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Frontier Issues in Economic Thought

by Neva R. Goodwin
Co-director, Global Development And Environment Institute
Plenary Session, U.S. Society for Ecological Economics
Duluth, MN - July 11, 2001

Abstract: This paper describes major themes and issues that are on the frontiers of economic thought at the end of the 20th and beginning of the 21st centuries.  Presented at the innaugural meeting of the U.S. Society for Ecological Economics, it emphasizes the contexts – including, importantly, the ecological context – within which economic activities must be understood.

I would like to start with a provocative question: am I addressing a group of ecological economists – or a group of economic ecologists?   That is, are you mostly ecologists who are reaching out to see what economics has to offer you; or are you economists who are trying to reconceptualize that discipline, to make it better suited to dealing with ecological issues and problems?

Obviously both perspectives are important; the movement needs both economists and ecologists, and it's of critical importance to humanity that you're gathering together and talking with one another. 

The discipline of ecology has been very open about its need to draw on a wide range of other disciplines to help in expressing, understanding, and responding appropriately to a web of complex interconnections.  But, while ecologists have always known that they needed help, economists have suffered from a more serious problem; they needed help desperately, and didn't know it – or couldn't admit it.  So I'm inclined to stress that the most critical goal for this society is to bring the ecological perspective into economics.  At the same time, I'm a little wary of the "economic ecology" approach, which runs the danger of accepting standard economics just so long as it's applied to the issues of interest.

This young organization has, as I see it, two missions: First to address some critical questions – which means you must start from some principles that tell you which questions are the critical ones – and, second, to find ways to address these questions that will turn up the most realistic understanding, and, ultimately, empower the most useful human response to the interactions between people and our natural environment. 
But perhaps I've perceived your mission in this way because these are the lines along which I define the mission of the project which you have asked me to talk about.

The "Frontiers" Series
Frontier Issues in Economic Thought is the title of a series of books that have been put out by the Global Development And Environment Institute at Tufts University.  The series has been closely tied to this Society from our beginning, in 1992, when we started working on the first volume, which we called A Survey of Ecological Economics.  That, and the final volume, on sustainable development, form the book-ends of the series.  They set the framework, in terms of the physical context in which economies operate, as well as highlighting the context of time (that being the frame in which development, or progress, occurs, or does not occur), in which past achievements are built on, or are allowed to decay.

The six books in the series can be seen as grappling, on the one hand, with what have traditionally been identified as the three essential economic activities: Production, Distribution, and Consumption.  At the same time, they also represent three framing themes: Context, Time, and something that I'll call purpose – but it could also be referred to as Goals, or Values.

It took several years to bring to publication our first book, A Survey of Ecological Economics, because, at the same time as we were reviewing the definition, scope, and theoretical frameworks for this field – and also looking at how it was applied, in such areas as energy and resource flow analysis, or international economic relations – we were also inventing a new genre for presenting mostly academic writings to readers who were not presumed to be in the same field as the writer.

I'll quickly list the rest of the titles, and then go into what they were supposed to accomplish, and what we think is to be learned from them.

Volume 2 is The Consumer Society.

Volume 3 - Human Well-Being and Economic Goals.  That title actually doesn't do a very good job of saying what the book is about.  The book starts with well-being, as a term that sums up many human goals; it explores how people have most thoughtfully defined that term, and then compares and contrasts this general notion of well-being with the kinds of goals that are assumed in economics.  That takes us to some interesting places, as you will see.

Volume 4, published in 1998, was The Changing Nature of Work.

Volume 5 is The Political Economy of Inequality.  And – just out this spring:

Volume 6 - A Survey of Sustainable Development: Social and Economic Dimensions.  I should add a note on that last title, too.  What we wanted to get across was that development must pay attention to environmental, social, and economic dimensions – all three – if it is to continue in a healthy way over time.  However, there was a limit to how many words our publisher, Island Press, would allow us to put into a title.  When people speak of sustainable development they're usually referring to the environmental dimension.   So we added a subtitle to indicate that this book pays attention to the social and economic dimensions as well.

