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Economics And The Environment

Mainstream economic thought of the 20th has been dominated by the principle of ‘more is better’ , this thinking is dangerously misguided. Concentrating on maximizing real GNP has been brought about by economists who are working on the assumption that growth is always justified, because of the infinite wants of the population. These economists also see growth as a solution to the problems of the world today. Even those who propose ‘sustainable growth’ are false in that they assume that it is possible to continue with the growth of the last two centuries.

Some of the fallacies being put forth are growth as a solution to pollution, “trickle down” effect of growth needed to help the poor, and technological salvation. They feel the exponential growth of the present can continue as long as technology can keep up, and that resource efficiency can grow indefinitely so as to stabilize resource flow. By analyzing these arguments we can see their contradictory tendencies and show that by prioritizing ‘growth’ alone, the global economy and its participants will be worse off.

First, there is a natural response to the word growth. It being a sense of advancement or betterment, this is not always the case. The notion of growth must always carry with it a concept of maturity. Growing beyond it would give rise to problems. For example, when a baby grows its parents are pleased and even show off to their friends at every inch and pound. However, imagine that the baby continued to grow infinitely! The parents would be concerned to say the least. The baby would outgrow its house parents and everything else it depends on for growth.

Common sense tells us that there is reasonable level at which everything must grow, beyond which it is considered detrimental to itself and its surroundings. Our economy is a subset of the ecosystem we live in, and must grow to proportions that are reasonable to it. It definitely cannot continue to grow outside of it, nor should it grow to a point where it is harmful to the ecosystem. The economy being dependent upon the ecosystem must adhere itself to achieving a state of compatibility with environment. Logic follows then, what is the optimal level of economic output?

How do we decide what level should be maintained. We certainly cannot use the standard of the average american. In order to get that, we would have to increase the world economy by a multiple of seven! As it stands now human being use up a little more than a fourth of the worlds net primary product of photosynthesis. We cannot go beyond or even close to 100% of NPP, since historically the tendency of growth is to reduce global NPP of photosynthesis. More and more there are stress-induced feedback’s from the ecosystem to the economy.

The greenhouse effect, ozone depletion, acid rain, etc. hat say even our present rate is unsustainable. So sustainable growth is contradictory in a finite, nongrowing ecosystem. As many economists can tell you, growth in real GNP should stop when decreasing marginal benefits equal increasing marginal costs, theoretically! However there is no statistical data that makes the effort to measure the cost of GNP. Data that would take into account all the environmental and sociological costs now and in the future for the ‘growth’ we realize today.

Those that admit to such an optimal point of growth say it is far off.. These policy maker and advisors to world leaders contradict themselves. Even their visions of sustainable growth has limits. Yet there has never a mention of limits on economic growth. For example, harvesting rates should not exceed regeneration rates, and water emissions should not be greater than the capacity of the environment to assimilate the waste. Yet if the world economy would cease to grow, the ecosystem could not even sustain this rate of metabolic throughput flow we enjoy today. More is better is an argument that needs much qualification.

The concept of an optimal scale of the total world economy cannot be seen in today’s macroeconomic theories. There can only be a sustainable economy, when the economy improves knowledge, technical efficiency, organization, and does this by not just adding more of the ecosystem into itself to alleviate burdens. The sustainable economy must limit itself to a scale to which would allow the ecosystem to renew itself. By limiting itself, the economy will be nongrowing but that does not mean ressionary. One of the more prominent arguments for development is that more growth would enable us to take on the burden of pollution.

Though we would be in a position to better cleanup after ourselves if we were made richer, the fact is that we would not be richer ‘in fact’. Since we do not actually take into account all costs of production (cost to environment), we do not actually know if we are better off. The cost of building a factory might actually be exponentially larger than the revenue taken in from all its production. That is to say that prices do not reflect the true costs so we are not actually richer for having developed. In fact we may very well be much poorer if all the math is done.

