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Sustainability thoughts 103: How the shift from traditional markets to green markets would have looked like had the 1987 Brundtland Commission recommended then an environmental sustainability fix?

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  • Independent QLC researcher

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Abstract It can be said that the traditional market is a free market that brings together traditional producers(K) and traditional consumers(L) under the assumption of full social and environmental externality neutrality. And this create a circular traditional economy illusion, the idea that production activity can take without generating production and consumption externalities. The fact that the social and environmental externalities associated with the traditional market are real leads to a disconnect between social and environmental externalities and traditional market pricing. In order to correct this disconnect, the 1987 Brundtland Commission recommended the use of sustainable development thinking, which was the wrong recommendation since the externality problem affecting the traditional market was and is a sustainability issue, not a sustainable development issue. There were 3 possible corrections to this sustainability problem: i) a full social and environmental externality correction or sustainability fix; ii) a partial correction through green markets or an environmental sustainability fix; and iii) a partial correction through red markets or a social sustainability fix. The discussion above raises some interesting questions depending of the type of fix that is recommended. With respect to the first possibility, the sustainability fix recommendation, the answer of how it would have looked like was recently shared in detail graphically and analytically(Muñoz 2020b). With respect to the second possibility, the question is how the shift from the traditional market model of Adam Smith towards green markets would have looked like had the 1987 Brundtland Commission recommended then an environmental sustainability fix? The main goal of this paper is to provide an answer to this question. Abstracto Se puede decir que el mercado tradicional es un mercado libre que reúne a los productores tradicionales(K) y a los consumidores tradicionales (L) bajo la suposición de una neutralidad total de la externalidad social y ambiental. Y esto crea la ilusión económica tradicional circular, la idea de que la actividad de producción puede ocurrir sin generar externalidades de producción y de consumo. El hecho de que las externalidades sociales y ambientales asociadas al mercado tradicional son reales conduce a una desconexión entre las externalidades sociales y ambientales y los precios tradicionales del mercado. Para corregir esta desconexión, la Comisión Brundtland de 1987 recomendó el uso del pensamiento de desarrollo sostenible, la cual fue y es la recomendación equivocada, ya que el problema de la externalidad que afecta al mercado tradicional fue y es una cuestión de sostenibilidad, no de desarrollo sostenible. Habían 3 correcciones posibles para solucionar este problema de sostenibilidad: i) una corrección completa de externalidad social y ambiental o una corrección de sostenibilidad; ii) una corrección parcial a través de mercados verdes o una corrección de sostenibilidad ambiental; y iii) una corrección parcial a través de mercados rojos o una corrección de sostenibilidad social. La discusión anterior plantea algunas preguntas interesantes dependiendo del tipo de solución que se recomienda. Con respecto a la primera posibilidad, la recomendación de solución de sostenibilidad, la respuesta de cómo se habría visto se compartió recientemente en detalle de manera gráfica y analítica (Muñoz 2020b). Con respecto a la segunda posibilidad, la pregunta es ¿Cómo habría sido el cambio de modelo del mercado tradicional de Adam Smith hacia los mercados verdes si la Comisión Brundtland de 1987 hubiera recomendado una corrección de sostenibilidad ambiental? El objetivo principal de este documento es proporcionar una respuesta a esta pregunta.
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Citation:
Muñoz, Lucio, 2020. Sustainability thoughts 103: How the shift from traditional markets to
green markets would have looked like had the 1987 Brundtland Commission recommended
then an environmental sustainability fix?,
Boletin CEBEM-REDESMA, Año 14, No.3, March,
La Paz, Bolivia.
-----------------------------------------------------------
Sustainability thoughts 103: How the shift from traditional markets to green markets
would have looked like had the 1987 Brundtland Commission recommended then an
environmental sustainability fix?
By
Lucio Muñoz*
* Independent qualitative comparative researcher/consultant, Vancouver, BC, Canada. Email: munoz@interchange.ubc.ca
Abstract
It can be said that the traditional market is a free market that brings together traditional
producers(K) and traditional consumers(L) under the assumption of full social and
environmental externality neutrality. And this create a circular traditional economy illusion, the
idea that production activity can take without generating production and consumption
externalities. The fact that the social and environmental externalities associated with the
traditional market are real leads to a disconnect between social and environmental externalities
and traditional market pricing. In order to correct this disconnect, the 1987 Brundtland
Commission recommended the use of sustainable development thinking, which was the wrong
recommendation since the externality problem affecting the traditional market was and is a
sustainability issue, not a sustainable development issue. There were 3 possible corrections to
this sustainability problem: i) a full social and environmental externality correction or
sustainability fix; ii) a partial correction through green markets or an environmental
sustainability fix; and iii) a partial correction through red markets or a social sustainability fix.
The discussion above raises some interesting questions depending of the type of fix that is
recommended. With respect to the first possibility, the sustainability fix recommendation, the
answer of how it would have looked like was recently shared in detail graphically and
analytically(Muñoz 2020b). With respect to the second possibility, the question is how the shift
from the traditional market model of Adam Smith towards green markets would have looked like
had the 1987 Brundtland Commission recommended then an environmental sustainability fix?
The main goal of this paper is to provide an answer to this question.
Key concepts
Environmental externality, social externality, Traditional market, green market, green
economy, cost internalization, cost externalization, externality neutrality assumption, circular
traditional market illusion, circular green market, circular green market illusion, the traditional
market price, the green market price.
Introduction
a) The structure of the traditional market of Adam Smith
It can be said that the traditional market(TM) is a free market that brings together
traditional producers(K) and traditional consumers(L) under the assumption of full social and
environmental externality neutrality, a situation that has been recently summarized(Muñoz 2020a)
as follows:
Figure 1 above tells us the following about the traditional market(TM): i) social and
environmental externalities[E(AC)] are exogenous issues to the model so they are externalized as
indicated by the continuous orange arrow from TM to E(AC); ii) traditional production(K) and
traditional consumption(L) externalities are irrelevant as indicated by the broken black arrows
from K and L to E(AC); iii) traditional producers(K) and traditional consumers(L) interact freely
in the traditional market(TM) as indicated by the continuous and opposing black arrows between
K and L; iv) the traditional market price(TMP = P) is determined then by the free interaction of
traditional supply(K) and traditional demand(L) as indicated by the continuous black arrows
from K and L to TM; and v) the model operates under rationality and fully independent choices.
b) The circular traditional market illusion
Since according to Figure 1 above social and environmental externalities[E(AC)] are
assumed irrelevant in the traditional market model(TM), then they can be left out of the model,
which leads to the circular traditional market illusion depicted in Figure 2 below:
Figure 2 above simply says economic activity and economic growth take place in the
traditional market(TM) without producing social and environmental effects[E(AC) = 0], which is
the thought behind the circular traditional market illusion. In other words, we produce and
consume under zero social and environmental externality impact when operating under the full
externality neutrality assumption. This assumption makes the traditional market(TM) a distorted
market in social and environmental terms(Muñoz 2010).