Taking the Frontiers series as a whole, it's a cross between a "Readers Digest" and an encyclopedia.  The bulk of each book is taken up with summaries of between 65 and 90 articles or book chapters.  In part, this is because we couldn't print all the articles we wanted in any one book; but more deeply, it's because our goal was a subversive one. 
We were concerned about what has often been referred to as "the narrowing of economics."  This doesn't only mean that the methodology has increasingly focussed on abstract models, with less and less connection to the real world.  The other meaning of this narrowing is that more and more important topics were being left out, or marginalized to the edges of the field, while the central focus was on things that can fit within the formal models.

We wanted to do something that would make it irresistibly attractive for people to start thinking about some very important issues, and to do so by reading what has been written by the best thinkers – who are often not the ones who are most prominent, or who turn up on the lists of authors most often cited in the economics literature.  We think the format we developed does provide a tool for research, teaching, and getting up to speed on a subject that will pull in a lot of folks who might otherwise be reading more standard presentations, or ignoring some of our topics altogether.
Students who sign up for a course in economics often do so thinking that they know what this subject is about.  It's about understanding two kinds of things:  First, what's actually going on in our world that could be called "economic"; and, second, how the human behaviors that make up an economy can be changed to produce better results.  But right there, in the second kind of understanding, we hit a snag.  How do we recognize what's "better"?  Right away, in these first, obvious questions about economics, you run up against the need to define well-being, or something like it, and then to ask whether the discipline of economics is actually promoting well-being.

The discouraging answer – which is why so many students never take another economics course after their first one – is that the goals that are explicit in economics – and even more, the goals that are implicit – are only very approximately identified with a broad goal such as well-being.  Worse yet, the discipline has no way of flagging when its prescriptions actually lead people or societies in the opposite direction, away from well-being.

Moreover, going back to the first kind of understanding that's normally expected from the field – "a good notion of what is actually going on in the economic realm" – that also is not very well satisfied by current mainstream approaches.  There's just too much left out; or, more often, the really important issues are not wholly left out of the field.  You can find them if you really look, but they're marginalized – pushed to the edges.  One goal of the Frontiers series was to bring some critical issues back into the center; not just the particular issues, but also some non-standard ways of thinking about them.

So, what are the critical issues for economics?  I have listed the three essential economic activities – Production, Distribution, and Consumption.  One way of describing the limitations of the paradigm is to see that an understanding of these activities is seriously deficient if they are studied out of context, out of time, and without a clear understanding of purpose; that is, the purpose of the actors – their goals and values – as well as the purpose  and the values of the discipline that is studying them.

The way I'll structure the rest of this talk is to take up each of the three Frontiers topics that directly relate to the three essential economic activities.  In doing so, I'll attempt to show how an understanding of production, distribution and consumption can be – indeed must be – informed by a constant awareness of the topics of the other three books: context, as suggested in Ecological Economics; purpose, explored in Human Well-Being and Economic Goals; and change over time, which is the sub-text of Sustainable Development.

The Nature of Production
The Changing Nature of Work offers short (approximately 3-page) summaries of 87 articles, along with 10 essays by the editors, giving an overview of what we see as the major issues in this realm of economic activity.  It maintains a focus on the meaning of work for people's lives as essential issues.  Some of those issues might turn up in a standard course on labor economics – like work in the informal economy, or the role of technology in determining work organization, or the impact of globalization on the nature of the work experience in developed and developing countries.  But you'll have to look much harder – and not in the mainstream economics literature – to find writings on some other, equally critical issues, relating to caring labor and new family patterns, or the employment of young black urban males, or the psychological meanings of both working, and not working, in formal and informal situations.
As technology, globalization, corporate structure, and management practices have evolved since the beginning of the industrial revolution (with the evolution seeming to progress ever more rapidly as we went through the managerial and technological revolutions of the nineteenth century and the first part of the 20th, and then the information revolution in the second half of the twentieth century), the work experience has been shaken up, reorganized, taken apart and put back together... dehumanized, re-humanized... workers' autonomy has been taken away, given back... taken away and given back...  Workers have been made to feel like part of the family, which was good; patronized, which was bad; encouraged to identify with their company and its fortunes -- and then shown that they were, after all, completely expendable.

