 A.N. Whitehead, The Function of Reason, Princeton, N.J.: Princeton University Press, 1929, p.12.
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Producing ecological economy
Katharine N. Farrell [Universidad del Rosario, Colombia]
Copyright: Katharine N. Farrell 2019
You may post comments on this paper at
https://rwer.wordpress.com/comments-on-rwer-issue-no-87/
Introduction: Georgescu-Roegen unheeded
Economic analyses and conclusions are intimately bound up with judgements regarding the
human condition. They are concerned with the study of what Marshall (1947, p. 1) referred to
as “[hu]mankind in the ordinary business of life,” and dedicated to examine “that part of
individual and social action which is most closely connected with the attainment and with the
use of the material requisites of wellbeing,” (Ibid.). In that respect, economics is, from first
principles, a normative enterprise.
While the idea that wellbeing and monetary wealth are so tightly correlated that the latter may
be used as a proxy for the former was not an original premise of the early versions of
economic analysis in European academic circles, and is today, increasingly brought into
question not only from without but also from within mainstream economics, the presumption
continues to influence the analytical apparatus used at all times by most, and at least
sometimes by almost all scholars who understand themselves to be aligned with this field of
enquiry. This is, as Georgescu-Roegen (1971) has noted, closely related to methodological
choices made by some of the most important founding thinkers of this modern, euro-
descendent, discipline: not least among them Pareto, Walras and Marshall himself. He
argues (Georgescu-Roegen, 1971, Introduction) that their aspiration to secure economics a
place at the table of the hard sciences”, led them to adopt an analytical approach of
arithmetic fetishism (my words, not his) that leaves unattended the qualitative aspects of
purposiveness and biodynamic transformation that lie at the heart of economic process:
ignoring, thereby, aspects central to defining what constitutes the material requisites of
wellbeing and to identifying viable means on the basis of which these may be attained and
effectively used.
Notwithstanding the notable contributions of Herman Daly, an early student of his, and
consistent engagement within the trans-discipline of ecological economics, Georgescu-
Roegen’s life work, like that of other heterodox economists, while taken up in part, within a
variety of discourses, has generally been marginal to mainstream economics in the 20th and
21st Centuries. While the general disposition toward heterodox economics arguments has
warmed considerably since the 2008 international financial crisis, adoption of radically distinct
modelling approaches, such as those proposed by Georgescu-Roegen (1971) has not been
forthcoming. The response has been, instead, mainly one of tweaks, focused either on
correcting failures in the construction of GDP measures, through satellite accounts, the
addition of compensatory sector variables or, in perhaps its most extreme form, the
reactionary discourse on degrowth or, as in the case of post-Keynesianisms and much of
behavioural and evolutionary economics, on the introduction of recalibrations, additional
variables, reconfigurations and the incorporation of non-linearities into models that remain,
nonetheless, at their core, closely aligned with the conventional structures of Walrasean
analyses.
Georgescu-Roegen’s response to this, which he calls “wholesale arithmetization”
(Georgescu-Roegen, 1971, p. 15), constructed through the elaboration of a wide range of
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arguments, over a period of decades (Georgescu-Roegen, 1960; 1965a; 1965b; 1966; 1968;
1969; 1975; 1976; 1977; 1981; 1986; 1988; 1999[1971]), includes detailed attention to two
interrelated points:
1. That economic processes are essentially biological in character.
2. That institutions constitute a core and critical aspect of human biology.
These provide, in my view, an excellent reference structure for considering all three questions
that have been posed for this brief intervention:
1. How and to what degree is the economy changing the ecosystem?
2. How must economics change if it is to become a force for leading us away from
catastrophe rather than toward it?
3. How can the global economy be changed so as avoid ecological collapse?
How and to what degree is the economy changing the ecosystem?
I would argue that our ability, from within an economics based approach, merely to grasp the
information required to address this question is severely constrained, precisely by the two
limitations observed by Georgescu-Roegen. That is to say, this question cannot be answered
without structured reference to the biophysical characteristics of economic process and due
attention to the role played, within those processes, by the human characteristic of using
institutions to organise economic activity.