c) The externality problem affecting the sustainability of the traditional market model
As it is a fact that production and consumption externalities associated with economic
activity[E(AC)] are real, then there is a disconnect between the pricing mechanism of the
traditional market(TMP = P) and social and environmental externalities[E(AC)] that need to be
accounted for, which lead to the externality problem affecting the sustainability of the traditional
market model(TM) as indicated in Figure 3 below:
The broken orange arrow between TM and E(AC) in Figure 2 above represents the
externality problem affecting the sustainability of the traditional market(TM) as the relevant
externalities indicated by the continuous black arrows from K and L to E(AC) are not accounted
for in the traditional market price(TMP = P) of the traditional market(TM). As indicated recently,
correcting now the externality problems in Adam Smith’s traditional market model has led us to
approaching sustainability backwards in terms of economic ideas(Muñoz 2012).
d) The 1987 Brundtland commission’s sustainable development solution to a sustainability
problem
The Brundtland commission in 1987(WCED 1987) saw the social and environmental
disconnect indicated in Figure 3 above under which business as usual had been operating; and it
called for solutions to this social and environmental disconnect through sustainable development
means. The Brundtland commission in 1987 apparently failed to see that the externality problem
affecting the traditional market model of Adam Smith detailed in Figure 3 above was and is a
sustainability problem, not a sustainable development problem; and therefore, the Brundtland
Commission recommended the wrong approach to deal with the sustainability problem. There
were 3 possible corrections to this sustainability problem depicted in Figure 3 above: i) a full
social and environmental externality correction or sustainability fix; ii) a partial correction
through green markets or an environmental sustainability fix; and iii) a partial correction through
red markets or a social sustainability fix. It has been pointed out that using sustainable
development tools to address a sustainability problem is a direct violation of the theory-practice
consistency principle(Muñoz 2009), and if we do so we are using tools that are inconsistent with
the nature of the problem we are trying to solve.
e) The need to understand the nature of a partial fix through green markets to the
environmental externality problem affecting Adam Smith’s model
The discussion above raises some interesting questions depending of the type of fix that
is recommended. With respect to the first possibility, the sustainability fix recommendation, the
answer of how it would have looked like was recently shared in detail both graphically and
analytically(Muñoz 2020b). With respect to the second possibility, a correction that was the
focus of attention at the United Nations Conference on Sustainable development Rio +20 in
2012(UNCSD 2012a; UNCSD 2012b), the question is how the shift from the traditional market
model of Adam Smith towards green markets would have looked like had the 1987 Brundtland
Commission recommended then an environmental sustainability fix? The main goal of this
paper is to provide an answer to this question.
Goals of this paper
i) To indicate the structure of the environmental externality problem affecting the
traditional market model; ii) To highlight the structure the green market fix to the environmental
externality problem affecting Adam Smith’s traditional market model; iii) To stress the structure
of the circular green economy associated with the environmental sustainability fix; and iv) To
point out the environmental externality gap or environmental sustainability gap embedded in the
circular traditional market illusion.
Methodology
First, the terminology used in this paper is shared. Second, the operational concepts and
externalization and internalization rules supporting this paper are discussed. Third, the structure
of the environmental externality problem affecting the traditional market model is indicated.
Fourth, the structure the green market fix to the environmental externality problem affecting
Adam Smith’s traditional market model and its implications are shared. Fifth, the structure of
the circular green economy associated with the environmental sustainability fix; and its
implications are highlighted. Sixth, the structure of the circular traditional market illusion in the
face of real environmental externality cost is shared to highlight the environmental externality
gap or environmental sustainability gap embedded in the traditional market. Seventh, the
structure of the perfect green market or environmentally friendly market is pointed out. Eighth,
the nature of the circular green market illusion is highlighted. Finally, some food for thoughts
and relevant conclusions are provided.
Terminology
--------------------------------------------------------------------------------------------
A = active social system a = passive social system
B = active economic system b = passive economic system
C = active environmental system c = passive environmental system
TM = traditional market GM = green market
K = traditional producers/supply L = traditional consumers/demand
GK = green producers/supply GL = green consumers/demand
EEM = environmental externality management M
i
= market type i
E(T) = externalization of T I(t) = internalization of t
E(AC) = externalization of A and C I(ac) = internalization of a and c
TMP = traditional market price GMP = green market price
ESG = environmental sustainability gap EEG = environmental externality gap
---------------------------------------------------------------------------------------------
Operational concepts and externalization and internalization rules
i) Operational concepts
1) Traditional market, the economy only market
2) Green market, the environmentally friendly market
3)Traditional market price, the general market economic only price or the price that covers the
cost of production at profit(TMP = ECM + i = P) or zero profit(TMP = ECM = P).
4) Green market price, the price that reflects both the economic and the environmental cost of
production or the price that covers the cost of environmentally friendly production.
5) Cost externalization, the leaving out of the pricing mechanism of the market relevant costs
associated with production.
6) Social cost externalization, the leaving out of the pricing mechanism of the market the social
costs associated with production.
7) Environmental cost externalization, the leaving out of the pricing mechanism of the market
the environmental costs associated with production.
8) Economic cost externalization, the leaving out of the pricing mechanism of the market the
economic costs associated with production.
9) Cost externalization assumption neutrality, the assumption that production has minimal or
no cost impact on external factors to a market model.
10) Full costing, the reflecting in the pricing mechanism of the market all cost associated with
production; there are no market distortions.
11) Partial costing, not reflecting in the pricing mechanism of the market all cost associated
with production; there are partial market distortions.
12) No costing, not reflecting in the pricing mechanism of the market any costs associated with
production; there is full market distortion.
13) Full inclusion, all factors are endogenous to the model, there are no exclusions.
14) Partial inclusion, some factors are exogenous to the model, there are some exclusions.
15) Fully independent development choices, when we have individual development choices
unrelated to each other or pure choices such as society only(A), economy only(B), and
environment only(C). In this world only fully independent development choices exist so the set =
{A, B, C}. This is the world of the Arrow Impossibility theory and theorem.
16) Partially codependent development choices, when we have mixed/paired development
choices such as socio-economy(AB), socio-environment(AC), and eco-economy(BC). In this
universe only codependent development choices exist so the set = {AB, AC, BC}. This is outside
the normal world of the Arrow Impossibility theory and theorem.
17) Fully codependent development choices, when all development choices are mixed together
such as the socio-economy-environment(ABC) model. In this paradigm only fully codependent
development choices exist so the set = {ABC}. This is outside the world of the Arrow
Impossibility theory and theorem.
18) Full cost externalization, all costs associated with production are not reflected in the
pricing mechanism of the market.
19) Partial cost externalization, some costs associated with production are not reflected in the
pricing mechanism of the market.