That's a quick telling of the story at the experiential level.

At the theoretical level, the red thread running through all of this is competition.  The economic system within which we operate (it's not popular anymore to call it capitalism, but a better name hasn't been proposed) this system operates according to assumptions about what matters.  That is to say, of course, that it is based on values -- as almost any human endeavor or construct must be.

The value that is most salient for the changing work experience is the value of competition.  Not every human belief system holds competition in high esteem.  Some societies regard it with repugnance, and organize their institutions to minimize it.   Others have dismissed it as not very nice – not genteel.  But in the late seventeen-hundreds a notoriously absent-minded, brilliant Scot named Adam Smith saw competition as a necessary counterweight against some realities of human nature, like self-interest, that had previously been frowned on, but which Smith felt could be harnessed for the good.  This was a really remarkable set of observations, with enormous power and creative potential, but containing the seeds for by-products, down the road, that he couldn't have predicted.

Smith gave form and expression to a growing belief that it was okay for a man to "make his own place" in the world; his lifetime identity didn't have to be determined by his place in life at birth.  This revolt against the social order, which had been gathering steam for decades, took the form of entrepreneurial individualism.  Smith recognized that motive as the driving force for accumulating wealth, which he took to be a good thing – another value embedded in the economic system, to which I'll return later.

The point is that Smith specifically recognized competition as an essential balance for the entrepreneurial, money-making motive.  He worried that the creative drive to get ahead would induce the owners of productive facilities to enlarge their profits at the expense of the consumers.  Competition was the force that could weigh in on the consumers' side, preventing the owners from raising their prices too much above their costs.

The problem is, there are three groups of actors here  – owners, consumers, and workers.  Competition was the force that was to tilt the balance away from owners, in favor of lower prices for consumers.  But when you shift your attention to a different dyad – owners and workers – then you find that competition plays a very different role.  It's precisely when competition is slack that it's relatively easy to raise wages, reduce hours, and improve working conditions.  This is the essential lesson from theories of economic dualism.  The primary sector, where jobs have all the desirable characteristics, is in the industries, or firms, where there is some shelter from competition.   Sweatshop conditions occur where the ideal world of the economist has been achieved: very intense competition drives owners to institute all the cost-cutting measures they can find.

If any of you have experienced work in a firm that's driven to rigorous cost-cutting, and can compare that to work at one where the competition wasn't breathing down the boss's neck – you'll know the difference.

Power, and the Distribution of Wealth
One problem with mainstream, neoclassical economics is that, for the most part, all "producers" are lumped together.  To be sure, on the topic of competition, as I just noted, there is a coincidence of interest – what I have sometimes called a "pan-human conspiracy", because it engages just about everyone who is involved in production.  All up and down the line, more competition is worse; less is better.  But this is not the only direction in which the cake is sliced.
I have referred to the necessity for economic activities to be understood within their ecological context.  It is equally essential to see them as occurring within social-psychological contexts of human motivations, culture, ethics, history, institutions, and politics – the last of which is largely about differences in power, and how it is used. 

This contextual awareness, especially with respect to power, ties together the topics of production and distribution.  In many important areas of production, such as who gets to make which decisions, or what considerations are regarded as important (worker safety vs. CEO perks, for example), or how profits are to be divided, there are vast differences of attitude, interest, etcetera, among the different people who play different roles in production: top decision makers, blue and white collar workers, low and high level managers, owners of various kinds.

Recognition of these differences has been sealed off within a sub-speciality – called "principal/agent theory" – of the subfield, labor economics.  Thus neoclassical economics marginalizes the theme that was the backbone for Karl Marx's theory: that, within firms, there are conflicts of interest among a number of different groups.

