Saturday, June 28, 2008
Steady-state economy
Unfortunately, “Instead of recognizing that the human economy is a dependent subset of the biosphere, many economists still assume that economic growth and liberalization, with wealth creation, is the key to affording adequate environmental management. Environmental quality is believed to be most effectively achieved through market forces, even as social and environmental costs are ‘externalized’.”[1]
To ensure that economic development is ecologically sustainable, perhaps our long term goal should be a steady-state economy―an economic system that would “maintain constant stocks of wealth and people at levels that are sufficient for a long and good life.”[2] John Stuart Mill, who supported political and economic freedom, argued 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…when minds cease to be engrossed by the art of getting on.”[3]
What might such an economy be like? “Material well-being would almost certainly be indexed by the quality of the existing inventory of goods, rather than by the rate of physical turnover. Planned obsolescence would be eliminated. Excessive consumption and waste would become causes of embarrassment, rather than symbols of prestige.”[4]
This would mean discarding the Gross National Product (GNP) and Gross Domestic Product (GDP) indices[5] used to measure economic growth, for these do not measure economic wellbeing but only the quantity of economic activity. “GNP reflects all expenditures, including many corrective measures such as policing, prisons, hospital services, homeless shelters, lawsuits, and every form of pollution and waste….The onwards-and-upwards rise of GNP presumes that the more people spend, the better their lives must become. But GNP makes no distinction between desirables and undesirables; it only distinguishes more from less.”[6]
The Genuine Progress Indicator (GPI)[7] and the Index of Sustainable Economic Welfare (ISEW)[8] offer alternative ways of measuring economic success. “Computation of the ISEW begins with personal consumption, but then adjusts this in relation to income distribution. (Our assumption is that the well-being of the society as a whole is affected by the condition of the poorest.) The index then adds for household services, chiefly the contribution of housewives. It subtracts for ‘defensive costs,’ that is, costs that result from economic growth and the social changes, such as urbanization, that accompany it. (For example, the cost of commuting to work should not be viewed as an addition to welfare just because it adds to the GNP.) This applies also to the cost of pollution. Since it is an index of sustainable welfare, it subtracts for the reduction of natural capital, and adds or subtracts for change in the net international position.”[9]
Also, we need to construct “economic models that provide a better cost accounting of the short- and long-term impacts of real-world economic activities and that privilege, through taxation and incentives, the development and implementation of nonpolluting technologies and processes.”[10]
[1] Anthony J. McMichael, Colin D. Butler, and Carl Folke, “New Visions for Addressing Sustainability,” in Donald Kennedy, ed., Science Magazine’s State of the Planet: 2006-2007 (Washington, DC: Island Press, 2006), 164.
[2] Herman E. Daly and Joshua Farley, Ecological Economics, 55. For example, “[T]he state of Kerala in India shows that many social needs can be met without significant economic growth. The per capita income of Kerala is about the same as that for India as a whole. But, with regard to infant mortality and life expectancy, it ranks well in comparison with highly industrialized nations. At the same time it has greatly reduced its rate of population growth without resorting to authoritarian measures. It has achieved this by educating its people, and especially its women, about health and population issues, providing inexpensive care to all, and meeting other basic needs.” John B. Cobb, Jr., “Toward a Just and Sustainable Economic Order,” in Andrew Light and Holmes Rolston III, eds., Environmental Ethics, 365.
[3] John S. Mill, Principles of Political Economy, Book IV, Chapter VI (1848), in Herman E. Daly and Joshua Farley, Ecological Economics, 54, and online at http://www.econlib.org/library/Mill/mlPbl.html.
[4] D. Hayes, Repairs, Reuse, Recycling – First Steps to a Sustainable Society (Washington, DC: The Worldwatch Institute, Paper 23, 1978), in Charles J. Kibert, Jan Sendzimir, and G. Bradley Guy, “Defining an Ecology of Construction,” Charles J. Kibert, Jan Sendzimir, and G. Bradley Guy, eds., Construction Ecology, 16.
[5] “In December 1991, the Bureau of Economic Analysis (BEA), an agency within the Department of Commerce, began to emphasize gross domestic product (GDP) over gross national product (GNP) as the most comprehensive measure of production in the U.S. The difference between GNP and GDP lies in the treatment of income from foreign sources. GNP measures the value of goods and services produced by US nationals, while GDP measures the value of goods and services produced within the boundaries of the US.” “The Difference between GNP and GDP,” online at http://www.cals.ncsu.edu/course/are012/readings/gdp&lead.html.
[6] “The United States’ per capita GNP registered an increase of 38 percent during the period 1980-1998, yet a decline in GPI of 25 percent.” Norman Myers and Jennifer Kent, Perverse Subsidies, 15.
[7] “Genuine Progress Indicator,” Redefining Progress: The Nature of Economics, online at http://www.rprogress.org/sustainability_indicators/genuine_progress_indicator.htm.
[8] “Improving and Promoting the Index of Sustainable Economic Welfare,” International Institute for Sustainable Development, online at http://www.iisd.org/measure/compendium/DisplayInitiative.aspx?id=1.