Again, with reference to the complexity of the problem, here, I think it is also important to
distinguish, before proceeding, between different economies and different ecosystems. Some
ecosystems, such as sustainably harvested temperate forests, are in quite good condition, in
spite of having been changed dramatically by human economic processes; others, such as
the tropical belt of mangrove forests, are in grave condition, in part due to changes caused by
humans, but also in part due to their unfortunate positioning, at the mouths of rivers, where
the ecological stress of upstream changes is concentrated and amplified. Similarly, not all
economies are changing ecosystems in the same ways, and finally, not all changes are reified
in the immediate surroundings of the economies that are causing them to occur. This give
rise to a plethora of related social justice questions which fall not within the remit of the
economist but of the social theorist and the body politic proper and cannot be addressed in an
appropriate way here. Nonetheless, they should not be overlooked. Happily, there are a
growing number of examples across the world of economic activity leading to ecological
recuperation, not only to destruction. That said, destruction is clearly still the norm.
Taking then, rather a broad view, and working from within a social, historical frame of
reference, I would suggest, following on from arguments presented in the late 1970s by the
German Democratic Republic dissident Rudolf Bahro (1977; 1987), that the most far reaching
and deeply seated way in which the contemporary global, late-industrial economy is changing
the ecosystems within which it is embedded is by systematically and collectively ignoring its
biological and social relationships to them. Following Faber et al. (1995; 1996), we might refer
to this as an extreme deficiency in what they refer to as the third tele of living organisms:
service. The label third tele is based on a teleological taxonomy, borrowed from biology,
which they employ to help make sense of the blatant disregard that industrialised humans
seem to have for the negative ecological impacts they cause, while going about the ordinary
business of life. Drawing on the Aristotelean concept of entelecheia, which means, literally,
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to have one’s telos (or final cause) as a characteristic of one’s self (e.g. it is in the entelecheia
of a bird to fly), they propose “a teleological terminology to characterise living beings (i.e.,
organisms)… [which enables them] - to emphasise the uniqueness of a living being; - to
consider the relationship of a living being to its species; - to represent its integration into the
oneness of Nature” (Faber et al., 1996, p. 45). They propose that the fulfilment of purpose of
a living organism, and by association, with a few logical degrees of differentiation, of a
biological species, can be described through reference to the internalizing of three basic tele
(plural of telos), which pertain to “What aims (tele) can we ascribe to a living being?” (Ibid.):
1. Self-maintenance, development and self-realisation;
2. Replication and renewal;
3. Service to other species and or the whole of nature.
They then go on to argue, much in keeping with Bahro (1977), that deficiency in the third telos
service is a basic a feature of industrial societies, which have become disassociated from
the biological systems that surround them, leading to ecological imbalance, as the ecological
impacts of industrialised humans fail to contribute toward the flourishing of the ecological
systems of which they form a part. One clear example of this is the excessive entropy
production of the industrial economy. A necessary correlate to the massive production rate
exhibited during the 20th and now 21st centuries, this implies a problem of system overload,
where the entropy production associated with human activity has exceeded the entropy
processing capacity of the ecosystems upon which we are dependant. Resolving this will
require more than improved efficiency, which would carry with it yet more entropy production.
It will require that we are able to understand and improve our relationships with the entropy
processing systems of the planet (Mayumi, 1995; Tsuchida and Murota, 1985) and perhaps
that we discover new ways of processing entropy and/or rediscover ones that industrialised
humans have ceased to practice.
The lack of attention to the contribution that human actions make toward maintaining or
diminishing the wellbeing of our non-human neighbours is bound up with the logic and history
of industrialisation. The aim to liberate man, and I do mean man, from the caprices of nature,
implies that the whims of nature can thus be ignored. While such disregard could be
maintained for some time, during the early stages of industrialisation, as both ecosystems and
human populations adjusted to the changes in their relationship, the now accelerating
cascade of global impacts (Steffens et al., 2018) illustrates the temporary character of that
charmed position. On an optimistic note, if one of the main problems is our lack of attention to
impacts, this would seem to imply that increased awareness, combined with moral motivation
to act appropriately, might help to address the problem. Unfortunately, awareness, in humans,
is a rather complicated affair, which implies engaging with everything from public education,
to the business models of Google and Facebook.
