Transcript Corruption of Economics

Corruption of Economics vs.
the Steady State Revolution
Outline
• History of economic thought
• Corruption of economics
• Modern economic growth theory
• Ecological economics
• Steady State Revolution
History of Thought
School
Period
Physiocracy 1760s
Area
France
Classical
19th century
Europe
Marxist
1848…
East
Georgist
1879…
United States
Neoclassical 20th century… World
Keynesian
1936…
West
Heterodox
Always
Everywhere
Georgist
• Henry George, Progress and Poverty
• Single-tax movement
• George vs. land barons
Neoclassical
• Alfred Marshall, Principles of Economics
• Political economy breaks up
– Political science
– Economics
• “American apologists”
Corruption of Economics
• George vs. land barons
• Incipient tax code at stake
• Establishment of American economics
Patron
Institution
Theorist
Low
Columbia
Clark, Seligman
Rockefeller Chicago
Gilman
Knight
Johns Hopkins Ely
Major Implications
• Y =  (K, L)
Major Implications
• Y =  (K, L)
• Land subsumed under
capital
Keynesian
• John Maynard Keynes, The General Theory
of Employment, Interest, and Money
• “Keynesian Revolution”,
end of laissez faire
• Inauspicious birth of
economic growth theory
Economic Growth
• Increase in the production and
consumption of goods and services
• Typically expressed in terms of GDP
• Facilitated by increasing:
–population
–per capita consumption
Modern Economic
Growth Theory
• Solow model
• Lucas model
• Romer model
Y =  (K, L)
Romer Model
• 1990, “Endogenous Technological Change”
• Y =  (K, L)
• Technological progress
• Research and development
• Production of ideas
Neoclassical State of Art
• Land gone from production function
• No limits to growth
• And what is required for increasing per
capita GDP in the long run?
Heterodox
• Anything not orthodox; that is, not adhering to
the “neoclassical synthesis”
•
•
•
•
•
Post-Keynesian
Various Marxist
Georgist
Ecological
Many others
Ecological Economics
• Ecological economics movement
– Scale
– Allocation
– Distribution
• Laws of thermodynamics
• Principles of ecology
Neoclassical Economy
Slightly More Sophisticated
Real Economy
Land
Plus Labor
Plus Capital
=
I.e.,…
Economy
Embedded in the Land
With Economic Growth
Economy
Slightly More Sophisticated
With Economic Growth
Endangerment Causes
Urbanization
Agriculture
Water diversions (e.g., reservoirs)
Recreation, tourism development
Pollution
Domestic livestock, ranching
247
205
160
148
143
136
Czech et al. 2000. Bioscience 50(7):593-601.
Causes (cont.)
Mineral, gas, oil extraction
Non-native species
Harvest
Modified fire regimes
Road construction/maintenance
Industrial development
134
115
101
83
83
81
Czech et al. 2000. Bioscience 50(7):593-601.
GDP
K
Natural capital
allocated to
wildlife
Natural capital
allocated to
human economy
Time
PDF files for these
articles available
at The Wildlife
Society website:
www.wildlife.org
ESA Listings and GDP
1400
$10
1200
$9
1000
$8
800
$7
600
$6
400
$5
R2 = 98.4
200
0
1973
$4
$3
1980
1990
2001
Wildlife Conservation and
Steady State Economy
To conserve wildlife...
K
...maintain steady state
economy below K.
Time
GDP
X natural capital allocable
KU
KT
Natural capital
allocated
to non-human
economy
Natural capital allocated
to human economy
Time
X natural capital allocable
GDP
X/2 conserved
Economic growth with
technology level 2
KU
K2
K1
Economic growth with
technology level 1
Time
The Great Debate:
Is There a Limit?
“Yes”
•
•
•
•
Physiocrats
Classical economists
Ecological economists
Ecologists
“No”
• Neoclassical
economists
• Corporations
• Politicians
Why would there
not be a limit?
• Technological progress
• Substitutability of resources
White Pine, “Big Wheel”
Sitka Spruce,
Timbco 435 “Feller Buncher”
Why would there
be a limit?
• Carrying capacity
• Thermodynamics
• Trophic levels
Carrying Capacity
• Consumers
• Artifacts
• Waste
Thermodynamics
• Matter, energy not
created or destroyed
• Entropy
Clear to All
Without technological progress,
GDP is limited.
