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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