[9] John B. Cobb, Jr., “Toward a Just and Sustainable Economic Order,” in Andrew Light and Holmes Rolston III, eds., Environmental Ethics, 365.
[10] Robert Nadeau and Menas Kafatos, The Non-Local Universe, 205.
To ensure that economic development is ecologically sustainable, perhaps our long term goal should be a steady-state economy―an economic system that would “maintain constant stocks of wealth and people at levels that are sufficient for a long and good life.”[2] John Stuart Mill, who supported political and economic freedom, argued 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…when minds cease to be engrossed by the art of getting on.”[3]
What might such an economy be like? “Material well-being would almost certainly be indexed by the quality of the existing inventory of goods, rather than by the rate of physical turnover. Planned obsolescence would be eliminated. Excessive consumption and waste would become causes of embarrassment, rather than symbols of prestige.”[4]
This would mean discarding the Gross National Product (GNP) and Gross Domestic Product (GDP) indices[5] used to measure economic growth, for these do not measure economic wellbeing but only the quantity of economic activity. “GNP reflects all expenditures, including many corrective measures such as policing, prisons, hospital services, homeless shelters, lawsuits, and every form of pollution and waste….The onwards-and-upwards rise of GNP presumes that the more people spend, the better their lives must become. But GNP makes no distinction between desirables and undesirables; it only distinguishes more from less.”[6]
The Genuine Progress Indicator (GPI)[7] and the Index of Sustainable Economic Welfare (ISEW)[8] offer alternative ways of measuring economic success. “Computation of the ISEW begins with personal consumption, but then adjusts this in relation to income distribution. (Our assumption is that the well-being of the society as a whole is affected by the condition of the poorest.) The index then adds for household services, chiefly the contribution of housewives. It subtracts for ‘defensive costs,’ that is, costs that result from economic growth and the social changes, such as urbanization, that accompany it. (For example, the cost of commuting to work should not be viewed as an addition to welfare just because it adds to the GNP.) This applies also to the cost of pollution. Since it is an index of sustainable welfare, it subtracts for the reduction of natural capital, and adds or subtracts for change in the net international position.”[9]
Also, we need to construct “economic models that provide a better cost accounting of the short- and long-term impacts of real-world economic activities and that privilege, through taxation and incentives, the development and implementation of nonpolluting technologies and processes.”[10]
[1] Anthony J. McMichael, Colin D. Butler, and Carl Folke, “New Visions for Addressing Sustainability,” in Donald Kennedy, ed., Science Magazine’s State of the Planet: 2006-2007 (Washington, DC: Island Press, 2006), 164.
[2] Herman E. Daly and Joshua Farley, Ecological Economics, 55. For example, “[T]he state of Kerala in India shows that many social needs can be met without significant economic growth. The per capita income of Kerala is about the same as that for India as a whole. But, with regard to infant mortality and life expectancy, it ranks well in comparison with highly industrialized nations. At the same time it has greatly reduced its rate of population growth without resorting to authoritarian measures. It has achieved this by educating its people, and especially its women, about health and population issues, providing inexpensive care to all, and meeting other basic needs.” John B. Cobb, Jr., “Toward a Just and Sustainable Economic Order,” in Andrew Light and Holmes Rolston III, eds., Environmental Ethics, 365.
[3] John S. Mill, Principles of Political Economy, Book IV, Chapter VI (1848), in Herman E. Daly and Joshua Farley, Ecological Economics, 54, and online at http://www.econlib.org/library/Mill/mlPbl.html.
[4] D. Hayes, Repairs, Reuse, Recycling – First Steps to a Sustainable Society (Washington, DC: The Worldwatch Institute, Paper 23, 1978), in Charles J. Kibert, Jan Sendzimir, and G. Bradley Guy, “Defining an Ecology of Construction,” Charles J. Kibert, Jan Sendzimir, and G. Bradley Guy, eds., Construction Ecology, 16.
[5] “In December 1991, the Bureau of Economic Analysis (BEA), an agency within the Department of Commerce, began to emphasize gross domestic product (GDP) over gross national product (GNP) as the most comprehensive measure of production in the U.S. The difference between GNP and GDP lies in the treatment of income from foreign sources. GNP measures the value of goods and services produced by US nationals, while GDP measures the value of goods and services produced within the boundaries of the US.” “The Difference between GNP and GDP,” online at http://www.cals.ncsu.edu/course/are012/readings/gdp&lead.html.
[6] “The United States’ per capita GNP registered an increase of 38 percent during the period 1980-1998, yet a decline in GPI of 25 percent.” Norman Myers and Jennifer Kent, Perverse Subsidies, 15.
[7] “Genuine Progress Indicator,” Redefining Progress: The Nature of Economics, online at http://www.rprogress.org/sustainability_indicators/genuine_progress_indicator.htm.
[8] “Improving and Promoting the Index of Sustainable Economic Welfare,” International Institute for Sustainable Development, online at http://www.iisd.org/measure/compendium/DisplayInitiative.aspx?id=1.
[9] John B. Cobb, Jr., “Toward a Just and Sustainable Economic Order,” in Andrew Light and Holmes Rolston III, eds., Environmental Ethics, 365.
[10] Robert Nadeau and Menas Kafatos, The Non-Local Universe, 205.
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