Also, how can we be advocates of cleaning up the environment through more growth, when it is usually the growth itself that is the cause of worldwide levels of environmental destruction. It is this thinking that was responsible for the Texaco fiasco in Ecuador. Texaco under the flag of growth and development for Ecuador set up shop, and was responsible for ecological destruction that is still taking its toll on people there. I wonder if Texaco accounted for all the environmental damage and all the ailments the people of Ecuador experiencing to this day.

And how do you quantify human suffering? Then there are those who claim that growth is necessary to help the poor. True it can be argued that growth helps the poor more recognizably than the elite, but it the wealth of the elite that is growing not he poor. We have experienced growth in the last two centuries unlike any in the history of the world, yet we still have poverty. With the type of growth we have been through there should not be poverty if the lower class collects even a small share. What is growing is the wealth of capitalists/ owners of accumulated capital.

Reinvested surpluses of the wealthy is what is growing and some of their fortunes do ‘trickle’ down to the poor. The poor are given employment and share in the burdens of the system yet do not equitably share in the benefits. This being a fundamental basis on which to evaluate an economic system, one cannot help but wonder on how growth for betterment of the poor can be used for defense of growth. Since growth is being led by technology, there is potential for further inequalities. Technical progress is changing the face of the labor force.

Labor now requires more educated workers and less and less uneducated workers, yet opportunities to obtain these qualifications are not becoming more available to the poor. So it seems what eventually comes of this is even more disparity between rich and poor. On a physical line of thinking, if development would be good for the poor then it would have to be made up of things the poor need. Clothing, food, and shelter and basic goods. The growth of our times though partly these things is mostly services, financial products, and not tangibles the poor benefit from.

To complete the discussion of poverty alleviation we must look at the per capita annual product of nations. That is the GNP/ population. This ratio is used to distinguish rich and poor countries. Changes in GNP in rich and poor countries have very different meanings. First in rich countries population increases relatively slowly, and in poor countries population increases rapidly. World wide growth at the same rate in rich and poor nations( more in rich), means less to the underprivileged country. Because their population is growing faster.

Any additional growth in developed countries means increase of trivial goods. Any increase in GNP/P means more to poor countries its true, but with their population increases, its not much of a benefit. Especially if you take into account the labor burden they take on to achieve the minimal increase. There are those who concede the fact that we live in a world with finite means, yet they have justified there growthmania with the use of technology. Technology has grown exponentially hand in hand with the economy, and it is argued that technology is responsible for the growth.

Although it is true that technology is partly responsible, there is no evidence that technology will support the type of growth we have been in. Nor is it right to assume that technology will influence development the way it has in the past. As a matter of physics, we cannot accept that technology will increase output without additional real inputs. There is a limit to which productivity can be increased due to technical innovation by itself. If we take results from the past we see what was thought to be technical change was just factor substitution.

The enormous increases in output that we have experienced and expect in the future cannot be through technology alone. And all of this is subject to the fact that technology produces more benefit than harm. Looking from a physical standpoint, this idea that technology is our salvation is even more absurd. Let’s analyze the entropy of our ecosystem. Entropy is the measure of the degree of randomness in the system. The less entropy something has the more structured it is, and the more energy it possesses.

We derive energy from nature by breaking the bonds that hold the structures in place. Oil, its composition of intermolecular bonds, release energy when broken, into heat, light and other forms of radiation. Entropy always goes from low to high naturally, releasing energy. Nature takes a very long time and lots of energy to make up resources like this. Technology enables to make more productive use of these resources but not at the level that would even sustain the level of growth we are used to. Technical progress cannot make more oil, or decrease the entropy of our ecosystem.

Economists of the persuasion that technology makes up the bulk of the increased output of the times also maintain that the efficiency of the resources can be exponentially increased. That is to say we can maintain the same level of material input and continue to increase the output exponentially. This reasoning is flawed to say the least. Measuring the productivity of a resource as GNP/ output of the resource. This supports no conclusion regarding resource productivity. In fact if one resource productivity is increased, it is usually due to its substitutes productivity being decreased.