Marx emphasized the conflict between workers versus owners of capital, where the question was, how much of the profit was really owing to the workers?   And how much could the owner steal from them, to keep for himself?  But it's much more complicated.  The owner is no longer a single, identifiable, cigar-chomping money-bags.  The real powers in today's system, which John Kenneth Galbraith proposes should be called something like "managism" instead of "capitalism" – the real powers are the top managers; the CEO and COO and a handful of others.  That is one of the topics of Frontiers Volume 5, The Political Economy of Inequality. 

If the value of competition is the organizing principle behind the structure of production, the value of wealth accumulation is the organizing principle behind the structure of distribution.  Again, it's worth glancing back through time to see what this value meant to Adam Smith and other early economic theorists.  To do this, it's helpful to draw on a distinction that we spell out in Human Well-Being and Economic Goals.  One category is final goals: things that are valued for their own sake, as good in themselves.  These may be contrasted with intermediate goals, which we value because they will lead to something else that we want.

This distinction can raise a lot of interesting debates about what belongs on the list of final goals, or is there a single one that can subsume all the others?  I myself don't think there is a single good answer.  I perceive a plurality of common and valid final goals, many of which sometimes also serve as intermediate to something else.  For example, freedom, and human dignity, or self-respect, are almost invariably valuable in themselves; but they can also play a role in achieving other valid final goals, like happiness, or self-actualization.

I won't pursue that subject, which could take us very far afield.  Instead, having named wealth accumulation as an organizing principle – one of the things that Adam Smith recognized as a goal – let's zero in on the question: What kind of goal is this?

In fact, wealth is a subject that is unusually easy to place within a goal hierarchy: there is absolutely no reason why it should ever be viewed as a final goal.  Increasing wealth can only, reasonably, be understood as an intermediate goal, which is worth pursuing if it contributes to the achievement of final goals such as happiness, freedom, human dignity – things that I find it convenient to sum up in the word, well-being.

This was clearly the understanding of the major economists from Adam Smith, in the second half of the 18th century, to Alfred Marshall, who dominated the field through the first quarter of the twentieth century.  To be sure, the final goals to which wealth could contribute certainly included comfort and the availability of pleasures; but these economists, writing in a situation where scarcity had much more bite than it has here, today, emphasized, above all, that the purpose of wealth was the alleviation of poverty. 

Unfortunately, this is a principle that motivates only a few economists today – some radical economists, who are entirely outside of the mainstream; and some who are associated with economic development, or what the UNDP calls human development economics – such as Paul Streeten, or Amartya Sen.

We gave an old-fashioned name, Political Economy, to our volume on distribution, to indicate that we were harking back to this older tradition.  Other marginalized themes from the past that we thought deserved a re-examination included the association of wealth and power, or the yet-to-be-fully-explored potential of the welfare state.  We also took up themes that have new importance in the current era, to do with the special roles, and exceptional rewards, of stars, in our star system of CEOs and other celebrities.

Consumption and the Consumer Society
The third standard category of economic activity – consumption – is addressed in our volume, The Consumer Society.  Having noted that economics has traditionally organized its understanding of production around the value of competition, while distribution is structured to accord with the value of wealth accumulation, it's natural to ask: what value is it that structures the economic understanding of consumption?

The answer to this has been designed to be the lynch-pin of the whole value-system that gives form and meaning to economics.  The super-value – the summum bonum – of economics was enunciated by the nineteenth-century economist, John Stuart Mill, and his fellow utilitarians.  The single word, utility, was used to mean "whatever it is that people want."

By the way, an alternative possible definition for utility is "whatever it is that gives people happiness"; but to accept that would be to open up a can of worms.  First of all, it implies that there is a single, final goal, which can be defined as happiness.  There are plenty of ethical and practical reasons to object to that. 

Neoclassical economics has a different reason to shy away from defining final goals in any concrete way.  To be sure, textbooks continue to say that the ultimate purpose of all economic activity is to maximize utility; but, for the practical purposes of economic analysis, utility is never defined as an end state, but only as a process.  Economics, with its aspirations to be a science, can deal with process – at least, timeless process (a rather strange concept) – because it's possible to observe what people want,  by observing their actions: presumably the things people try to get are what they want.  Specifically, of course, what economists observe is purchasing behavior.   That's what provides the totality of formal economic information on what people want, and therefore on what constitutes utility.   We can't similarly observe what makes people happy, so if we were to accept happiness as our goal we would get out of the realm of the objective, into mushy, subjective, "unscientific" issues.