20) No cost externalization, all costs associated with production are reflected in the pricing
mechanism of the market.
21) Full cost internalization, all costs associated with production are reflected in the pricing
mechanism of the market.
22) Partial cost internalization, some costs associated with production are reflected in the
pricing mechanism of the market.
23) No cost internalization, all costs associated with production are not reflected in the pricing
mechanism of the market.
24) Externalities, factors assumed exogenous to a model
25) Full externality assumption, only one component is the endogenous factor in the model; the
others are exogenous factors.
26) Partial externality assumption, not all factors are endogenous factors at the same time in
the model.
27) No externality assumption, all factors are endogenous factors at the same time in the model.
28) Economic externality, the economic costs associated with production not reflected in the
pricing mechanism of the market.
29) Social externality, the social cost associated with production not reflected in the pricing
mechanism of the market.
30) Environmental externality, the environmental cost associated with production not reflected
in the pricing mechanism of the market.
31) Green or environmental margin, to cover the extra cost of making the business
environmentally friendly.
32) Social margin, to cover the extra cost of making the business socially friendly.
33) Economic margin, to cover only the economic cost of production
34) Profit, the incentive to encourage economic activity
35) Full cost price, a price that reflects all costs associated with production.
36) Some cost price, a price that reflects only some costs associated with production.
37) No cost price, a price that does not reflect any cost associated with production.
38) Circular market illusion, the idea that production activity can take place without producing
relevant externalities.
39) Circular traditional economy illusion, the idea that production activity can take place
without producing relevant social and/or environmental externalities.
40) Circular dwarf green economy, the idea that market prices can be manipulated externally
to generate revenue to cover the cost of dealing with the environmental externality they create to
close the non-free market cycle dwarf green production-dwarf green consumption-environmental
externality.
41) Circular green economy, the idea that market prices reflect the cost of making business
environmentally friendly in order to cover the cost of dealing with the environmental
externalities they create to close the free market cycle green production-green consumption-
environmental externality.
42) Circular environmental externality management based market illusion, the idea that you
can solve an environmental externality problem by dealing with the consequences of that
problem, not the cause.
43) Circular green economy illusion, the idea that green production and green consumption
can take place without having social impacts(E(A) = 0).
ii) Externalization rules
Let’s assume we have a market with two relevant components, society(A) and
environment(C), where A = active component, a = passive component, C = active component,
and c = passive component, then the externalization rules(E) work as follows:
1) E(A) = a ---
relevant social costs(A) are assumed irrelevant
2) E(C) = c ---
relevant environmental costs(C) are assumed irrelevant
3) E(AC) = ac ---
relevant social costs and economic costs(AC) are assumed irrelevant
iii) Internalization rules
Let’s assume we have a market with two relevant components, society(A) and
environment(C), where A = active component, a = passive component, C = active component,
and c = passive component, then the internalization rules(I) work as follows:
4) I(a) = A ----
irrelevant social costs(a) are now relevant
5) I(c) = C ----
irrelevant environmental costs(c) are now relevant
6) I(ac) = AC ----
irrelevant social costs and economic costs(ac) are now relevant
iv) Model structure and externalization rules
Let’s assume we have the following three market structures M1 = ac, M2 = Ac and M3 =
AC, then the following holds true:
7) M1 = ac = E(AC) = a fully irresponsible market as all costs are externalized
8) M2 = Ac = [I(a)][E(C)] = a partially responsible market as social cost is internalized
9) M3 = AC = [I(a)][I(c)] = a fully responsible market as all costs are internalized.
v) Reversing externalization rules
Let’s assume we have a market with two relevant components, society(A) and
environment(C), where A = active component, a = passive component, C = active component,
and c = passive component, then the process of reversing externalization-internalization rules
works as follows:
The case of internalizing the externality: if E(AC) = ac, the following holds true:
10) I[E(AC)] = I(ac) = AC, internalization-externalization forces cancel each other out
The case of externalizing the internality: if I(ac) = AC, the following holds true:
11) E[I(ac)] = E(AC) = ac, externalization-internalization forces cancel each other out
The structure of the environmental externality problem affecting the traditional
market(TM)
If we assume that social costs do not matter[E(A) = 0], but take the view now that the
environmental externality matters[E(C) > 0], then the simplified version of the externality
problem affecting the traditional market(TM) in environmental terms can be indicated as in
Figure 4 Below:
The broken orange arrow between TM and E(C) in Figure 4 above represents the
environmental externality problem affecting the sustainability of the traditional market(TM) as
the relevant environmental externalities indicated by the continuous black arrows from K and L
to E(C) are not accounted for in the traditional market price(TMP = P) of the traditional
market(TM).
The structure of the green market(GM) fix
To fix the environmental externality problem affecting the traditional market model(TM)
summarized in Figure 4 above and to be able to fulfill the Brundtland Commission’s wish of
making business as usual model an environmental externality friendly model we have to
recognize two things: i) Environmental externalities[E(C)] are real; and ii) hence they must be
internalized in the pricing mechanism of the traditional market(TMP = P). The internalization of
environmental costs{I[E(C)]} in the pricing mechanism of the traditional market(TM) leads to a
shift to green markets(GM) or environmentally friendly market, a situation summarized in Figure
5 below:
Figure 5 above tells us the following about the green market(GM) or environmentally
friendly market: i) if you internalize the environmental externalities[E(C)] in the pricing
mechanism of the traditional market(TMP = P) you shift the traditional market model(TM)
towards green markets(GM) as indicated by the continuous orange arrow from E(C) to GM; ii)
the green market(GM) is driven by green supply/producers(GK) and green demand/consumers
(GL) as indicated by the opposing continuous black arrows between GK and GL; iii) in the green
market(GM) the free interaction of green or environmentally friendly producers(GK) and green
or environmentally friendly consumers(GL) determines the eco-economic price or green market
price(GMP = GP), a price that also reflects the environmental cost of production, as indicated by
the continuous arrows from GK and GL to GM; iv) this is a market where environmental
externalities are relevant as indicated by the continuous black arrows from GK and GL to E(C);
and v) the green market(GM) operates under rationality and partial codependent choices or eco-
economic choices.
In other words, based on Figure 5 above it can be said that the green market(GM) is a
free market that brings together green producers(GK) and green consumers(GL) under
conditions of no environmental externality neutrality or under eco-economic costing.
The structure of the circular green market based economy
Since under the green markets(GM) the green market price(GMP = GP) reflects the
environmental costs of production[I(c)], then the green market generates the resources needed to
deal with the environmental cost associated with economic activity, closing the cycle green
production-green consumption-environmental externalities as indicated by the connecting green
arrows in Figure 6 below:
We can see in figure 6 above that environmental costs[E(C)] in the green market(GM) are
now endogenous issues[I(c)] to the model as indicated by the blue line. Hence, green
markets(GM) take responsibility for the environmental externalities they produce so they
generate the resources needed to create and support the programs and/ businesses necessary to
close or deal with the environmental externality gap. The circular green market structure in
Figure 6 above indicated by the continuous green arrows GS, GL, I(c) represents an end to the
circular traditional market’s environmental externality neutrality illusion that environmental
costs did not matter as here all environmental costs related to economic activity are accounting
for.