The meaning of resource productivity can only be taken seriously when it allude to technology, and that argument has been shown. If not growth and development then what? We have shown that the ecosystem cannot even sustain the amount metabolic throughput flow we use now! Herman Daly and colleagues have been proponents of development without growth. This is almost heresy to so called progressives with their growthmania tendencies. In stead what has been put forth is a steady-State model for economic and ecological compatibility.

The three way that are possible are economic imperialism, ecological reductionism, and the steady-state approach. Economic imperialism involves expanding the economy to include the whole of the ecology. Putting ecological issues in terms of economics. All energy and matter that flows in and out of the system in terms of costs. Then regulating them through correct pricing. By calculating the true cost to the environment and even sociological costs we would limit the expansion. This causes the industrialist to realize the costs. Imagine what the true costs of owning a car would be now that all environmental considerations are accounted for.

All the solar energy used, and wastes released would reflect the true costs and keep growth in check.. In fact it would bring to a complete halt the rapid growth that we have taken for granted. Ecological reductionism the economic system would be reduced to a minimum and the ecological system would be the dominant. We would be accounting for solar energy, natural resources and waste costs to the environment and not in economic terms. The focus would be the ecological system that we obtain the resources from, and release the wastes into. The steady-state melds the two previous approaches.

It places a boundary between the ecosystem and the economic subsystem. This would place strictest importance on where the boundary is placed. And, it would regulate heavily the flows that go in and out of both systems. There would be a balance between the flows. The ecosystems flows would be regulated in terms of the solar energy taken in and the waste heat released. The economic subsystem would be regulated for taking in energy from ecosystem and materials and the waste products and heat released into the ecosystem. How would we do this?

First we would have to obtain a constant level of stock resources by minimizing the amount of throughput flows( the energy and material we incorporate, use, and change through production and consumption). This would take the form of zero growth. However not zero development. Although this would bring about unemployment and suffering, it is in order to avoid larger scale suffering and unemployment that we must do this. We know now that we cannot continue to grow as we have been, and if we implement the steady-state approach we can at least save ourselves from the wide scale destruction that is imminent.

This steady-state model calls for recognizing an optimal level of ‘development’. That would be a level of consumption. Where the harvesting rates are not larger than the regeneration of natural agricultural products and their products. And a level that allows the environment to assimilate the wastes we produce and to renew the capacity of the environment to do this. Some have argued that there will always be an infinite supply of resources. They failed to see the growth the propose is exactly what has diminished the ability of the ecosystem to regenerate and renew these resources.

We should not use nonrenewable resources faster than substitutes are created. Champions of the poor countries are correct that limiting growth as proposed by the steady-state model would hurt underdeveloped countries. The steady-state models answer for those countries is simply to control population rather than to promote growth. Since it is impossible to attain a level of living like the U. S. that goal in impossible regardless. Also there should be a redistribution of wealth among the underprivileged. By strict economic standards alone we see that the marginal utility of developed countries is extremely low.

Poorer countries would get much more use of development. If we try to maximize utility among the poor we would actually increase total world utility with a minimal of growth. Of all the research done on this topic the underlying issue I feel is that we need to reduce consumption and production. These views are unpopular with many people and on many levels. The growth of today is only a reflection of the unlimited wants of the people. One of the reasons that economics isn’t an exact science. Human being are predisposed to be irrational in their wants.

In science we learn that an organism develops a relationship with its environment, that is beneficial to and the habitat it is dependent upon. Parasites consume and ‘grow’ out of control, they have no checks. They completely use up all of the resources available and the kill the host and eventually themselves for lack of nutrients. Are we to the virus of this planet. More is better approach needs to be qualified. Growing beyond the limits of the environment is irrational to say the least and at its worst certain depletion of resources and he life force of this ecosystem whom we have infected.

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