This desire to find a "scientific" basis for the value system that must underlie any social science has conditioned all of neoclassical economics' priorities.  The result comes out as follows:  The overriding goal is to maximize utility.  In general, only the utility of consumers is considered – with a slight caveat, which I'll mention in a moment.  This emphasis on consumers comes about because, among the peculiar assumptions that have been taken on by neoclassical economics, there is the assumption that work provides only disutility.

So, the goal is to maximize the consumer's utility; but, because economics isn't permitted to know anything about the consumer's utility except what is revealed through purchasing behavior, guess what is the maximand in economic models?   Consumption!

In a few minutes I'll come back to some broader implications of this remarkable result which have been made especially evident by ecological economics.   First, I want to make some more comments on the way the world has been divided up in the mainstream economic models.  One reason to focus on this is that, when I conclude, I'll propose an alternative set of conceptual categories that may be more useful.

Much of economic theory is organized around a tripartite division of economic actors: owners, workers, and consumers.  I have mentioned that competition is the force that's supposed to keep the owners from benefiting too much at the expense of the consumers; and also that we appear, in recent decades, to have experienced an imbalance of power between owners and workers, which is, at least in part, the consequence of this same competition.

What about the third dyad, workers and consumers?  Almost the only time that neoclassical economics recognizes that these are, by and large the same people, is when it gives the worker the job of maximizing his total utility by doing a benefit/cost analysis in which he works just so long as the money earned per hour provides enough utility in the purchases it permits to outweigh the disutility of another hour's work.

As an aside, I wonder how much of the present mainstream economic theory, with its strange way of dividing up people into separate, non-communicating roles, has its roots in an illusion of the Victorian era: that the natural order in the world is that working is the male role, and consuming is what females do.  I don't need to rehearse the stringent limits to the actual realization of this illusion in the world, or the role played by 1950s sitcoms like "Leave it to Beaver", which depicted a world in which all women were housewives, and all men were bread-winners – and all children, presumably, were at least a little above average.

Though this illusion bears very little relation to present-day realities, it does point up how much the world has changed.  We are very different from our forebears of the eighteenth century, not because we are able to have so much more, but because we have learned to want so much more.

Some of this difference is discussed in Human Well-Being and Economic Goals; other aspects arise in The Consumer Society, where we look at the different meanings of consumption in an affluent society from its meaning in a context of chronic scarcity.  As you know, scarcity is a basic premise of economics. 

In fact, my first introduction to economics was when working, after college, with the iconoclastic philosopher and architect, Buckminster Fuller.   Fuller contradicted conventional ideas of both scarcity and abundance.  On the one hand, he emphasized that we do now have the means to meet the needs of all the people on Earth – and to do so at a level of comfort and sufficiency that had been out of reach for most human beings during all of history prior to the twentieth century.  Unfortunately, even in the twenty-first century, this basic level of needs satisfaction is still out of reach for the majority – but that isn't because there's not enough to go around; it's because our approach to distribution is out of line with the contemporary reality of sufficiency.

If economics assumes scarcity as a basic premise (and it's true, of course, that there is never enough when you assume unlimited wants), at the same time, it has failed to assume other kinds of limits.  It has, most egregiously, ignored the ecological context, and the limits of the system that Fuller named Spaceship Earth – along with social, cultural, and other constraints.  That is what has brought us unsustainable development: the decay of past achievements, or the achievement of physical or social changes, which, in their very nature, or in the particular context, cannot be sustained over time.

The Problem of Final Goals
Now let me go back to the problems that are created by the neoclassical conflation of utility with consumption as the final goal for the whole economic endeavor.  These problems arise in two major categories.  One obvious category has to do with the impact of human behavior on our natural environment.  I'll continue to hold that aside for a little longer.
The other category of problems has to do with the possibility – which turns out to be a reality – that there is a significant difference between consumption and actual human well-being.  Maximizing consumption is just not the same as maximizing human well-being.