On the question of degree, I am inclined to demure, referring the reader instead to the myriad
of documentation, which, sadly, is readily available, concerning the extent to which human
economic activity is compromising the viability of many forms of life across the planet earth,
including, all too often, human life. That said, the simple answer would seem to me to be: to
an unacceptable degree. However, bearing in mind that humans, like our biological
companion species, the rat, the pigeon, the dog and the cockroach, are remarkably versatile,
we should take into account that unacceptable to humansmight well be a degree of change
far beyond the level of contamination and habitat destruction that other species can support.
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So, I would settle here then on the following: wildly beyond that which the ecosystems of the
planet can reasonably support while continuing to generate habitat suitable for humans.
How must economics change if it is to become a force for leading us away from
catastrophe rather than toward it?
Georgescu-Roegen’s call, echoed by many of his contemporaries, and today paid lip service
to by most, if not all economist, was to give serious analytical attention to representing the
role of biological dynamics in economic process. It was expressed in large part through his
detailed and repeated reference to the second law of thermodynamics, which served as the
basis for his proposal to radically reconfigure the mathematical foundations of economic
analysis: because economic process is intended to bring about qualitative change, which is
frequently irreversible and which “eludes arithmomorphic schematization” (Georgescu-
Roegen, 1971, p. 63). This means that accurate representation of the dynamics of economic
process must include theory that addresses the structure of the relationship between
qualitative and quantitative elements. While there is not sufficient space to unpack the point
here in detail, that position, which includes postulates regarding the relationship between
time, space and human intentionality, is closely linked to a second position that underpins his
elaboration of an alternative analytical economics methodology the flow-fund theory.
Using flow-fund theory, which replaces the stock, flow, fund distinction used in conventional
economic analysis, with a flow-fund distinction that depends on the spatial and temporal
boundaries of the economic process in question (Farrell and Mayumi, 2009; Silva-Macher and
Farrell, 2014; Farrell and Silva Macher, 2017), makes it possible to construct complex,
functional analyses that continue to represent the basic features of economic process, while
making explicit the role of intentionality in their delimitation and also providing a means to
include ecological elements and dynamics, which cannot be accurately represented in
monetary units. The two propositions at the heart of Georgescu-Roegens flow-fund theory, to
make analytical space: 1) for the representation of biodynamics and 2) for the role of purpose
in delimiting the boundaries of an economic process, rest at the core of what he referred to as
bioeconomics”, (Georgescu-Roegen, 1986; Mayumi and Gowdy, 1999). Mayumi (2009, p.
1237) describes this as “a new style of scientific thought… that combines elements of
evolutionary biology, institutional economics and biophysical analysis associated with energy
and mineral resources.” At a most basic level, I would say, the work of Georgescu-Roegen
needs to be taken far more seriously by mainstream and conventional heterodox economists
than it has been to date. Precisely because it implies the need for a radical break with
convention, it has been left to the side or cherry picked. It is well past time for that to change.
More generally, following on from these observations, a further suggestion, regarding how
economics must change, if it is to become a force for leading us away from catastrophe,
rather than toward it, is that arithmetic fetishism must be jettisoned, and way made for the
development of completely new types of inter-and transdisciplinary models, in which
economic analysis is subordinated to a larger goal: representing the social-ecological and
biophysical complexity of the human driven biological processes currently wreaking havoc
across the planet earth.
While it has become fashionable to blame economic growth for the current ecological woes of
the planet, and there is, of course, much evidence to support that position, I believe the
problem is not so simple. Growth is a natural biological process, employed by all living
organisms on the planet earth in order to resist the inevitable and constant deterioration that
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is implied by their inherently entropic nature (Schroedinger, 1944). It comes in many forms,
from maturation, to regeneration to cancer, which are distinguishable through reference to
their qualitative differences. It seems illogical to me to propose that growth, in itself, is
inherently a problem and irresponsible to attempt to analyse economic processes without
having a plausible theory regarding the role and function of growth within them. Rather it is
the pursuit of growth for growth’s sake, and the associated construction of models that
presume the realization of growth to be a suitable measure of utility, that seem to me to be
the problem. This implies a need to redesign economic models in a way that situates growth
as one among multiple economic phenomena involved in regulating the viability of an
economy: others being, for example, ecological impact and social acceptability. Taken as an
end in itself, as opposed to being treated as a means to a more humane end, growth serves
growth, not society (Raine et al., 2006). Considered in the absence of attention to the
associated phenomena of waste production and death, analyses focused only on the quantity,
as opposed to also including attention also to the quality of growth and deterioration, are
incomplete.
