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The Illth of
Nations and the Fecklessness of Policy:
An Ecological Economist's Perspective
Herman E. Daly (School of Public Policy, University of Maryland,
USA)
© Copyright 2003 Herman E.
Daly
Our traditional economic problems (poverty, overpopulation,
unemployment, unjust distribution) have all been thought to have a common
solution, namely an increase in wealth. All problems are easier if we are
richer. The way to get richer has been thought to be by economic growth,
usually as measured by GDP. I do not here question the first
proposition that richer is better than poorer, other things equal. But I do
question whether what we persuasively label "economic growth" is
any longer making us richer. I suggest that physical throughput growth is at
the present margin and in the aggregate increasing illth
faster than wealth, thus making us poorer rather than richer. Consequently
our traditional economic problems become more difficult with further growth.
The correlation between throughput growth and GDP growth is sufficiently
strong historically so that in the absence of countervailing policies even
GDP growth frequently increases illth faster than
wealth.
What we conventionally call "economic growth" in the sense of
"growth of the economy" has ironically become "uneconomic
growth" in the literal sense of growth that increases costs by more than
it increases benefits. I am thinking here of the North rather than the South,
because in many poor countries where the majority lives close to subsistence
the benefits of production growth, even if badly distributed, justify
incurring large costs. But since the South is striving with encouragement
from the IMF and World Bank to become like the
North, I am not really neglecting the South by focusing on the North.
One will surely ask how do I know that growth has become uneconomic for many
Northern countries? Some empirical evidence is referenced below.1
But more convincing to me is the simple argument that as the scale of the
human subsystem (the economy) expands relative to the fixed dimensions of the
containing and sustaining ecosystem, we necessarily encroach upon that system
and must pay the opportunity cost of lost ecosystem services as we enjoy the
extra benefit of increased human scale. As rational beings we presumably
satisfy our most pressing wants first, so that each increase in scale yields
a diminishing marginal benefit. Likewise, we presumably would sequence our
takeovers of the ecosystem so as to sacrifice first the least important
natural services. Obviously we have not yet begun to do this because we are
just now recognizing that natural services are scarce. But let me credit us
with capacity to learn. Even so, that means that increasing marginal costs
and decreasing marginal benefits of expanded human scale will accompany
increasing human scale. The optimum scale, from the human perspective, occurs
when marginal cost equals marginal benefit. Beyond that point growth
becomes uneconomic in the literal sense of costing more than it is worth.
It is interesting to know empirically if we have reached that point (I think
we have in many countries), but even if we have not, it is obvious that
continued growth of a dependent subsystem relative to a finite sustaining
total system will inevitably reach such an optimal scale. If we add to the
limit of finitude of the total system the additional limits of entropy and
complexity of ecological interdependence, then it is clear that the optimal
scale will be encountered sooner rather than later. Additionally, if we
expand our anthropocentric view of the optimum scale to a more biocentric view, by which I mean one that attributes not
only instrumental but also intrinsic value to other species, then it is clear
that the scale of the human presence will be further limited by the duty to
reserve a place in the sun for other species, even beyond what they "pay
for" in terms of their instrumental value to us. And of course the whole
idea of "sustainability" is that the optimal scale should exist for
a very long time, not just a few generations. Clearly a sustainable scale
will be smaller than an unsustainable scale. For all these reasons I think
that for policy purposes we do not need exact empirical measures of the
optimal scale. If one jumps from an airplane it may be nice to have an
altimeter, but what one really needs is a parachute.
So what policies constitute a parachute? Briefly, they are policies that
limit aggregate throughput, the metabolic flow beginning with depletion and
ending with pollution, by which we and our economy live. Although
market cannot itself set that aggregate limit, it can allocate the limited
throughput - assuming the market is competitive and confined to some limited
degree of inequality in the distribution of wealth and income. Such policy
instruments are evolving now, e.g., cap-and-trade systems for extraction
rights, pollution emission rights, fishing rights, etc. Also ecological tax
reform limits throughput by making it more expensive. It shifts the tax base
from value added (something we want more of) on to "that to which value
is added", namely the throughput (something we want less of). In
differing ways each of the above "parachutes" would limit throughput
and expansion of the scale of the economy into the ecosystem, and also
provide public revenue. I will not discuss their relative merits, having to
do with price versus quantity interventions in the market, but rather
emphasize the advantage that both have over the currently favored
strategy. The currently favored strategy might be
called "efficiency first" in distinction to the "frugality
first" principle embodied in both of the throughput-limiting mechanisms
mentioned above.2
"Efficiency first" sounds good, especially when referred to as
"win-win" strategies or more picturesquely as "picking the
low-hanging fruit". But the problem of "efficiency first" is
with what comes second. An improvement in efficiency by itself is equivalent
to having a larger supply of the factor whose efficiency increased. The price
of that factor will decline. More uses for the now cheaper factor will be
found. We will end up consuming more of the resource than before, albeit more
efficiently. Scale continues to grow. This is sometimes called the "Jevons effect". A policy of "frugality
first", however, induces efficiency as a secondary consequence;
"efficiency first" does not induce frugality--it makes frugality
less necessary, nor does it give rise to a scarcity rent that can be captured
and redistributed.