If economics, as a discipline, as a source of policy, and as a justification for business and other behaviors, is to contribute to human well-being, and not detract from it, then it needs a better goal than the maximization of consumption.   But it's hard to pick apart the neoclassical edifice of theory; you pull on any one piece, and all the rest comes with it.  Production and consumption are linked together by prices.  Given any finite amount of purchasing power the consumer can maximize his purchases if the prices he faces are as low as possible.  Hence the elevation of competition among producers as a critical supporting value – because competition keeps driving down prices.
Looking only at this, we might believe that the link between production and the maximization of consumption actually does represent what economics says it represents: consumer sovereignty – prioritizing consumer welfare over anything else.  But if we were really looking at the world from the consumer's point of view, we might say,  "Hey, wait a minute – there's something wrong with a culture that keeps encouraging me to buy more stuff – that even raises my level of dissatisfaction, envy, insecurity, and other unpleasant emotions, in order to motivate me to buy more stuff."
I, as consumer, would go on to point out that, if it was actually my well-being that was being maximized, the U.S. Supreme Court might think again about giving first amendment rights to commercial speech.  And if the goal was to maximize the well-being – not to mention the survival – of our species' future, there might be some kind of organized effort to find ways of raising well-being while reducing consumption and production, and also shifting their content towards less environmentally harmful goods and services.

Virtually none of that is happening on the level of national policy; while, both in economic theory and in its application, what is being maximized is not consumers' well-being, but the ability of producers to keep increasing their sales – in a world where size is power, so that companies can't survive by just staying still; they have to keep enlarging their markets – while at the same time the people with enough money to sop up this growing output are becoming increasingly saturated. 

This picture is one in which it's harder and harder to see wealth as something that's worth maximizing because it is good in itself.  Yet mainstream economic theory continues to hew to a value system in which wealth and consumption are both treated as final goals.  This fundamental error makes it easier to ignore another piece of logic.

If, for a moment, the whole world were to put aside concerns about long-term ecological and human well-being, and sincerely accept consumption maximization as a short-term goal, at least one good thing would result.  It would be obvious that purchasing power should be spread out in as many hands as possible.  The evenest possible distribution would achieve both the overt goal of maximizing consumption, and the covert goal of maximizing sales.

In fact, the world's biggest companies are beginning to recognize that their sales would benefit if they could find ways to raise the purchasing power of the billions of people in the world who are now too poor to participate in the global market place.  But this realization, which, for something that has been so consistently ignored, is remarkably simple and obvious, runs counter to the underlying goal of wealth accumulation.

To understand how the logic has gotten so screwed up, it's helpful to ask: who gets to set the goals, and to determine how they'll be pursued?  Far too often, these aspects of economic theory have been set, ultimately, by the economic power structure.  That's why the overt, acceptable goal of maximizing consumer utility got translated into maximizing producer sales; and why even this goal has not yet been pursued to its fullest logical extent.

Serious distributional issues get left out of most economic debates over how to increase total wealth because it's not in the interest of the relatively few who hold most of the world's resources to recognize that the two leading goals now claimed by economic theory – maximizing total utility, and maximizing sales – would both be promoted by a more even distribution of wealth and income. 

But by now, given this audience, I really can't go on ignoring the ecological context, while I talk about maximizing sales.  That's a goal for producers, while raising consumption is certainly a critical goal for the half of the world's population who don't have access to safe drinking water, or enough to eat, or the kind of education that is supportive of basic human rights.   However, all economic activity – consumption, production and distribution – is relevant to the size and character of the human impact on the natural world.  Whether we set our goal as maximizing consumption, or maximizing production – or sales – it comes out to the same thing: more throughput, more environmental disruption.  The bottom line is a growing incompatibility between the goal of sustainability and the kinds of production and consumption that are fostered by the current system. 