While Georgescu-Roegen’s work is discussed at present, more often than not, in the context
of the contemporary discourse on degrowth, which claims him as a founding thinker, his
position on the question was arguably more conservative than is often assumed and is
perhaps better described as advocacy of agrowth (Missemer, 2017) or balanced
development (Georgescu-Roegen, 1965b). His position can be understood in terms of the
simple matter of resource allocation trade-offs, where economic actors, in choosing what
economic process(es) they undertake, are situated somewhere along a kinky, multi-
dimensional, production possibility frontier, where the allocation and distribution of available
resources may be configured to produce final goods and services, productive capacity or
some combination of the two (Georgescu-Roegen, 1965b; 1999[1971], pp. 239-240 and 274-
275; Scheidel and Farrell, 2015, p. 231).
By retaining reference to both the purpose of the economic actors in question and the limiting
factor of resource availability, the preceding conceptualisation of growth can include, for
example, recovery and transformation, both of which would imply a shift deep into the domain
of producing productive capacity but not necessarily an increase in the quantity of
deterioration or in the quality of an economy’s ecological impact. Linking that position directly
to his flow-fund theory, Georgescu-Roegen (1968) would appear to have been most
concerned with identifying the conditions required to ensure balanced growth of living
economic processes, i.e. to develop theory that would make it possible to explicitly link the
rate of growth and productivity of an economy to the rate of growth and productivity of the
biological systems upon which an economy’s own productivity is inevitably, if only ultimately,
dependent (O’Hara, 1999; 2016). This, I would posit, is another aspect of how economics
must change: a more nuanced and contextualised approach to growth is required on both
sides of the growth/degrowth divide.
Taking up the idea of pursing balanced, ecologically viable, embedded growth, which implies
also taking into account deterioration and death, we can speak of a two strand research
agenda which I would propose to call producing ecological economy:
1. Identifying local, regional and international modes of production, consumption,
sharing and exchange that are both economically and ecologically viable;
2. Changing local, regional and international regulations and practices to facilitate the
development and maintenance of these types of economic activity.
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Both strands imply a need for economic research to open up to what Max-Neef (2005) calls
strong inter-disciplinarity, where multiple disciplines are involved not only in the execution but
also in the configuration of analyses and in the specification of analytical problems to be
addressed. This, I believe, may be the most pressing and most challenging change that
needs to be brought about in economics. In contrast to subsuming knowledge from other
disciplines to serve the ends and means of conventional modern economic analysis, as is
done, for example, in the fields of neuro- and behavioural economics, this implies situating
economics as a contributor toward the collaborative project of developing multi-dimensional,
complex representations of the social-ecological relationships and processes that both
underlie and are impacted by late-industrial economic activity.
Producing ecological economy has both a descriptive and a normative aspect, regarding, in
the first instance, the identification of social and material criteria suitable for establishing
ecologically beneficial economic activities across the entire planet and in the second, the
specification of means for realizing their operationalisation under humane and ethical terms,
across cultures and social-ecological contexts. Much of that work is of a political, rather than
a scientific nature. And although I will address here only the latter, it should be noted that the
former is also of vital importance for achieving lasting social change of any sort, not least
such as might serve to halt the steady march through calamity in which humanity would
appear to be engaged at present. The multiple statuses of politics in this process - within and
across inter-disciplinary teams and between research teams and their clients, in some
instances the public - must be taken into account when developing comprehensive models
and analyses. This too implies a radical reconfiguration of the analytical basis upon which
economic models are constructed.
Farrell and Silva Macher (2017, p. 167) have described attention to this contextualised and
relational character of economic process as work focused on the ecological economic Gestalt:
i.e. on the relationship between ecological and economic systems. Such work requires
effective integration of insights deriving from a myriad of disciplines and applied to
contextualised research questions related to the ordinary lives of many different types of
economic and ecological communities. Here there is some ground for optimism, as there are
a growing number of examples of such work (Bischi, 2018; Farrell and Silva Macher, 2017;
Farley and Malghan, 2016; Moreau et al., 2017; Rincón Ruiz, et al., 2018; Wilson and Kirman,
2016). Nonetheless, this is still a project in the early stages of development and much of the
attention of environmental and ecological economists continues to be dedicated to identifying
ways to estimate the real costs and benefits of environmental externalities and to develop
strategies to internalize them into price based decision processes. The persistence of such
work illustrates the momentum of arithmetic fetishism, in which processes that do not easily
lend themselves to quantification are arithmetized for the purpose of forcing them into the
existing, quantitative analytical rubric. It is, I would posit, largely a waste of time and
resources, as the resulting data are not only meaningless but also distracting (Farrell, 2007).
