User:Gaeanautes/Concerns & Disagreements

Post-war economic expansion and emerging ecological concerns
The economic expansion following World War II took place while mainstream economics largely neglected the importance of natural resources and environmental constraints in the development. Addressing this discrepancy, ecological concerns emerged in academia around 1970. Later on, these concerns developed into the formation of ecological economics as an academic subdiscipline in economics.

Post-war economic expansion and the neglect of mainstream economics
After the ravages of World War II, the industrialised part of the world experienced almost three decades of unprecedented and prolonged economic expansion. This expansion — known today as the Post–World War II economic expansion — was brought about by international financial stability, low oil prices and ever increasing labour productivity in manufacturing. During the era, all the advanced countries who founded — or later joined — the OECD enjoyed robust and sustained growth rates as well as full employment. In the 1970s, the expansion ended with the 1973 oil crisis, resulting in the 1973–75 recession and the collapse of the Bretton Woods monetary system.

Throughout this era, mainstream economics — dominated by both neoclassical economics and Keynesian economics — developed theories and models where natural resources and environmental constraints were neglected. Conservation issues related specifically to agriculture and forestry were left to specialists in the subdiscipline of environmental economics at the margins of the mainstream. As the theoretical framework of neoclassical economics — namely general equilibrium theory — was uncritically adopted and maintained by even environmental economics, this subdiscipline was rendered largely unable to consider important issues of concern to environmental policy.

In the years around 1970, the widening discrepancy between an ever growing world economy on the one hand, and a mainstream economics discipline not taking into account the importance of natural resources and environmental constraints on the other hand, was finally addressed — indeed, challenged — in academia by a few unorthodox economists and researchers.

Emerging ecological concerns
During the short period of time from 1966 to 1972, four works were published addressing the importance of natural resources and the environment to human society:


 * In his 1966 philosophical-minded essay on The Economics of the Coming Spaceship Earth, economist and systems scientist Kenneth E. Boulding argued that mankind would soon have to adapt to economic principles much different than the past 'open Earth' of illimitable plains and exploitative behaviour. On the basis of the thermodynamic principle of the conservation of matter and energy, Boulding developed the view that the flow of natural resources through the economy is a rough measure of the Gross national product (GNP); and, consequently, that the GNP should be regarded as a cost to be minimized by society rather than a benefit to be maximized. Therefore, mankind would have to find its place in a cyclical ecological system without unlimited reservoirs of anything, either for extraction or for pollution — like a spaceman on board a spaceship. Boulding was not the first to make use of the 'Spaceship Earth' metaphor, but he was the one who combined this metaphor with the analysis of natural resource flows through the economy.


 * In his 1971 magnum opus on The Entropy Law and the Economic Process, Romanian American economist Nicholas Georgescu-Roegen integrated the thermodynamic concept of entropy with economic analysis, and argued that all natural resources are irreversibly degraded when put to use in economic activity. What happens in the economy is that all matter and energy is transformed from states available for human purposes (valuable natural resources) to states unavailable for human purposes (valueless waste and pollution). In the history of economic thought, Georgescu-Roegen was also the first economist of some standing to theorise on the premise that all of Earth's mineral resources will eventually be exhausted at some point (see below).


 * Also in 1971, pioneering ecologist and general systems analyst Howard T. Odum published his book on Environment, Power and Society, where he analysed human society in terms of ecology. He formulated the maximum power principle, according to which all organisms, ecosystems and human societies organise themselves in order to maximize their use of available energy for survival. Odum pointed out that those human societies with access to the higher quality of energy sources enjoyed an advantage over other societies in the Darwinian evolutionary struggle. Odum later co-developed the concept of emergy (i.e., embodied energy) and made other valuable contributions to ecology and systems analysis. His work provided the biological term 'ecology' with its broader societal meaning used today.

Taken together, these four works were seminal in bringing about the formation of ecological economics later on.
 * In 1972, scientist and systems analyst Dennis Meadows and his team of researchers had their study on The Limits to Growth published by the Club of Rome. The Meadows team modelled aggregate economic trends in the world economy and made the projection — not prediction — that by the mid to latter part of the 21st century, industrial production per capita, food supply per capita and world population would all reach a peak, and then rapidly decline in a vicious overshoot-and-collapse trajectory. Due to its dire pessimism, the study was scorned and dismissed by most mainstream economists at the time of its publication.    Since then, several independent researchers have confirmed that the development of world trends so far does indeed match up to the original 'standard run' projections made by the Meadows team, indicating that a global collapse may still loom large in the not too distant future.