In other words, environmental externality costing transforms the green market(GM) and
its circular structure green production(GK), green consumption(GL), and environmental
externalities internalization[(I(c)] into responsible structures in environmental terms as indicated
by the continuous green arrow circling GK-GL-I(c) in Figure 6 above. Hence, there are no
environmental externality gaps(EEG) or environmental sustainability gaps(ESG) in green
markets(GM) as they are environmentally friendly markets.
The environmental externality gap affecting the circular traditional market illusion
Since under the traditional markets(TM) the traditional market price(TMP = P) does not
reflect the environmental costs of production[E(C)], then the traditional market(TM) does not
generate the resources needed to deal with the environmental cost associated with economic
activity, passing them to society as a whole, leaving open the cycle traditional production-
traditional consumption-environmental externalities as indicated in Figure 7 below:
We can appreciate in figure 7 above that now in the traditional market(TM)
environmental costs[E(C)] are exogenous issues to the model so they are externalized as
indicated by the broken blue line. Therefore, traditional markets now do not take responsibility
for the environmental externalities they produce and therefore, they do not generate the resources
needed to create and support the programs and/ businesses needed to close the environmental
externality gap(EEG) or environmental sustainability gap(ESG) they create, leaving it open as
indicated by the broken green arrow from E(C) to K; and hence passing this way the
responsibility to deal with those externalities to society as a whole.
In other words, there is an environmental externality gap(EEG) or environmental
sustainability gap(ESG) embedded in the circular traditional market illusion as in this market
relevant environmental costs related to economic activity are not accounting for. Partial
costing(economic only costing) transforms the traditional market(TM) and its circular structure
traditional production(K), traditional consumption(L), and environmental externality
externalization [(E(C)] into distorted or irresponsible structures in environmental terms as
indicated by the broken green arrow in the circle K-L-E(C) in Figure 7 above.
Notice that the existence of this embedded environmental externality gap(EEG) or
environmental sustainability gap(ESG) indicated in Figure 7 above provides a rational for the
existence of environmental externality management markets or programs(EEM) designed to
produce the funds needed to manage environmental externalities without attempting to correct
the root cause of the environmental externality generation and accumulation problem associated
with the traditional market, a distorted traditional market price in environmental terms. Finally,
when comparing Figures, we can see that the closing of the environmental sustainability
gap(ESG) or environmental externality gap(EEG) represented by the broken green arrow in
Figure 7 leads to the structure of the circular green market based economy presented in Figure 6
above, where there are no environmental externality(EEG) or environmental sustainability(ESG)
gaps as indicated by the continuous green arrow going from I(c) to GK.
The structure of the green market(GM)
Based on the discussion above, it can be said that the green market(GM) or
environmentally friendly market is a free market that brings together green producers(GK) and
green consumers(GL) under the assumption of no environmental externality neutrality and the
assumption of full social externality neutrality, a situation that is summarized as in Figure 8
below:
Figure 8 above tells us the following about the structure of a green market(GM) or
environmentally friendly market: i) social externalities[E(A)] are exogenous issues to the model
so they are externalized as indicated by the continuous orange arrow from GM to E(A); ii) green
production(GK) and green consumption(GL)’s social externalities are irrelevant as indicated by
the broken black arrows from GK and GL to E(A); iii) green producers(GK) and green
consumers(GL) interact freely in the green market(GM) as indicated by the continuous and
opposing black arrows between GK and GL; iv) the green market price(GMP = GP) is
determined then by the free interaction of green supply(GK) and green demand(GL) as indicated
by the continuous black arrows from GK and GL to GM; and v) the model operates under
rationality and partial codependent choices or eco-economic choices.
The circular green market illusion
Since according to Figure 8 above social externalities[E(A)] are assumed irrelevant in the
green market model(GM), then they can be left out of the model, which leads to the circular
green market illusion depicted in Figure 9 below:
Figure 9 above simply says green economic activity and green economic growth take
place in the green market(GM) without producing social effects[E(A) = 0], which is the thought
behind the circular green market illusion. In other words, we produce and consume under zero
social externality impact when operating under the full social externality neutrality assumption.
This assumption makes the green market(GM) or environmentally friendly market a distorted
market in social terms.
Food for thoughts
Is there a sustainable development solution to an environmental sustainability problem? I
think no, what do you think?; Can we solve an environmental sustainability problem by attacking
the consequences? I think no, what do you think?; and Are environmental externality
management markets free markets? I think no, what do you think?
Conclusions
First, it was shown that when environmental externalities are real and accounted for, then
there is a disconnect between the pricing mechanism of the traditional market and the
environmental externality. Second, it was indicated that the shift from traditional market to
green markets requires the internalization of the environmental cost associated with economic
activity. Third, it was highlighted that when environmental cost internalization takes place the
circular traditional economy illusion with respect to environmental externalities ends as now all
environmental costs are reflected in the pricing mechanism of the green market. Fourth, it was
pointed out that as the green market takes responsibility for the environmental externalities it
produces it generates the resources needed to close the green market cycle green production-
green consumption-environmental externalities.
Fifth, it was stressed that as the traditional market does not take responsibilities for the
environmental externalities it produces, there is an environmental externality gap or
environmental sustainability gap preventing the closing of the traditional production-traditional
consumption-environmental externality cycle when environmental externality accounting
becomes binding. Sixth, it was mentioned that the existence of this embedded environmental
externality gap or environmental sustainability gap in the traditional market and its circular
market illusion provides the opportunity to deploy environmental externality management
approaches to keep environmental externalities within a bearable level. Seventh, it was exalted
that green markets are driven by actions of green producers and green consumers under the
assumption of full social externality neutrality. Finally, it was pointed out that at the heart of the
green market illusion is the idea that green economic activity can take place without producing
social externalities.
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World Commission on Environment and Development(WCED), 1987. Our Common Future,
Oxford University Press, London, UK.
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Citation:
Muñoz, Lucio, 2020. Sustainability thoughts 103: How the shift from traditional markets to
green markets would have looked like had the 1987 Brundtland Commission recommended
then an environmental sustainability fix?,
Boletin CEBEM-REDESMA, Año 14, No.3, March,
La Paz, Bolivia.