Work reaching beyond that fetishism, into the conceptual domain of the ecological economic
Gestalt, has tended, up to now, to be in the area of institutional economics, where there is
more openness to structural critiques of conventional modelling approaches. In the case of
Mayumi (1995; 2001; 2009; 2017), Georgescu-Roegen’s last student, the focus has been on
questions of epistemology and mathematical formalisation. Both Gowdy (1994; Gowdy and
Mesner, 1998; Mayumi and Gowdy, 1999), picking up on Georgescu-Roegen’s attention to
the exosomatic evolutionary dynamics of technological and institutional change, and O’Hara
(1997; 1999; 2016), picking up on his attention to the relationship between economic process
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and both social and ecological context, have developed interpretations of his work that can be
linked with contemporary institutional economics and I would suggest that this is an important
way forward for changing economics. Here the early work of Nobel Laureate Elinor Ostrom
(1990) and more recent works by Vatn (2005) and Hodgson (2015) provide quite a
comprehensive, environment-oriented, complement to the existing body of Classical
Institutional Economics contributions, suggesting a promising route for developing the
situated economic theory that is needed.
How can the global economy be changed so as avoid ecological collapse?
This question, I think is basically impossible to answer I find it decidedly uncomfortable to
even attempt to answer such a general and far reaching question directly and so will proceed
through reference to a metaphor. Many years ago, in conversation with a colleague, at a
conference, we imagined the following image to represent this challenge: what would it imply,
to transform a jet airliner, full of passengers, into a flock of birds, in mid-flight? That is to say,
to transform, while running, a mechanical system, dependant on inputs of fossil fuel and an
individualist based organising principle, into a biological one, employing biodynamic energy
sources and structured around an organising principle of cooperation and attention to one’s
relations to others. The level of coordination required to avoid a catastrophic collapse of the
system, in-full-flight, is, on its own, daunting: not to mention the massive amount of diverse
technical expertise that would be required to realize such a transformation. Then there is the
magical element, of realising some form of biomechanical metamorphosis, transforming
human beings using machine, into birds.
Taken lightly, for illustrative purposes, our metaphor suggests a few concrete criteria that
might be applied to address this final question. First, handle with care. The chances of a
misstep leading to a total system collapse are high. Looking into the specifics, we could say
that there is a clear need to effectively manage the transition from a mechanically based to a
biologically based operating system. This implies holding on to the knowledge that is
presently available regarding how the mechanical system (i.e. the industrial, accumulation
driven economy) functions and working with that knowledge, to identify ways of coupling that
systems with a biologically based one, in order to maintain momentum and avoid system
failure. It also implies, as has been mentioned above, a need for the coordinated effort of
diverse inter-disciplinary teams, comprised of experts in everything from human behaviour to
fluid dynamics, so once again, strong-interdisciplinarity. And finally, it implies a need to adopt
a posture of humility in front of the life-giving capacity of the natural world, which modern
industrial science has yet, for all its achievements, to replicate.
While I do not agree with all the propositions contained therein, I believe one would be hard
pressed to find a more succinct and coherent articulation concerning how the global economy
not only could but indeed, must, be changed if humanity is to even hope to be able achieve
the transformation to an ecological economy, than the following statement, issued at Rio +20,
by a coalition of leaders of indigenous communities from across the Americas and the world:
Mother Earth is the source of life which needs to be protected, not a resource
to be exploited and commodified as a natural capital”. We have our place
and our responsibilities within Creation’s sacred order. We feel the sustaining
joy as things occur in harmony with the Earth and with all life that it creates
and sustains. We feel the pain of disharmony when we witness the dishonor
of the natural order of Creation and the continued economic colonization and
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degradation of Mother Earth and all life upon her. Until Indigenous Peoples
rights are observed and respected, sustainable development and the
eradication of poverty will not be achieved (Kari Oca II Declaration, 2012).
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