Formation of ecological economics as an academic subdiscipline
Although most of the theoretical and foundational work behind ecological economics was in place by the early 1970s, a long gestation period elapsed before this new academic subdiscipline in economics was properly named and institutionalized. Ecological economics was formally founded in 1988 as the culmination of a series of conferences and meetings through the 1980s, where key scholars interested in the ecology-economy interdependency were interacting with each other. The most important people involved in the establishment were Herman Daly and Robert Costanza from the US; AnnMari Jansson from Sweden; and Juan Martínez-Alier from Spain (Catalonia). Since 1989, the discipline has been organised in the International Society for Ecological Economics that publishes the journal of Ecological Economics.

When the ecological economics subdiscipline was established, Herman Daly's 'preanalytic vision' of the economy was widely shared among the members who joined in: The human economy is an open subsystem of a finite and non-growing ecosystem (Earth's natural environment), and any subsystem of a fixed nongrowing system must itself at some point also become nongrowing. Indeed, it has been argued that the subdiscipline itself was born out of frustration with the unwillingness of the established disciplines to accept this vision. However, ecological economics has since been overwhelmed by the influence and domination of neoclassical economics and its everlasting free market orthodoxy. This development has been deplored by activistic ecological economists as an 'incoherent', 'shallow' and overly 'pragmatic' slide.

Conceptual and ideological disagreements
Several conceptual and ideological disagreements presently exist concerning the steady-state economy in particular and the dilemma of growth in general. The following issues are considered below: The role of technology; resource decoupling and the rebound effect; a declining-state economy; the possibility of having capitalism without growth; and the possibility of pushing some of the terrestrial limits into outer space. Herman Daly's approach to these issues are presented throughout the text.

Role of technology
Technology is usually defined as the application of scientific method in the production of goods or in other social achievements. Historically, technology has mostly been developed and implemented in order to improve labour productivity and increase living standards. In economics, disagreement presently exists regarding the role of technology when considering its dependency on natural resources:


 * In neoclassical economics, on the one hand, the role of 'technology' is usually represented as yet another factor of production contributing to economic growth, like land, labour and capital contribute. However, in neoclassical production functions, where the output of produced goods are related to the inputs provided by the factors of production, no mention is made of the contribution of natural resources to the production process. Hence, 'technology' is reified as a separate, self-contained entity or fetish, capable of contributing to production without receiving any natural resource inputs beforehand. This representation of 'technology' also prevails in standard mainstream economics textbooks on the subject.


 * In ecological economics, on the other hand, 'technology' is represented as the way natural resources are transformed in the production process. Hence, Herman Daly argues that the role of technology in the economy cannot be properly conceptualized without taking into account the flow of natural resources necessary to support the technology itself: An internal combustion engine runs on fuels; machinery and electric devices run on electricity; all capital equipment is made out of material resources to begin with. In physical terms, any technology — useful though it is — works largely as a medium for transforming valuable natural resources into material goods that eventually end up as valueless waste and pollution, thereby increasing the entropy — or disorder — of the world as a whole.  This view of the role of technology in the economy has been termed 'entropy pessimism'.

From the ecological point of view, it has been suggested that the disagreement boils down to a matter of teaching some elementary physics to the uninitiated neoclassical economists and other technological optimists. From the neoclassical point of view, leading growth theorist and Nobel Prize laureate Robert Solow has defended his much criticised position by replying in 1997 that 'elementary physics' has not by itself prevented growth in the industrialized countries so far.

Resource decoupling and the rebound effect
Resource decoupling occurs when economic activity becomes less intensive ecologically: A declining input of natural resources is needed to produce one unit of output on average, measured by the ratio of total natural resource consumption to Gross domestic product (GDP). Relative resource decoupling occurs when natural resource consumption declines on a ceteris paribus assumption — that is, all other things being equal. Absolute resource decoupling occurs when natural resource consumption declines, even while GDP is growing.

In the history of economic thought, William Stanley Jevons was the first economist of some standing to analyse the occurrence of resource decoupling, although he did not use this term. In his 1865 book on The Coal Question, Jevons argued that an increase in energy efficiency would by itself lead to more, not less, consumption of energy: Due to the income effect of the lowered energy expenditures, people would be rendered better off and demand even more energy, thereby outweighing the initial gain in efficiency. This mechanism is known today as the Jevons paradox or the rebound effect. Jevons's analysis of this seeming paradox formed part of his general concern that Britain's industrial supremacy in the 19th century would soon be set back by the inevitable exhaustion of the country's coal mines, whereupon the geopolitical balance of power would tip in favour of countries abroad having more abundant mines.

