How do they face their children?

Corporate profits versus the earthHaving touched on population growth in the last entry, it’s time for a quick look at how economic growth has become a serious threat to the global ecosystem. This is a large topic which has filled a good number of books. But on its most basic level its logic is simple. The key point is that neoclassical economics, the dominant economic model for much of recent history, is based in large part on an assumption that the economy, as a whole, can and should continue growing forever. A major part of such growth is its physical dimension, which is well reflected in increasing “throughput,” defined by Herman Daly as “the flow beginning with raw material inputs, followed by their conversion into commodities, and finally into waste products.” (p. 28 ) The neoclassical view promotes unending physical growth and throughput

The problem with forever

When confronted with the prospect of depleted natural resources as a result of ongoing growth, the neoclassical economist’s answer is that human capital in the form of technical innovation will always make up for lost natural capital (natural resources), or even that we will always find new ways to extract ever more resources. (An article by the late economist, Julian Simon, provides a particularly striking example of this thinking.) The flaw in this model is self evident. It fails to acknowledge that the earth and its resources, as well as its absorptive and regenerative capacities, are finite. Indeed, it contrasts sharply with the newer “ecological economics” model which starts from the assumption that the economy is a part of the finite ecosystem and so should strive to respect its limits, lest it damage it.

A clear illustration of the difference between these views (and a much fuller discussion of this topic) is found in a paper (pdf) co-authored by Jeremy B. Williams whose excellent blog, Ruminations, appears in my blogroll. Williams and his coauthor, Judith M. McNeill, provide simple diagrams, much like Figures A and B below, to show the difference. The neoclassical model (figure A) sees the economy as everything. If the ecosystem is even acknowledged, it is merely a part of the economy, and the latter is free to grow forever. (Imagine the outer square expanding.) The ecological economics view (Figure B) sees the economy as a part of the ecosystem, which we know is finite. The economy cannot grow forever due to the constraints of the ecosystem upon which it depends. If it grows too much it impinges on and damages the ecosystem.

Neoclassical economics viewEcological economics view

Which is correct? It’s amazing, really, that there’s any debate about this, but a simple thought makes the answer clear. Imagine human society in prehistoric times, when people survived as hunter-gatherers. No one would disagree that in that scenario humans and everything in their culture were just a small piece of the ecosystem. Now consider the advent of barter and the subsequent early use of money. We then had an “economy,” such as it was. That economy was a part of human society. Did its development somehow extract this portion of human society from the ecosystem? Clearly not. Humans and all their activities, including their economy, still existed within and depended on the ecosystem for their survival. And so it remains today.

Invested in business as usual

Nevertheless, academic theories can be slow to die, especially when people have financial stakes in them. Ecological economics has not yet supplanted the neoclassical model as the dominant view and, not surprisingly, individuals who have historically profited from seemingly endless growth do not want that to change. They do not want to accept limits. There is simply too much lure of profit in continuing on the same path, regardless of its impact on the ecosystem or future generations. (The psychologist in me can’t help but conclude these people must employ some form of denial about the impacts of their activities. Otherwise, how can they face their children or grandchildren?)

Exxon is a case in point. For years they have blocked efforts to address climate change, and have waged a propaganda campaign to sew doubt about the human contribution to global warming. They’ve made so much money with business as usual, that to admit the need for anything else is, to them, unthinkable. (There was recently, by the way, a small sign they may at last be softening their position just slightly. But unless they are convinced they can pursue another course without any impact on profits, I won’t be holding my breath.)

The case of Exxon is just one example of how our blindness to and denial of limits to growth have caused most of the environmental damage we see today. It’s time we adopt the ecological economics model and think about a shift to its alternative to endless growth, the steady state economy. More on that in an upcoming post.

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8 responses to “How do they face their children?

  1. John,

    I would agree with your points here. I have a friend though who is a Harvard educated academic economist who counters the argument in this way:

    – you can grow the value of things by making better “recipes” not just adding more “ingredients”

    – you can grow an economy through growth in service.

    In reality, you and I both know that this is not what is happening and that material inputs continue to grow exponentially. I wonder what your thoughts on these points are?

  2. correction – should read “growth in services”

  3. Verdurous,

    I think that gets into something I was going to touch on in the article, but it was getting too long as it was. Daly and others (e.g., the Rocky Mountain Institute in some of their writings) talk about the difference between growth as measured by quantitative increases in throughput etc., and development as indicated by qualitative improvement, increased efficiency, etc. (I think the latter would include growth in services too.)

    To some extent it seems like quibbling over terminology, but I think the ecological economists want to emphasize the importance of the physical dimension of growth. So actually, I don’t think they disagree with your friend. But Daly argues that measures like GNP don’t distinguish between growth and development, and that we need to take steps to deal with growth while allowing development, or qualitative growth, to continue indefinitely.

  4. Timothy V. Delaney

    Dear John,

    Warning – Delaney’s archaeological application to this issue follows.

    For an incredibly dry view of the intricate interplay between humans and the environment, check out Karl W. Butzer’s “Archaeology as Human Ecology.”

    You may also want to check out Dr. Richard Leakey’s “The Sixth Extinction” (remind me to tell you a funny story about this one, lol), and Morton Fried’s “The Evolution of Political Society.” Fried’s work doesn’t so much touch upon this specific issue (hell, none of them do, really, lol, but putting the issue into a pre-historic perspective, to me, is always educational and fascinating), but it gives a good VERY GENERAL overview on cultural/political development (which of course is dependent on, and impacts, a culture’s environmental circumscription)(see also, if interested, Levi-Strauss’ work on variation in cultural mythology as an explanation of – and/or a culture’s justification of – said culture’s relationship with their environment)….

    I’m happy to bring – si, bring – the aforementioned text’s to ya, if you’d like.

    Happy New Year,

  5. Hi Tim,

    Thanks for the book leads. I just ran into a reference to Leakey’s book yesterday when I was researching the issue of current versus past extinction rates. (Figures around 100-1000 times the normal background rate appear commonly in recent articles and books.)

    So yeah, I’ll put those on the list — though I may not get to the “incredibly dry” one for a while. :-/


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