... However, instead of moving towards perfect green market thinking to fully fix the environmental sustainability problem highlighted in 1987(WCED 1987) development stakeholders concerned about environmental impacts have moved towards patching the problem through externality management frameworks instead. How green markets would have looked like if the World Commission on Environment and Development(WCED) would have recommended a full fix has been recently highlighted (Muñoz 2020c) as well as the idea that perfect markets shift to higher level perfect markets when fully fixed such as the shift from the perfect traditional market to the perfect green market (Muñoz 2021b). ...
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Abstract When markets are created, sustainability gap pressures associated to cost externalization dynamics embedded in them are also created. At the beginning, sustainability gap pressures are minimal, which seems to be one of the reasons why Adam Smith provided us with a traditional perfect market model in 1776 that works under externality neutrality assumptions; and therefore, there are no limits to economic growth. As the market expands its related sustainability gaps expands too, and it begins to affect the sustainability of that market. When markets have expanded to a point that their associated sustainability gaps may bring them down, then dealing with those sustainability gaps pressures becomes binding too in order for those paradigms to persist or avoid collapse. Now business as usual is no longer possible as if business as usual continues the market will collapse as the externalities previously assumed irrelevant are relevant. Moreover, the inability to fix or patch or the unwillingness to fix or patch binding sustainability gaps affecting the market can also brings along other paradigm evolution pressures such as flips towards authoritarianism or flips towards inverse opposite competing development paradigms, as then these paradigm evolution routes become more likely to take place as ways of addressing the same sustainability issues. Therefore, in response to binding sustainability gap pressures the market can subjected to calls for action by stakeholders such as the following: a) calls for implementing full cost internalization policies to fix fully the sustainability gap problem affecting the model; b) calls for implementing externality management programs to patch the sustainability gap problem; c) calls for flipping the model towards an inversely opposite market model, perfectly or imperfectly, to deal with the sustainability gap problem; and d) calls for flipping to a dictatorship based market model as a better way to address the same sustainability gap problem. Understanding which response route markets such as the traditional market, the socialism market, the environmental market, the red socialism market and so on would take when dealing with their associated sustainability gap pressures is important, but this understanding is currently unclear. Hence, there is a need to develop a general model that captures all the possible response routes mentioned above that any market can take when facing binding sustainability gap pressures, which raises the question: How can a general paradigm evolution model aimed at capturing all possible market evolution routes in response to binding sustainability gap pressures be stated step by step?. Among the goals of this paper is to provide an answer to that question. Key concepts Sustainability, perfect markets, imperfect markets, sustainability markets, externality management markets, sustainability gap, paradigm fix, paradigm patch, paradigm shift, perfect paradigm flip, imperfect paradigm flip, dominant paradigm ------ ------ Resúmen Cuando se crean mercados, también se crean presiones de brecha de sostenibilidad asociadas a las dinámicas de externalización de costos incrustadas en ellos. Al principio, las presiones de la brecha de sostenibilidad son mínimas, lo que parece ser una de las razones por las que Adam Smith nos proporcionó un modelo de mercado perfecto tradicional en 1776 que funciona bajo supuestos de neutralidad de externalidades; y por lo tanto, no hay límites para el crecimiento económico. A medida que el mercado se expande, sus brechas de sostenibilidad asociadas también se expanden y comienzan a afectar la sostenibilidad de ese mercado. Cuando los mercados se han expandido hasta un punto en que las brechas de sostenibilidad asociadas a ellos los pueden destruir, entonces la necesidad enfrentar esas brechas de sostenibilidad se vuelve relevante para que esos paradigmas persistan o eviten el colapso. Ahora, el negocio como de costumbre ya no es posible, ya que si el negocio continúa como de costumbre, el mercado colapsará ya que las externalidades que antes se asumían como irrelevantes son relevantes. Además, la incapacidad corregir o parchear o la falta de voluntad para corregir o parchear las brechas de sostenibilidad relevantes que afectan al mercado también puede traer consigo otras presiones de evolución de paradigmas, como giros hacia el autoritarismo o giros hacia paradigmas de desarrollo inversamente opuestos, ya que estas rutas de evolución de paradigmas se hacen más probables si se miran come mejores alternativas para abordar los mismos problemas de sostenibilidad. Por lo tanto, en respuesta a las presiones relevantes de la brecha de sostenibilidad, el mercado puede estar sujeto a llamadas de acción por parte de las partidos o grupos sociales interesados, como las siguientes: a) llamadas a implementar políticas de internalización de costos totales para solucionar completamente el problema de la brecha de sostenibilidad que afecta al modelo; b) pedidos de la implementación de programas de gestión de externalidades para solucionar el problema de la brecha de sostenibilidad; c) llamadas de un cambio de modelo hacia un modelo de mercado inversamente opuesto, perfecto o imperfecto, para abordar el problema de la brecha de sostenibilidad; y d) llamadas a cambiar a un modelo de mercado basado en la dictadura como una mejor manera de abordar el mismo problema de brecha de sostenibilidad. Es importante comprender qué ruta de respuesta tomarían los mercados, como el mercado tradicional, el mercado del socialismo, el mercado ambiental, el mercado del socialismo rojo, etc., cuando enfrentan las presiones ligadas a la brecha de sostenibilidad, pero esta comprensión no está clara actualmente. Por lo tanto, existe la necesidad de conceptualizar un modelo general que capture todas las posibles rutas de respuesta mencionadas anteriormente que cualquier mercado puede tomar al enfrentar presiones relevantes de brecha de sostenibilidad, lo que plantea la pregunta: ¿Cómo se puede conceptualizar paso a paso un modelo de evolución de paradigma general destinado a capturar todas las posibles rutas de evolución del mercado en respuesta a las presiones de brechas de sostenibilidad? Uno de los objetivos de este documento es dar una respuesta a esa pregunta.
... In other words, if we analyze an environmental externality management point in that gap between the two production frontiers, we can see that it falls outside the green production frontier and it falls below the pareto optimal consumption and production point "e"; therefore, it is a less preferred bundle than point "e", but production and consumption takes place or would take place there at the outlier point anyway as it is or it would be an externally set bundle under environmental externality management market forces. The existence of this environmental sustainability gap affecting the sustainability of the traditional market and the need to fix it (Muñoz 2020b), not to patch it (Muñoz 2020c) has been pointed out recently. ...
