Issues in Economic Thought
Neva R. Goodwin
Co-director, Global Development And Environment
Plenary Session, U.S. Society for Ecological Economics
Duluth, MN - July 11, 2001
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?
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.
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
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
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.
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.
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.
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.
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.
2 is The Consumer Society.
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
4, published in 1998, was The Changing Nature
5 is The Political Economy of Inequality.
And just out this spring:
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
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.
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.
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.
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.
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
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
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.
a quick telling of the story at the experiential
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.
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.
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.
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
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.
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
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.
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.
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.
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.
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.
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.
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?
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.
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.
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.
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
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
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
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.
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"
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.
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!
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.
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.
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
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.
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.
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.
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.
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
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
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
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.
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.
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.
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.
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.
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.
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.
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.
need to rethink the economic goals and values that
increasingly diverge from social, individual, and
ecological, health and well-being.
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.
treadmill isn't getting us anywhere good.
A primary goal of economics should be to find ways
to help us get off it.
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.
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
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.
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
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.
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
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
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.
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).
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.
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?
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.
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.
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.
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."
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.