So far I have briefly outlined what I take to be
the problem of the "illth of nations"
(apologies to both Adam Smith and John Ruskin), and indicated some policy
guidelines for avoiding the uneconomic growth that increases illth faster than wealth. I probably do not need to tell
readers of post-autistic economics that these views do not find favor with mainstream neoclassical economists. The
concepts of throughput, of entropy, and even of optimal scale of the macroeconomy are foreign to them. The last is especially
odd since in microeconomics the concept of the optimal scale of each micro
activity is central. Yet the sum of all micro activities, the macro economy,
is not thought to have an optimal scale relative to its sustaining ecosystem.
Probably this is because macroeconomists think of the macroeconomy
as the Whole, not as a Part of some larger Whole. For them nature is not a
containing envelope, but just a sector of the macroeconomy
- mines, wells, croplands, pastures, and fisheries. When the Whole grows it
expands into the Void encroaching on nothing and incurring no opportunity
cost. But of course the real economy is a Part and it grows not into the
Void, but into the rest of the ecosystem, and really does incur opportunity costs.
I have long considered this Whole versus Part difference to reflect different
preanalytic visions (Schumpeter) or different
paradigms (Khun). Different preanalytic visions cannot, of course, be reconciled by
further analysis. I still believe this is fundamental.
Recently, however, my experiences of teaching in a policy school and of
dealing with ecologists and biologists as well as economists, has led me to
see an additional problem at the level of policy in general. In other words,
even if we could agree on the right preanalytic
vision of the basic way the world works, would we then be able to enact and
follow effective policies, such as the "parachutes" briefly
discussed? So far, our capacity to enact policies of "frugality
first" seems very weak. Indeed, even "efficiency first"
policies are not easy to enact. So let us turn our attention to the question
of policy in general, and policy fecklessness in particular.
What are the presuppositions we must make before we can reasonably and
seriously discuss policy--policy of any kind? There are two that I can see.
First we must believe that there are real alternatives among which to choose.
If there are no alternatives, if everything is determined, then it hardly
makes sense to discuss policy--what will be will be. No options, no
responsibility, no need to think.
Second, even if there were real alternatives, policy dialogue would still
make no sense unless there was a real criterion of value by which to choose
from among the alternatives. Unless we can distinguish better from worse
states of the world then it makes no sense to try to achieve one state of the
world rather than another. No value criterion, no responsibility, no need to
think.
In sum, serious policy must presuppose: (1)
non-determinism-- that the world is not totally determined, that there is an
element of freedom which offers us real alternatives; and (2) non-nihilism--
that there is a real criterion of value to guide our choices, however vaguely
we may perceive it.
To be sure, not every conceivable alternative is
a real alternative. Many things really are impossible. But the number of
viable possibilities permitted by physical law and past history is seldom
reduced to only one. Through our choices, value and purpose lure the physical
world in one direction rather than the other. Purpose is independently
causative in the world.
This seems pretty obvious to common sense--so
what is the point of stating the obvious? The point is that many members of
the intelligentsia deny one or both presuppositions, and yet want to engage
in a policy dialogue. I don't mean that we disagree on exactly what our
alternatives are in a particular instance, or about just what our value
criterion implies for a concrete case. That is part of the reasonable policy dialogue.
I mean that determinists who deny the effective existence of alternatives,
and nihilists or relativists who deny the existence of value beyond the level
of subjective personal tastes, have no right to engage in policy
dialogue--and yet they do! This is my cordial invitation to them to remember,
and to reflect deeply upon their option of remaining silent--at least about
policy.
Who are these people? In the sciences I am thinking about the hard-line neodarwinists and sociobiologists;
in the humanities, the post-modern deconstructionists; and in the social
sciences, the evolutionary psychologists, and those economists who reduce
value to subjective individual tastes any one of which is as good as another.