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Pareto optimality in perfect traditional markets can be affected by cost internalization and by government intervention. For example, environmental cost internalization shifts pareto optimality in perfect traditional markets towards green pareto optimality in perfect green markets while government intervention in environmental markets transforms pareto optimality in traditional markets into environmental externality management markets, which are not perfect markets. Pareto optimality and green pareto optimality are linked by an environmental sustainability gap, which can be seen as an environmental externality management market zone as government intervention can create an environmental externality market at any point within that gap. If we analyze an environmental externality management point in that gap, we can see that it falls outside the green production frontier and it falls below the pareto optimal consumption and production point; therefore, it is a less preferred bundle, but production and consumption takes place there anyway. Hence, there is a link between green pareto optimality, pareto optimality, and environmental externality management markets and its structure through the environmental sustainability gap, but to my knowledge nothing is written about how the environmental sustainability gap is linked to optimal and non-optimal markets such as pareto optimal markets, green pareto optimal markets and environmental externality management based markets. Therefore, there is a need to understand the nature of this environmental externality link so as to be able to address questions such as Are environmental externality management based production and consumption bundles inconsistent with green pareto efficiency and with pareto efficiency principles at the same time? If yes, why? What is the structure of the environmental externality management market? Among the goals of this paper is to provide answers to these questions. Resúmen La optimalidad de Pareto en los mercados tradicionales perfectos puede verse afectada por la internalización de costos y por la intervención del gobierno. Por ejemplo, la internalización del costo ambiental cambia la optimalidad de pareto en mercados tradicionales perfectos hacia la optimalidad de pareto verde en mercados verdes perfectos, mientras que la intervención del gobierno en los mercados ambientales transforma la optimalidad de pareto en los mercados tradicionales en mercados de manejo de externalidades ambientales, los cuales no son mercados perfectos. El óptimo de Pareto tradicional y el óptimo de pareto verde están vinculados por una brecha de sostenibilidad ambiental, que puede verse como una zona de mercado de gestión de externalidades ambientales, ya que la intervención del gobierno puede crear un mercado de externalidades ambientales en cualquier punto dentro de esa zona. Si analizamos un punto de manejo de externalidades ambientales en esa zona, podemos ver que cae fuera de la frontera de producción verde y cae por debajo del punto óptimo de consumo y producción del Pareto tradicional; por lo tanto, es un paquete menos preferido, pero la producción y el consumo tienen lugar allí de todos modos. Por lo tanto, existe un vínculo entre la optimalidad de pareto verde, la optimalidad de pareto tradicional, los mercados de gestión ambiental y su estructura a través de la brecha de sostenibilidad ambiental, pero que yo sepa, no hay nada escrito sobre cómo la brecha de sostenibilidad ambiental está vinculada a mercados óptimos y mercados no óptimos, como los mercados óptimos de pareto tradicional, los mercados óptimos de pareto verde y los mercados basados en la gestión de las externalidades ambientales. Por lo tanto, es necesario comprender la naturaleza de este vínculo de externalidad ambiental para poder abordar preguntas como: ¿Son los paquetes de producción y consumo basados en la gestión de las externalidades ambientales inconsistentes con la eficiencia de pareto verde y con los principios de eficiencia de pareto tradicional al mismo tiempo? ¿Si es así, por qué? ¿Cuál es la estructura del mercado de gestión de externalidades ambientales? Entre los objetivos de este documento esta proporcionar respuestas a estas preguntas.
... There is an environmentac externacity probcem affecting the sustainabicity of the traditionac market that arises when we must account for the environmentac externacities associated with business as usuac, and the structure of this sustainabicity probcem has been recentcy shared (Muñoz 2020) as described in Figure 1 becow: ...
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There is an environmental externality problem affecting the sustainability of the traditional market. This sustainability problem has a root cause and it has consequences. Dealing with the root cause requires an environmental sustainability fix, which corrects the cost distortion while taking hold of the consequences. A move far away from business as usual and within perfect green market thinking. Dealing with the consequences requires a sustainable development patch that addresses some of the consequences while leaving the root cause of the environmental externality generation problem untouched. A move within business as usual, but with an environmental face that falls outside perfect green market thinking. The 2012 United Nations Conference on Sustainable development Rio + 20 apparently had chosen the environmental sustainability fix as the way to go in the face of an environmental sustainability problem, but somehow today we see the world using sustainable development tools like environmental externality management. The reasons why before and soon after 2012 United Nations Conference on Sustainable Development Rio + 20 we were pro green markets and pro green economies and pro green growth, and then soon after we are pro non-green market solutions is beyond this paper. Understanding the nature of the green market fix to the environmental externality problem had they continued with it and understanding the nature of environmental externality management market patch being used right now are relevant to this paper and to the academic and policy community as a whole. The discussion above raises the questions; can we solve an environmental sustainability problem by managing the consequences of that problem? If not, why not? Among the goals of this paper is to provide an answer to those questions analytically and graphically. Resúmen Existe un problema de externalidad ambiental que afecta la sostenibilidad del mercado tradicional. Este problema de sostenibilidad tiene una causa raíz y tiene consecuencias. Atacando la causa raíz requiere una solución de sostenibilidad ambiental, la cual corrige la distorsión de costos al mismo tiempo que toma control de las consecuencias. Una movida lejos del pensamiento de los negocios usuales y dentro del pensamiento perfecto del mercado verde. Enfrentar las consecuencias requiere un parche de desarrollo sostenible que aborde algunas de las consecuencias mientras deja intacta la causa raíz del problema de generación de externalidad ambiental. Un movimiento dentro de negocios como de costumbre, pero con una cara ambiental que cae fuera del pensamiento perfecto del mercado verde. La Conferencia de las Naciones Unidas sobre el Desarrollo Sostenible de 2012 Río + 20 aparentemente había elegido una corrección de sostenibilidad ambiental como solución a un problema de sostenibilidad ambiental, pero de alguna manera han cambiado de dirección y hoy vemos a un mundo usando herramientas de desarrollo sostenible como el manejo de externalidad ambiental. Las razones por las cuales antes y poco después de la Conferencia de las Naciones Unidas sobre el Desarrollo Sostenible de 2012 Río + 20 fuimos pro-mercados verdes, pro-economías verdes, y pro-crecimiento verde, y luego, poco después de la conferencia nos fuimos pro-no mercados verdes, está más allá del foco de este documento. Entender la naturaleza de la corrección de mercado verde al problema de externalidad ambiental si hubieran continuado con ella y entender la naturaleza del parche de mercado de manejo de externalidad ambiental que se está utilizando en este momento son aspectos relevantes para este documento y para la comunidad académica y política en general. La discusión anterior plantea las preguntas; ¿Podemos resolver un problema de sostenibilidad ambiental atreves del manejo de las consecuencias de ese problema? ¿Y si no, porque no? Entre los objetivos de este documento está proporcionar una respuesta a esas preguntas analíticamente y gráficamente.
... The discussion above raises some interesting questions depending of the type of fix that is recommended. With respect to the first possibility, the sustainability fix recommendation; and with the second possibility, an environmental sustainability fix recommendation, the answers of how they would have looked like were recently pointed out in detail graphically and analytically (Muñoz 2020b;Muñoz 2020c). With respect to the third possibility, the question is how the shift from the traditional market model of Adam Smith towards red markets would have looked like had the 1987 Brundtland Commission recommended then a social sustainability fix? ...