In 2009, two separate studies were published that — among other things — addressed the issues of resource decoupling and the rebound effect: German scientist and politician Ernst Ulrich von Weizsäcker published Factor Five: Transforming the Global Economy through 80% Improvements in Resource Productivity, co-authored with a team of researchers from The Natural Edge Project. British ecological economist Tim Jackson published Prosperity Without Growth, drawing extensively from an earlier report authored by him for the UK Sustainable Development Commission. Consider each in turn:
 * Ernst Ulrich von Weizsäcker argues that a new economic wave of innovation and investment — based on increasing resource productivity, renewable energy, industrial ecology and other green technology — will soon kick off a 'Green Kondratiev' cycle, named after the Russian economist Nikolai Kondratiev. This new long-term cycle is expected to bring about as much as an 80 percent increase in resource productivity, or what amounts to a 'Factor Five' improvement of the gross input per output ratio in the economy, and reduce environmental impact accordingly, von Weizsäcker promises. Regarding the adverse rebound effect, von Weizsäcker notes that "... efforts to improve efficiency have been fraught with increasing overall levels of consumption."  As remedies, von Weizsäcker recommends three separate approaches: Recycling of and imposing restrictions on the use of materials; establishing capital funds from natural resource proceeds for reinvestments in order to compensate for the future bust caused by depletion; and finally, taxing resource consumption so as to balance it with the available supplies.
 * Tim Jackson points out that according to empirical evidence, the world economy has indeed experienced some relative resource decoupling: In the period from 1970 to 2009, the 'energy intensity' — that is, the energy content embodied in world GDP — decreased by 33 percent;  but as the world economy also kept growing, carbon dioxide emissions from fossil fuels have increased by 80 percent during the same period of time.  Hence, no absolute energy resource decoupling materialized. Regarding key metal resources, the development was even worse in that not even relative resource decoupling have materialized in the period from 1990 to 2007: The extraction of iron ore, bauxite, copper and nickel was rising faster than world GDP to the effect that "resource efficiency is going in the wrong direction," mostly due to emerging economies — notably China — building up their infrastructure.  Jackson concludes his survey by noting that the 'dilemma of growth' is evident when any resource efficiency squeezed out of the economy will sooner or later be pushed back up again by a growing GDP.  Jackson further cautions that "simplistic assumptions that capitalism's propensity for efficiency will stabilize the climate and solve the problem of resource scarcity are almost literally bankrupt."

Herman Daly has argued that the best way to increase natural resource efficiency (decouple) and to prevent any rebound effects is to impose quantitative restrictions on resource use by establishing a cap and trade system of quotas, managed by a government agency. Daly believes this system features a unique triple advantage: For all its merits, Daly himself points to the existence of physical, technological and practical limitations to how much efficiency and recycling can be achieved by this proposed system. The idea of absolute decoupling ridding the economy as a whole of any dependence on natural resources is ridiculed polemically by Daly as 'angelizing GDP': It would work only if we ascended to become angels ourselves.
 * Absolute and permanent limits are set on the extraction rate of, use of and pollution with the resources flowing through the economy; as opposed to taxes that merely alter the prevailing price structure without stopping growth; and as opposed to pollution standards and control which are both costly and difficult to enact and enforce.
 * More efficiency and recycling efforts are induced by the higher resource prices resulting from the restrictions (quota prices plus regular extraction costs).
 * No rebound effects are able to appear, as any temporary excess demand will result only in inflation or shortages, or both — and not in increased supply, which is to remain constant and limited on a permanent basis.

Declining-state economy
A declining-state economy is an economy made up of a declining stock of physical wealth (capital) or a declining population size, or both. A declining-state economy is not to be confused with a recession: Whereas a declining-state economy is established as the result of deliberate political action, a recession is the unexpected and unwelcome failure of a growing or a steady economy.

Proponents of a declining-state economy generally believe that a steady-state economy is not far-reaching enough for the future of mankind. Some proponents may also reject modern civilization as such, either partly or completely, whereby the concept of a declining-state economy begins bordering on the ideology of anarcho-primitivism, on radical ecological doomsaying or on some variants of survivalism.