New Goals and New Categories of Analysis
There are a lot of problems with the prevalent economic ideology; but the main reason we need to revise our economic theories has to do with the fundamentally flawed goals that are embedded in the discipline.  Two intermediate goals – increasing wealth and consumption, or sales – are treated as though they were final goals; while competition is called in, in a well-meant but insufficiently effective effort to protect the consumers, who are presumed to have little economic power against the producers: a group that includes both powerful owners and high executives, and relatively powerless workers.  For various reasons, including the high degree of overlap between workers and consumers, this protection doesn't work as Adam Smith had hoped.

We need to rethink the economic goals and values that increasingly diverge from social, individual, and ecological, health and well-being.

So what kind of goals does a reformed economics need to adopt in place of maximizing wealth and sales?  I keep using the term, "well-being", to point in the right direction, but for most purposes we need to be more specific. 
I believe that a valid set of intermediate goals, that would set us on a sustainable path toward increased well-being, would focus on the interests that are attached to various human roles in the economy, and would seek ways to make these interests converge.  To start with, there's that thorny issue of competition which is good for us as consumption-maximizers and bad for us as wage-maximizers.  In the system that Juliet Schor calls "the work-and-spend cycle" this tension is inevitable; we have to be wage-maximizers in order to be consumption-maximizers; so we're forced to go on hating competition in one role, and rejoicing in it in another.  

This treadmill isn't getting us anywhere good.  A primary goal of economics should be to find ways to help us get off it. 

That, of course, brings us back to the third, and most obviously powerful, group of economic players: the owners.  Another purpose of economics should be to find ways to align the owners' goals, also, with the final goal of present and future well-being that is common to all humans.   This is difficult, but not, I believe, impossible.  I organized a section of the final, "Sustainable Development" volume in the Frontiers series, on how modern corporations can be encouraged to accept the requirements of transparency, accountability, and, ultimately, responsibility for their social, environmental and economic impacts – what is coming to be known as "the triple bottom line."  A movement in this direction is actually proceeding at a rate that's several times as rapid as I dared to hope ten years ago.

Other indications of how things could be made to go in the right direction may be found in A Survey of Sustainable Development where, for example, Nancy Birdsall reviews the policies that governments can – and some do – take, to simultaneously reduce poverty and put a brake on population growth.  Gordon Conway is optimistic about the possibility of a partnership between scientists and the rural poor.   Frank Ackerman, from our Institute, sees, in ordinary households, a devotion to recycling that transcends economic rationality.  This is encouraging evidence that people are, in fact, motivated by social and environmental, as well as economic, concerns.  However, we are still up against powerful forces that have reason to fight every step of the way on each of these promising paths. 

Some religious groups believe that the more souls born, the more potentially saved and sent to Heaven – a place where there is no problem of crowding or resource shortage.  If population control means funnelling resources to the poor, there are also plenty of less-poor, or rich folks, who would rather see those resources flow into their own pockets.
As for partnerships between scientists and poor farmers: the eight-hundred pound gorillas in that story are the agribusiness industries whose interests often appear to be diametrically opposed to many other people's.  It's an interesting question whether it is, once again, competition that drives them to externalize costs; and is this a competition from which consumers – at least some consumers – are benefitting?  The same question is relevant to all the other dialogues with industry representatives who, at this moment, seem truly confused about where their interest lies, and what is the relevance of responsibility to them, as individuals, and to the industries they represent.
Jonathan Harris, the lead editor of Volume 6, notes, in his first overview essay, that "both the categories of analysis and the policy implications derived from that analysis change significantly when we take sustainability seriously."   I will conclude by proposing some categories of analysis that I find to be very helpful in the radical rethinking that is needed for economics. 

I was brought to this approach to conceptualizing the economic sphere by the emphasis of ecological economics, which has gradually made it possible to think about economies – plural.  First of all, in addition to whatever we have heretofore defined as "The Economy" – a human construct – we are obliged to take account of "the economy of nature."  Having taken that step, we can open the question of what we have meant by "the economy".  Not only have we focussed on a human economy, but we have only noticed a single aspect: the market economy.