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It can be said that the traditional market is a free market that brings together traditional producers(K) and traditional consumers(L) under the assumption of full social and environmental externality neutrality. And this create a circular traditional economy illusion, the idea that production activity can take without generating production and consumption externalities. The fact that the social and environmental externalities associated with the traditional market are real leads to a disconnect between social and environmental externalities and traditional market pricing. In order to correct this disconnect, the 1987 Brundtland Commission recommended the use of sustainable development thinking, which was the wrong recommendation since the externality problem affecting the traditional market was and is a sustainability issue, not a sustainable development issue. There were 3 possible corrections to this sustainability problem: i) a full social and environmental externality correction or sustainability fix; ii) a partial correction through green markets or an environmental sustainability fix; and iii) a partial correction through red markets or a social sustainability fix. The discussion above raises some interesting questions depending of the type of fix that is recommended. With respect to the first possibility, the sustainability fix recommendation; and with the second possibility, an environmental sustainability fix recommendation, the answers of how they would have looked like were recently pointed out in detail graphically and analytically(Muñoz 2020b; Muñoz 2020c). With respect to the third possibility, the question is how the shift from the traditional market model of Adam Smith towards red markets would have looked like had the 1987 Brundtland Commission recommended then a social sustainability fix? The main goal of this paper is to provide an answer to this question.
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Perfect green market theory stipulates that when we correct the traditional market pricing mechanism of the traditional market to reflect environmental externalities we shift it to a green market model as we are then closing the environmental sustainability gap, creating in the process a model with a closed circular green economy. As the traditional market price shifts to the green market price we shift from a model with broken circular economy under binding environmental externalities to a model with unbroken circular economy. In other words, the price shift goes one to one with changes in circular economy structures. Hence, there is a need to understand the link between the nature of market prices and the nature of related circular economies when environmental externality accountings becomes binding. For example, what is the nature of the circular traditional economy under no environmental externality neutrality assumption? What is nature of the circular green market economy under social externality neutrality assumption? What is different between those two circular economies in terms of environmental sustainability gaps? Among the goals of this paper is to give answers to these questions. Resúmen La teoría del mercado verde perfecto estipula que cuando corregimos el mecanismo tradicional de precios del mercado tradicional para reflejar así las externalidades ambientales lo cambiamos a un modelo de mercado verde, ya que la corrección elimina la brecha de sostenibilidad ambiental, creando en el proceso un modelo de economía verde circular cerrado. Cuando el precio del mercado tradicional cambia al precio del mercado verde pasamos de un modelo con economía circular rota bajo externalidades ambientales asociadas a un modelo con economía circular ininterrumpida. En otras palabras, el cambio de precios va uno a uno con los cambios en las estructuras de las economías circulares. Por lo tanto, es necesario comprender el vínculo entre la naturaleza de los precios de mercado y la naturaleza de las economías circulares relacionadas cuando la contabilidad de las externalidades ambientales se vuelve relevante. Por ejemplo, ¿cuál es la naturaleza de la economía circular tradicional bajo ningún supuesto de neutralidad de externalidades ambientales? ¿Cuál es la naturaleza de la economía de mercado verde circular bajo el supuesto de neutralidad de las externalidades sociales? ¿Qué es diferente entre esas dos economías circulares en términos de brechas de sostenibilidad ambiental? Entre los objetivos de este trabajo se encuentra dar respuesta a estas preguntas.
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There is an environmental sustainability gap embedded in the circular traditional market economy illusion, which comes to life when accounting for environmental externalities in the traditional market becomes binding. Dealing with this environmental sustainability gap was at the heart of the 2012 United Nations Conference on Sustainable Development Rio +20. The 2012 UNCSD conference had two choices at that time to address that environmental sustainability gap: a) paradigm fixing through green markets to end the disconnect between the traditional market price in the traditional market and the associated environmental externality cost or b) paradigm patching through environmental externality management based markets aimed at managing the environmental sustainability gap. In other words we can address the environmental sustainability gap issue in two ways: a) we can fix the environmental sustainability gap by addressing the root cause of the externality problem, the disconnect between the traditional price in the traditional market and the relevant environmental externality; or b) we can patch the environmental sustainability gap by managing the consequences of the traditional price-environmental cost disconnection problem. Notice, that paradigm fixing through green markets leads to something beyond business as usual as the Brundtland Commission had called for in 1987 while paradigm patching leads simply to providing an environmental cover to business as usual. When the 2012 UNCSD Rio + 20 conference called for the world to go green markets, green economies and green growth it seemed like it had chosen the option of fixing the traditional market model in a way that flips it towards perfect circular green market thinking to fully close that environmental sustainability gap, and go that way beyond business as usual. That meant that the 2012 UNCSD Rio + 20 conference had seen a sustainability problem to be fixed through environmental sustainability means or green markets, it did not see a sustainable development issue as the Brundtland commission did in 1987. Hence, the 2012 UNCSD Rio + 20 conference called for the use of perfect green market thinking and green economy thinking to address the environmental sustainability gap affecting the sustainability of the traditional market, a sustainability issue. However, since that 2012 UNCSD Rio + 20 conference the world community has rapidly moved towards the option of patching the business as usual model through the use of circular environmental externality management based markets. In other words, the world community has slowly moved away from green market solutions to green market problems since 2012 and it has moved rapidly towards the use of non-green market solutions to green market problems, a clear violation of the theory-practice consistency principle, which requires the theory to match the practice or vis a vis. At this moment it is not clear what the 2012 United Nations Conference on Sustainable Development Rio +20 thinking was in terms of what the nature of both the circular green economy and the circular environmental externality management based economy is to compare them and to determine that way which one of them is the proper solution to the environmental sustainability gap problem or to justify its use. The discussion above raises important questions such as how the structure of the circular green economy would have looked like had Rio + 20 conference envisioned one? How the structure of the circular environmental externality management based economy would have looked like had Rio +20 conference proposed one? Which are the main differences between the circular green economy and the circular environmental management based economy and what are the market implications of this? Among the goals of this paper is to provide answers to these questions. Resúmen Existe una fisura de sostenibilidad ambiental incrustada en la ilusión circular de la economía de mercado tradicional, que cobra vida cuando la inclusión de las externalidades ambientales en el mercado tradicional se vuelve indispensable. Enfrentar esta fisura de sostenibilidad ambiental en forma directa fue el corazón de la Conferencia de las Naciones Unidas sobre el Desarrollo Sostenible 2012 Río +20. La conferencia de la UNCSD de 2012 tenía dos opciones en ese momento para abordar esa fisura de sostenibilidad ambiental: a) corrección de paradigma a través de mercados verdes para