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Gittens + ecological economics « Previous | |Next »
September 23, 2009

Ross Gittens makes a good point in his article in the Sydney Morning Herald. Referring to the climate crisis he says that though we've seen it coming for years we still can't take it seriously. He says that there is a need to shift from a "growth at all costs" economic model to one that recognizes the real costs and benefits of growth.

The core of Gitten's critique of, and breakout from, the ideology of free market capitalism and unlimited economic growth is this:

Even the economists who brought us the emissions trading scheme don't adequately appreciate the problem we've got. They think all we've got to do is switch to low-carbon energy sources (ideally by finding a way to capture all the carbon emitted by burning coal) and the economy can go on growing as if nothing had happened. Being economists, they see us as all living in an economy, with this thing at the side called the environment that occasionally causes problems we need to deal with. As usual, wrong model.

In reality, the economy exists within the ecosystem, taking natural resources from that system, using them and then ejecting wastes, including sewage, garbage and all forms of pollution and greenhouse gases.


He adds that on the one hand we're chewing through non-renewable resources at a rapid rate and using renewable resources faster than their ability to renew themselves. On the other, we're spewing out wastes faster than the ecosystem can absorb them. Global warming is an example of the latter.

Mainstream (neo-classical) economics, with its negative conception of freedom, holds that economic growth, the democratization of affluence, and ever increasing consumption are both the formula for individual and social happiness and the goal of public policy. All traditional economic problems (poverty, overpopulation, unemployment, unjust distribution) have a common solution, namely an increase in wealth.The way to get richer is by economic growth.

This disconnects economics from the economy's biophysical foundations and is blind to the biophysical limits to economic growth. It is flat-earth economics since nature is not a containing envelope, but just a sector of the macro-economy - mines, wells, croplands, pastures, and fisheries.

The possibilities of economic growth increasing costs by more than it increases benefits (which is what climate change suggests) introduces the idea of sustainability. Ecological economics maintains that the economy is a subset of an ecosystem which is finite, non-growing, and materially closed (i.e., no matter enters or leaves it) and that it uses the environment as a source for material inputs and as a sink for wastes.

Unfortunately the economy has become so large relative to the ecosystem that human activity is undermining the ecosystem's ability to support human life. Hence the need for a new model of the economy and development.This requires making the shift from thinking of the economy as a growth machine to ecological economics that models the economy as a living system.

| Posted by Gary Sauer-Thompson at 6:24 AM | | Comments (7)
Comments

Comments

When I studied economics we were told we would be masters of the universe. Ours was not a dismal but a noble science. It had harnessed the verities of maths to those of human behaviour and would go on to conquer politics. Indeed it had conquered politics since all politics is about ensuring economic growth and only what measures matters.

At last! Someone finally gets what the hippies were saying 40 years ago.

Gary


I am not really sure you can describe what you call "free market economics" as an "ideology". It is actual practice and reality. "Ideology" is best reserved for political wishes, ambitions, utopias, and such. As we know it was Engels (or maybe the other one) who initially defined 'ideology' as "false consciousness".

Also, neoclassical economics is not so much a praxis, but is an analytical tool-kit that reveals the mechanisms by which such and such a goal or change is possible. Of course, once born-fallible human beings start trying to emulate the analytical toolkits, anything can happen. But that does not mean that the analytical tool-kits themselves are worthless.

I think it is pretty safe to say that for all neoclassical economics' vulnerabilities, there is not an analytical tool-kit yet invented that could have delivered the prosperity the world enjoys today.

Now, I know on an earlier thread you say you have a Masters degree in Economics, and for saying otherwise, I sincerely apologise. But I do wonder what sort of course it was, because even my mere undergraduate economics courses went far beyond the simplistic heuristics you constantly insist encapsulates "neoclassical/mainstream" economics.

Sure, in first year, very simple models are used, which I argue should be the case. Make a minimum of assumptions - a two person market, perfect knowledge, zero transactions costs, neat utility functions that lend themselves to simple mathematical functions and calculus, etc. A lot can be learnt from this.

But even by second year, all these assumptions are relaxed, and the effects on the simple first year heuristics really start to light up economics as a discipline.

In fact, second year is all about NON-perfect competition - monopoly, oligopoly - asymmetric information among the many participants in a market; the reality of transaction costs (where do you think the banks got the idea to charge for ATM transactions?) time dynamics are introduced - theoretically through game theory - empirically through econometrics; the existence of non-'rational' or 'otherwise rational' competitors, producers, and consumers; the reality that each individual has a different appetite for risk; that prices and costs are not always smooth, and are usually sticky. And on and on and on.

By the time we get to 3rd year and Honours, let alone Masters, this demon "orthodox/mainstream/neoclassical" economics is an extremely sophisticated analytical beast, capable of engaging in most any situation you want throw at it, replete with feedback loops of the results of applied econometric testing of theories.

It is thus how all sciences have always progressed.

Oh p.s. my point about unparalleled prosperity is that implicit in neoclassical economics is that it shows the most efficient ways to maximise precisely "positive" liberty. OTOH, history shows us that positive freedom is least in pre-modern trival societies, and in modern collectivist/socialist societies.

John
the concept of ideology here is based on Marx's Capital as a distorted form of knowledge; distorted because it is shaped by interest and only represents the appearance of things not there essential processes. Marx's conception was based on Hegel's Logic---on the appearance essence section of that text.

I gave an example of the ideological dimension of neoclassical economics-- economics disconnects itself from the economy's biophysical foundations and is blind to the biophysical limits to economic growth.

Gary

Well, yes I did point out the marxist roots of your use of "ideology". OTOH, my considered and lengthy critique of your take on orthodox/neoclassical economics and its treatment in university Economics departments remains unanswered, nor your remarks on economic growth, positive liberty, markets, etc.


In addition, I am once again curious that a Master of Economics could be - seemingly - unaware that all undergraduate economics courses from 1st year onward ecplicitly cover "market failure", "externalities", and so on. Further, check the website of any Economics faculty in the country and indeed the world and note standard undergraduate economics courses are more than aware of the economy's biophysical context such as:

Resource Economics
Environmental Economics
Market Failure
Agricultural Economics
Environmental Management


I am now curious what subjects were required and optional in your own Economics Masters degree?

Neo-classical economics is unable to conceptualize Australia undergoing an ecological collapse or crash due to global warming. Though that will impact heavily on the economy--eg., no agriculture in Southern Australia due to increasing desertification-economics can only see nature as a resource input into economic production.