Unclear to Many
Does technological progress
occur without increased
consumption?
Consider the Sources
• Research and development
• Corporate profit
• Economies of scale
GNP
X natural capital allocable
KU
K
Natural capital
allocated
to non-human
economy
Natural capital allocated
to human economy
Time
X natural capital allocable
GDP
X/2 conserved
Economic growth with
technology level 2
KU
K2
K1
Economic growth with
technology level 1
Time
K
U
X/2 natural capital allocable
GDP
X/2 converted
Economic growth with
technology level 2
K2
K1
Economic growth with
technology level 1
Time
Environmental Threat
Environmental Kuznets Curve
GDP or Per Capita GDP
Kuznets Curve
• Has supposedly applied to SO2
• Hasn’t applied much otherwise
• Sharply criticized for disregard of
international economics
Environmental Threat
More Realistic Scenario
K
TP3
TP2
TP1
GDP or Per Capita GDP
Maximum Power Principle
Power
(H.T. Odum)
“Power” = work performed;
i.e., production.
0%
Efficiency
100%
Production ($)
Political Economy
Capitalism
Laissez Faire
Anarchy
0%
Socialism
Utopia
Efficiency
100%
Production ($)
Alternatively
Capitalism
Socialism
Laissez Faire
Utopia
0%
Anarchy
Efficiency
100%
In Any Event
• Capitalism selected for
• Production, not efficiency, selected
for in the aggregate
• Limits to efficiency also imposed by
political economy
The “Information Economy”
• What is the information used for?
• How does one come to afford the
information?
$
=
$
$
And yet we hear:
“Some people just don’t get it. There is no conflict
between economic growth and environmental
protection!”
Why do they persist?
Goals
• Replace national goal of
“economic growth” with national
goal of steady state economy.
• Replace bloating economy with
steady state economy.
Revolutions
• Magnitude of change
• Pace of change
• “When evolution won’t cut it”
• Evolution combined with revolt
Steady State Revolution
• Academic, social
• Peaceable, not pacifistic
• Models
–abolition of child labor
–reduction of smoking
Academic Phase
• Replacement of neoclassical
economic growth theory
• Refocusing of curricula
• More public outreach
Social Phase
• “Economic growth” reconstructed
as economic bloating
• Dollar spent is dollar burned
• Castigation of the liquidating class
Class Structure of the
Steady State Revolution
• Liquidating class
• Steady state class
• Amorphic class
Expenditures
Consumption Classes
Percentile:
80
99 100
Expenditures
Consumption Classes
Percentile:
80
99 100
Expenditures
Consumption Classes
Percentile:
80
99 100
Expenditures
Consumption Classes
Percentile:
80
99 100
Liquidators
Amorphs
Steady
Staters
Liquidating Class
Amorphic Class
Steady State Class
Liquidating Class
Amorphic Class
Steady State Class
Economic Rationale
• “Trickle-down consumption”
• Redistribution of wealth compensates
for reduced per capita consumption
• Reduction of waste
• Leads toward steady state economy
Liquidators
Ecological
Capacity
Amorphs
Most Steady Staters
Some Steady Staters
Poverty
Line
Liquidators
Amorphs
Ecological
Capacity
Liquidators
Amorphs
Most Steady Staters
Some Steady Staters
Steady Staters
Poverty
Line
Political Rationale
• No “everyone revolt against everybody”
• Taps into predisposition
• Readily identifiable classes
Psychological
Rationale
• Darwin, Veblen, Maslow
• Cure for “liquidator syndrome”
• Ratcheting effect toward
sustainable ideology
Maslow’s Hierarchy
1) Food
2) Security
3) Love, affection, reproduction
4) Self-esteem
5) Self-actualization
Sociopolitical
Rationale
• Ideological horse before the public
policy cart
• Supplementary to policy
prescriptions
• Replaces politicians, not system
Ethics
• Equity (current, intergenerational)
• Consistent with religions
• “Devil in the details” of castigation
• Tolerance overrated
“Nothing could be more salutary
than a little healthy contempt for a
plethora of material blessings.”
Aldo Leopold, 1948
Remember
A dollar spent
is a dollar burned!
K
Time