poner fin a la desconexión entre el precio de mercado tradicional en el mercado tradicional y el asociado costo de externalidad ambiental o b) parcheo de paradigma a través de mercados basados en el manejo de externalidades ambientales dirigidos a gestionar la fisura de sostenibilidad ambiental. En otras palabras, podemos abordar el problema de la fisura de sostenibilidad ambiental de dos maneras: a) podemos solucionar la fisura de sostenibilidad ambiental atacando la causa raíz del problema de externalidad, la desconexión entre el precio tradicional en el mercado tradicional y la externalidad ambiental relevante o b) podemos parchar la fisura de sostenibilidad ambiental mediante el manejo de las consecuencias del problema de desconexión precio de mercado tradicional-costo de externalidad ambiental. Tenga en cuenta que la corrección de paradigma a través de los mercados verdes conduce a algo más allá del pensamiento de las economías tradicionales, como lo había pedido la Comisión Brundtland en 1987, mientras que el parcheo de paradigma conduce simplemente a proporcionar una cobertura ambiental a las economías tradicionales. Cuando la conferencia UNCSD Rio + 20 de 2012 convocó al mundo a ir a mercados verdes, economías verdes y crecimiento verde, parecía que había elegido la opción de corregir el modelo de mercado tradicional de una manera que lo voltee hacia un pensamiento de mercado verde circular perfecto y así completamente cerrar esa la fisura de sostenibilidad ambiental e ir más allá de las economías como de costumbre. Eso significaba que la conferencia UNCSD Rio + 20 de 2012 había visto un problema de sostenibilidad que se solucionaría a través de medios de sostenibilidad ambiental o mercados verdes, no vio un problema de desarrollo sostenible como lo hizo la comisión Brundtland en 1987. Por lo tanto, la UNCSD Rio + 20 2012 conferencia pidió el uso del pensamiento perfecto del mercado verde y el pensamiento de la economía verde para abordar la fisura de sostenibilidad ambiental que afecta la sostenibilidad del mercado tradicional, un problema de sostenibilidad. Sin embargo, desde esa conferencia UNCSD Rio + 20 de 2012, la comunidad mundial se ha movido rápidamente hacia la opción de parchear el modelo de marcado tradicional mediante el uso de mercados circulares basados en el manejo de las externalidades ambientales. En otras palabras, la comunidad mundial se ha alejado lentamente de las soluciones del mercado verde a los problemas del mercado verde desde 2012 y se ha movido rápidamente hacia el uso mercados que no son verdes para solucionar problemas del mercado verde, una clara violación del principio de consistencia teoría-práctica, que requiere que la teoría coincida con la práctica o vis a vis. En este momento, no está claro qué pensaba la Conferencia de las Naciones Unidas sobre el Desarrollo Sostenible de Río +20 de 2012 en términos de cuál es la naturaleza de la economía verde circular y de la economía basada en la gestión de externalidad ambiental circular para compararlos y determinar de esa manera cuál de ellos es la solución adecuada al problema de la fisura de sostenibilidad ambiental o para justificar su uso. La discusión anterior plantea preguntas importantes como ¿cómo se habría visto la estructura de la economía verde circular si la conferencia de Río + 20 hubiera previsto una? ¿Cómo se habría visto la estructura de la economía basada en la gestión de la externalidad ambiental circular si la conferencia de Río +20 hubiera propuesto una? ¿Cuáles son las principales diferencias entre la economía verde circular y la economía basada en la gestión ambiental circular y cuáles son las implicaciones de mercado de esto? Entre los objetivos de este documento está proporcionar respuestas a estas preguntas.
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It can be said that the traditional market is a free market that brings together traditional producers(K) and traditional consumers(L) under the assumption of full social and environmental externality neutrality. And this create a circular traditional economy illusion, the idea that production activity can take without generating production and consumption externalities. The fact that the social and environmental externalities associated with the traditional market are real leads to a disconnect between social and environmental externalities and traditional market pricing. In order to correct this disconnect, the 1987 Brundtland Commission recommended the use of sustainable development thinking, which was the wrong recommendation since the externality problem affecting the traditional market was and is a sustainability issue, not a sustainable development issue. There were 3 possible corrections to this sustainability problem: i) a full social and environmental externality correction or sustainability fix; ii) a partial correction through green markets or an environmental sustainability fix; and iii) a partial correction through red markets or a social sustainability fix. The discussion above raises some interesting questions depending of the type of fix that is recommended. With respect to the first possibility, the question is how the shift from the traditional market model of Adam Smith towards sustainability markets would have looked like had the 1987 Brundtland Commission recommended then a sustainability fix? The main goal of this paper is to provide an answer to this question.
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It can be said that free markets bring together producers and consumers to exchange good and services creating in the process relevant externalities. It can also be said that the way markets deal with those externalities they generate determines their degree of responsibility, leading to a range of different free market structures from fully irresponsible markets to partially responsible markets to fully responsible markets. The responsibility framework introduced here can be used to frame the structure of specific free markets in a way that allow us to highlight its characteristics and limitations so as to gain a detailed understanding about what it is wrong with that specific model and also about what needs to be done to correct it properly in terms of responsibility. The main goal of this paper is to use this responsibility framework to point out what was wrong with Adam Smith’s free traditional market model and to stress the implications of this. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Resúmen Se puede decir que los mercados libres reúnen a productores y consumidores para intercambiar bienes y servicios creando en el proceso externalidades relevantes. También se puede decir que la forma en que los mercados tratan esas externalidades que ellos generan determina su grado de responsabilidad, lo que conduce a una gama de diferentes estructuras de mercados libres, desde mercados completamente irresponsables hasta mercados parcialmente responsables hasta mercados completamente responsables. El marco de responsabilidad introducido aquí se puede utilizar para enmarcar la estructura de mercados libres específicos de una manera que nos permita destacar sus características y limitaciones con el fin de obtener una comprensión detallada sobre lo que está mal con ese modelo específico y también sobre lo que se debe hacer para corregirlo correctamente en términos de responsabilidad. El objetivo principal de este documento es usar este marco de responsabilidad para señalar lo que estaba mal con el modelo de mercado libre tradicional de Adam Smith y para enfatizar las implicaciones de esto.
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Abstract It has always been assumed that we live in a world of perfect markets, where supply and demand interactions work magically in the absence of market distortions or externalities. Today we know we live in a world ruled by overproduction and overconsumption, which promote ongoing wasteful, polluting and degrading social and environmental processes. Is it possible that the traditional perfect market’s assumptions can be responsible for these negative outcomes through the creation of supply and demand scenarios that only meet at the lower pure economy price; and therefore lead to economic market flooding and waste? If yes, that means that we have been living in distorted markets all this time, market that do not reflect the right price; and these distortions need to be corrected now to ensure that the traditional perfect market reflects sustainability rules. The general goals of this paper are: a) To introduce the notion of the right market price, the traditional market price, and the corrected market price and to show how they can be related to ensure traditional market sustainability; b)To extend this notion to the right agricultural market price, to the traditional agricultural market price, and the corrected agricultural market price and to point out how they can be linked to ensure that agricultural markets are consistent with sustainability rules; and c) To list some relevant specific and general conclusions.