Romanian American economist Nicholas Georgescu-Roegen was the teacher and mentor of Herman Daly and is presently considered the main intellectual figure influencing the degrowth movement that formed in France and Italy in the early 2000s. In his paradigmatic magnum opus on The Entropy Law and the Economic Process, Georgescu-Roegen argues that the carrying capacity of Earth — that is, Earth's capacity to sustain human populations and consumption levels — is bound to decrease sometime in the future as Earth's finite stock of mineral resources is presently being extracted and put to use; and consequently, that the world economy as a whole is heading towards an inevitable future collapse. In effect, Georgescu-Roegen points out that the arguments advanced by Herman Daly in support of his steady-state economy apply with even greater force in support of a declining-state economy: When the overall purpose is to ration and stretch mineral resource use for as long time into the future as possible, zero economic growth is more desirable than growth is, true; but negative growth is better still! Instead of Daly's steady-state economics, Georgescu-Roegen proposed his own so-called 'minimal bioeconomic program', featuring restrictions even more severe than those propounded by his student Daly (see above).

American political advisor Jeremy Rifkin, French champion of the degrowth movement Serge Latouche and Austrian degrowth theorist Christian Kerschner — all followers and interpreters of Georgescu-Roegen — have argued in favour of declining-state strategies. Consider each in turn:
 * In his book on Entropy: A New World View, Jeremy Rifkin argues that the impending exhaustion of Earth's mineral resources will mark the decline of the industrial age, followed by the advent of a new solar age, based on renewable solar power. Due to the diffuse, low-intensity property of solar radiation, this source of energy is uncapable of sustaining industrialism, whether capitalist or socialist. Consequently, Rifkin advocates an anarcho-primitivist future solar economy — or what he terms an 'entropic society' — based on anti-consumerism, deindustrialization, counterurbanization, organic farming and prudential restraints on childbirths. Rifkin cautions that the transition to the solar age is likely to become a troublesome phase in the history of mankind, as the present world economy is so dependent on the non-renewable mineral resources.
 * In his manifesto on Farewell to Growth, Serge Latouche develops a strategy of so-called 'ecomunicipalism' to initiate a 'virtuous cycle of quiet contraction' or degrowth of economic activity at the local level of society: Consumption patterns and addiction to work should be reduced; systems of fair taxation and consumption permits should redistribute the gains from economic activity within and among countries; obsolescence and waste should be reduced, products designed so as to make recycling easier. This bottom-up strategy opposes overconsumption in rich countries as well as emerging, poor countries to aspire this overconsumption of the rich. Instead, the purpose of degrowth is to establish the convivial and sustainable society where people can live better lives whilst working and consuming less. Latouche further cautions that "the very survival of humanity ... means that ecological concerns must be a central part of our social, political, cultural and spiritual preoccupation with human life."
 * In his article on Economic de-growth vs. steady-state economy, Christian Kerschner has integrated the strategy of declining-state, or degrowth, with Herman Daly's concept of the steady-state economy to the effect that degrowth should be considered a path taken by the rich industrialized countries leading towards a globally equitable steady-state economy. This ultra-egalitarian path will then make ecological room for poorer countries to catch up and combine into a final world steady-state, maintained at some internationally agreed upon intermediate and 'optimum' level of activity for some period of time — although not forever. Kerschner admits that this goal of a world steady-state may remain unattainable in the foreseeable future, but such seemingly unattainable goals could stimulate visions about how to better approach them.

Herman Daly on his part is not opposed to the concept of a declining-state economy; but he does point out that the steady-state economy should serve as a preliminary first step on a declining path, once the optimal levels of population and capital have been properly defined. However, this first step is an important one:

[T]he first issue remains to stop the momentum of growth and to learn to run a stable economy at historically given initial conditions. ... But we cannot go into reverse without first coming to a stop. Step one is to achieve a steady-state economy at existing or nearby levels. Step two is to decide whether the optimum level is greater or less than present levels. ... My own judgment on these issues lead me to think we have overshot the optimum."

Daly concedes that it is 'difficult, probably impossible' to define such optimum levels; even more, in his final analysis Daly agrees with his teacher and mentor Georgescu-Roegen that no defined optimum will be able to last forever (see above).

Capitalism without growth...?
Several radical critics of capitalism have questioned the possibility of ever imposing a steady-state or a declining-state (degrowth) system as a superstructure on top of capitalism. Taken together, these critics point to the following growth dynamics inherent in capitalism:

— In short: There is no end to the systemic and ecologically harmful growth dynamics in modern capitalism, radical critics assert.
 * In capitalism, economic activity is generally guided by the profit motive, a competitive work ethos and the drive to accumulate capital and wealth for its own sake to gratify personal ambition, provide social prestige — or simply to get rich in a hurry. Psychologically, these drives in the work sphere repress and distort biological and social homeostasis in most people.
 * In capitalism, employments and incomes depend directly on sales revenues, that is, on people spending money on the consumption of goods and services for sale on the market. This dependency creates a pecuniary incentive to increase sales as much as possible. To this end, much cunning advertising is devised to manipulate human wants and prop up consumption patterns, often resulting in lavish and wasteful consumerism.
 * In capitalism, the financial system is based on fractional-reserve banking, enabling commercial banks to hold reserves in amounts that are less than their deposit liabilities. This credit creation is multiplying the monetary base supplied by the central bank in order to assist private corporations expanding their activities.
 * In capitalism, technological development exhibits a strong labour-saving bias, creating the need to provide new employment elsewhere in the economy for workers displaced by the introduction of new technology.
 * In capitalism, private corporations generally resist government regulations and restrictions that impede profits and deter investment opportunities. Attempts to downscale the economy would rapidly degenerate into economic crisis and political instability on this count alone.
 * In capitalism, governments need tax revenues to service their debt obligations, run their institutions and finance their welfare programmes for the benefit of the public. Tax revenues are collected from general economic activity.
 * In the capitalist world economy, globalisation intensifies competition everywhere, both within and between countries. National governments are compelled to compete and struggle with each other to provide employment, investments, tax revenues and wealth for their own populations.

Fully aware of the massive growth dynamics of capitalism, Herman Daly on his part poses the rhetorical question whether his concept of a steady-state economy is essentially capitalistic or socialistic. He provides the following answer (written in 1980):

The growth versus steady-state debate really cuts across the old left-right rift, and we should resist any attempt to identify either growth or steady-state with either left or right, for two reasons. First, it will impose a logical distortion on the issue. Second, it will obscure the emergence of a third way, which might form a future synthesis of socialism and capitalism into a steady-state economy and eventually into a fully just and sustainable society.

Daly concludes by inviting all (most) people — both liberal supporters of and radical critics of capitalism — to join him in his effort to develop a steady-state economy.

Pushing some of the terrestrial limits into outer space...?
Ever since the beginning of the modern Space Age in the 1950s, space advocates have developed plans for colonising space in order to counter human overpopulation and mitigate ecological pressures on Earth (if not for other reasons).

In the 1970s, physicist and space activist Gerard K. O'Neill developed a large plan to build human settlements in outer space to solve the problems of overpopulation and limits to growth on Earth without recourse to political repression. According to O'Neill's vision, mankind could — and indeed should — expand on this man-made frontier to many times the current world population and generate large amounts of new wealth in space. Herman Daly countered O'Neill's vision by arguing that a space colony would become subject to much harsher limits to growth — and hence, would have to be secured and managed with much more care and discipline — than a steady-state economy on large and resilient Earth. Although the number of individual colonies supposedly could be increased without end, living conditions in any one particular colony would become very restricted nonetheless. Hence, Daly concluded: "The alleged impossibility of a steady-state on Earth provides a poor intellectual launching pad for space colonies."

By the 2010s, O'Neill's old vision of space colonisation has long since been turned upside down in many places: Instead of dispatching colonists from Earth to live in remote space settlements, some ecology-minded space advocates conjecture that resources could be mined from asteroids in space and transported back to Earth for use here. This new vision has the same double advantage of (partly) mitigating ecological pressures on Earth's limited mineral reserves while also boosting exploration and colonisation of space. The building up of industrial infrastructure in space would be required for the purpose, as well as the establishment of a complete supply chain up to the level of self-sufficiency and then beyond, eventually developing into a permanent extraterrestrial source of wealth to provide an adequate return on investment for stakeholders. In the future, such an 'exo-economy' (off-planet economy) could possibly even serve as the first step towards mankind's cosmic ascension to a 'Type II' civilisation on the hypothetical Kardashev scale, in case such an ascension will ever be accomplished.

However, it is yet uncertain whether an off-planet economy of the type specified will develop to attain the volume needed in due time to fully compensate for dwindling terrestrial reserves. Sceptics point to exorbitant Earth-to-orbit launch costs of any space mission, inaccurate identification of target asteroids suitable for mining, and remote in situ ore extraction difficulties as obvious barriers to success: Investing a lot of terrestrial resources in order to recover only a few resources from space in return is not worthwhile in any case, regardless of the scarcities, technologies and other mission parameters involved in the venture. In addition, even if an off-planet economy could somehow be established at some future point, one long-term predicament would then loom large regarding the continuous mining and transportation of massive volumes of materials from space back to Earth: To keep up that volume flowing on a steady and permanent basis in the face of the astronomically long distances and time scales ever present in space. Taken together, all of these obstacles could prevent full-scale colonisation of space forever — and then limits to growth on Earth will remain the only limits of concern throughout mankind's entire span of existence.