With the market seen as the only economy, its values and assumptions have been increasingly applied to all economic activities.  That is what the economics textbooks are  about, but that isn't all there is.[1]

There is also the "public purpose economy," consisting of governments and their agencies; non-profits, such as charitable foundations and social service organizations; and international institutions like the World Bank or the United Nations, along with their agencies.

Perhaps the most essential of the human economies is the "core economy:" where households and communities carry on their internal activities of production, distribution and consumption.  It is here that children are raised, meals are prepared, homes are maintained and lived in, and the first line of defense is maintained against sickness, sadness and anti-social behavior. 

The differences among these economies may be seen by looking at several distinguishing characteristics; in particular, their goals or justifications; what currency they use; what kind of demand they respond to; and how they define and reward work.  These differences are laid out in work I am now doing that builds upon, and goes beyond, what we have learned from the Frontiers project.  I have only time to give a taste of it now.

For example, as contrasted with the market economy, where the only effective demand is that which is backed up by purchasing power, there is widespread agreement between the core and the public purpose economies that it is important to meet basic human needs, even when these are not made "effective" by ability to pay (though, to be sure, both of these economies have their own sensitivities to other kinds of pressures, which can make them more or less attentive to various needs). 

While the core and the public purpose economies share many extra-market values, the latter is currently laboring under severe stress because it has been put in the position of being judged by the standards of the market.  Thus we find institutions in the public purpose economy which have accepted a production mode where workers are treated like factory workers, and their output of public goods is supposed to be measured as though these results were to be sold in the market.

The extension of the market economy mentality implies that the public purpose economy should quantify, in advance, benefits from public goods that are often, in fact, unquantifiable.  How could anyone have known in advance – or, for that matter, with hindsight – the money value of our systems of public parks, or public education?  If prior proof of market-style cost-effectiveness had been required, would ARPA have invented the internet?  How much government R and D would get funded?  Would there have been a space program?  A Peace Corps?  

An area where ecological economics has led the way in direct and honest confrontation of an extremely difficult issue is the host of problems relating to accounting and evaluation.  When we were working on A Survey of Ecological Economics in the early 1990s, Jonathan Harris organized a section describing where this issue was then.  As I look back at his overview essay and the thirteen summaries in that section, it seems to me that the problems that were laid out there are still the essential ones to grapple with.

The six Frontiers volumes may be seen as planks of a blueprint for a better society – providing pieces of an economic theory that, among other things, doesn't dodge the basic question: how do you define "better"?  Work on this project has pushed us to think outside of the standard categories for analysis, and I am optimistic about the continuing work to which I hope these publications have contributed. 

For example, at the Global Development And Environment Institute we are building into the general, introductory microeconomics textbook that we are developing (Microeconomics in Context) a recognition of the variety of economies – one largely beyond human control, plus several human constructs.  This recognition helps to clarify the fact that monetary measurement is appropriate mostly for the market economy, while the large amount of critical economic activity that goes on in the public purpose and the core economies must be studied and evaluated in different ways, sometimes not even including quantification.  There's still a tremendous amount of work to be done to define what those different ways may be, but we've come far enough to know, for example, that evaluation does not have to mean quantification, and not everything has to be quantified in order to be understood.  

A major task before us is to describe the operating principles of the distinct human economies.  We do know that there is one irrefutable principle from which we can start; that, while there are many important differences between the market and non-market economies, all of the human economies share the requirement to operate within the constraints of the economy of nature.  
[1]          Two other economies were discussed during the USSEE meeting.  One is that huge area of non-market transaction that takes place within multinational corporations.  A large fraction of the goods and services flowing about the globe do not go through markets, but are moved through these channels of coordinated activity that are protected from the competition outside of their bounds.  (Another example of the pan-human conspiracy.)  A request for a name for this kind of economy elicited a number of creative responses: the leading contender, so far, is "the corporate command economy."

Also, several USSEE members reminded me that financial markets have become so huge, and in many ways so detached from the markets for real things or services, that we should, at least, divide "the market economy" into two parts: financial and real.

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