No one can in practice live by the creed of determinism or nihilism. In
this sense no one takes them seriously, so we tend to discount any effect on
policy of these doctrines. We tend to dismiss them as academic posturings. However, we halfway suspect that the many
learned people who publicly proclaim these views might be right--and that is
enough to enfeeble policy. For example, many people tell me that
globalization is inevitable; any attempt to counter global economic
integration is futile. If I manage to convince them that it might not be
inevitable, the next line of defense is, how do we
know that globalization will be any worse than the alternative? We cannot
tell, we don't really know that it won't be good for us (because we don't
know what is good in the first place), so there is no point in opposing
it. Either it is inevitable, or if not then we can have no reason to
believe that any alternative would be better. Forget policy, go back to
sleep.
Perhaps I can clarify my point by distinguishing four categories based on
acceptance or non-acceptance of each of the two presuppositions identified.
(1) Perennial
wisdom (e.g. Judeo-Christianity in the West) - there exist real alternatives
from which to choose by reference to objective criteria of value.
(2) (2)
Criterionless choice-- alternatives are real
options, but there is no objective criterion for choosing among them.
(Existentialist angst)
(3) (3)
Providential determinism--there are no real options, but there is an
objective criterion of value by which to choose, if only we had a choice.
Fortunately providence has chosen for us according to the objective
criterion, which we would not be wise or good enough to have followed on our
own. (Theological predestination; technological providentialism)
(4) (4)
Criterionless determinism--there are no real
alternatives to choose from, and even if there were, there is no objective
criterion of value by which to choose. All is mechanism - random variation
and natural selection, as claimed by the hard-line neodarwinists.
People engaged in policy, yet holding to positions (2), (3), or (4)
are in the grip of a severe and debilitating inconsistency. Their
participation in policy dialogue should be subject to the injunction of
"estoppel"--a legal restraint to prevent
witnesses from contradicting their own testimony.3 It
should be applied in academia as well as in the courtroom!
To summarize: Avoiding the uneconomic growth that is increasing the illth of nations will require clear and forceful policy.
All policy, especially such a radical one, requires a belief in both
objective value and real alternatives. The fact that many people engaged in
discussing and making policy reject one or both of these presuppositions is,
in Alfred North Whitehead's term, "the lurking
inconsistency", a contradiction at the basis of the modern worldview
which enfeebles thought and renders action feckless. If we even halfway
believe that purpose is an illusion foisted on us by our genes to somehow
make us more efficient at procreation, or that one state of the world is, for
all we can tell, as good as another, then it is hard to get serious about
real issues. Whitehead noted, "Scientists
animated by the purpose of proving that they are purposeless constitute an
interesting subject for study". He went on to say that, "It is not
popular to dwell on the absolute contradiction here involved".
I think, 75 years later, that it is high time we dwelt on this absolute
contradiction. We pay a price for ignoring contradictions--in this case the
price is feebleness of purpose and half-heartedness in policy. Citizens
really must affirm that the world offers more than one possibility to choose
from, and that some choices really are better than others. Determinists and
nihilists have a right to exist, but an obligation to remain silent on
policy. If hard-line, neodarwinist, deterministic
materialists refuse to be silent, then they should be invited to explain why
the survival value of such neodarwinism is not
negative for the species that really believes it!
Notes
1 For critical discussion and the latest revision of
the ISEW, see, Clifford W. Cobb and John B. Cobb, Jr., et al., The Green National Product, University Press
of America, New York, 1994. For a presentation of the ISEW
see Appendix of For the Common Good, H. Daly and J. Cobb, Boston: Beacon
Press, 1989; second edition 1994. See also Clifford W. Cobb, et al., “If the
GDP is Up, Why is America Down?, Atlantic Monthly, October, 1995. See also
Manfred Max-Neef, Economic Growth and Quality of
Life: A Threshold Hypothesis, Ecological Economics, 15, (1995), pp. 115-118.
See also,Clive Hamilton, Growth Fetish, Allen and Unwin, 2003, NSW Australia.
2. By "frugality" I mean "non-wasteful
sufficiency", rather than "meager
scantiness".
3. estoppel = a bar or impediment preventing a party from asserting a fact or
claim inconsistent with a position that the party previously
took, either by conduct or words, esp. where a representation has been relied
or acted upon by others. (Random House Dictionary of the English Language)
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CITATION:
Herman E. Daly, “The Illth of Nations and the
Fecklessness of Policy: An Ecological Economist’s Perspective”, post-autistic
economics review, issue no. 22,
24 November 2003, article 1, http://www.paecon.net/PAEReview/issue22/Daly22.htm
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