PCDForum Article #5, Release Date January 25, 1994

by Herman E. Daly and David C. Korten

In the course of recent discussions on trade agreements, many economists (often tenured academics) have been quick to condemn those who fear that free trade will cost them their jobs as special interest protectionists who are putting their narrow personal interests ahead of the larger societal interest. Retraining, not protectionism, is the answer to their problem.

Economists generally focus on protectionism against international competition. They have been inclined to overlook a rather different form of job protection that is likely to prove far more costly to society than protecting the jobs of textile or auto workers.

Have you ever wondered why most everyone agrees that development must be sustainable, and yet there remains a profound disagreement as to what sustainable development means. An important part of the answer can be found in the staunch resistance of a powerful professional lobby to evidence that their craft is based on dangerously obsolete premises. Rather than accept appropriate retraining for jobs for which society has a desperate need, they persist in a campaign to convince the public that nothing consequential has changed and their craft remains as useful as ever.

To be more specific, until environmental sustainability became a recognized need, economic growth generally ruled supreme as the organizing principle of public policy. Since economic growth is a subject about which conventional economics has a good deal to say, this supremacy has been a considerable boon to economists.

By contrast, as we elaborate below, conventional economics has very little to say about sustainable development. This realization has led a few economists to set about retraining themselves, creating in the process, the new discipline of ecological economics.

The core of the economics profession, however, has lacked the good grace to accept the retraining they advise for other workers whose jobs have been rendered redundant by technological progress. They have chosen instead to resolve their problem with a simple assumption, i.e., that sustainable development is a synonym for economic growth. While this has been helpful to those economists who prefer to avoid retooling, it doesn’t do much for a society that has had too much economic growth and too little sustainable development. The difference is basic.

The dictionary defines growth as an increase in size by accretion or assimilation of materials. So when something grows it changes quantitatively by getting physically bigger. Historically, economic growth has involved the physical expansion of the economy. Unfortunately, however, the constant physical expansion of the economy on a finite planet is not possible. Nature is becoming increasingly persistent in sending us the message that physical economic expansion has already surpassed the limits of what our planet’s ecosystem can sustain.

The dictionary defines development as the realization or unfolding of potential; qualitative change, improvement; not necessarily connected with physical expansion. Sustainable development is appropriately understood to be development (qualitative improvement) without growth (quantitative expansion) beyond the capacity of the ecosystem to regenerate the raw materials extracted into the economy as inputs and to absorb the materials and energy discarded by the economy as waste. Thus to rephrase the assertion made above, society has had too much physical expansion of economic activity relative to what the ecosystem will sustain with too little improvement in the quality of life for most people.

Fair enough. But why do we maintain that conventional economics has important things to say about economic growth, but relatively little to say about sustainable development? The answer is found in what the great economist Joseph Schumpeter called the pre-analytic vision. Every analysis necessarily begins with a set of assumptions about

the thing to be analyzed: a pre-analytic vision. This vision is fundamental to defining the boundaries of what the analysis may justifiably conclude.

The pre-analytic vision of standard economics assumes that the object of analysis is an isolated circular flow of exchange values between firms and households. Analysis based on this vision has its uses, especially when the goal is economic growth and should not be denigrated.

But if we are interested in the relationship of the economy to the environment, which must be the foundation of any meaningful concept of sustainable development, the pre-analytic vision of conventional economics is actively misleading. It has already assumed away the environment and made it external to the analysis. Indeed, economists often refer explicitly to the natural environment as an externality. Having assumed away the environment to begin with, many economists dismiss the possibility that there might be environmental limits to economic growth. This doesn’t mean there are no such limits, only that the model in use does not address that question. Using a model that has assumed away a constraint to prove that the constraint does not exist stands logic on its head.

Questions of sustainability can be validly addressed only by an expanded pre-analytic vision that views the economy as a subsystem of the larger ecosystem. This expanded vision forms the foundation of ecological economics. This vision immediately brings several analytical questions to mind, such as: how big is the subsystem relative to the total system? How big can it be before it begins to destroy the functioning of the total system on which it depends? How big should it be according to some ethical concept of welfare? Should that concept of welfare include only human beings, as it traditionally does in economic thinking, or should there also be a category for the welfare or enjoyment of life by other species? How do we share this total? These questions would lead naturally to a conclusion that we need to devise a biophysical budget that allocates the available life support capacity between human and non-human species, and between present and future generations. At some point we would need to address the question of how the human portion is divided between supporting a larger number of people at a lower level of physical consumption or a smaller number of people living at a higher level of consumption.

All such choices raise very large ethical questions from which economists have actively fled in the past in their interest to maintain their image as scientists. Science seeks to deal with objective fact and nothing makes a scientist more uncomfortable than to be shown to have made a moral or political assumption. By holding onto a pre-analytic vision that places no limits on perpetual economic growth, traditional neoclassical theory is able to avoid such difficult questions as: what are we going to do about poverty if we cannot solve it just by growing a bigger and bigger economic pie? If poverty must be resolved through some combination of sharing and population control that the market cannot automatically manage, how will the burdens be allocated?

Ecological economics does not presume to resolve such difficult issues through objective analysis. Rather it makes them publicly visible as issues that must be resolved through appropriate political processes.

We are long overdue in getting on with the politically difficult task of constructing a biophysical budget that addresses the fundamental ethical choices listed above. Once focused on improving the quality of our lives rather than the quantity of our consumption, we may realize that there are some things in life more important than competing to see how fast we can consume earth’s living systems.

We must not let the protectionist interests of a small group of economists seeking to avoid retraining delay us further in getting on with this painful, but essential, task. This is a situation in which we would be well advised to heed the advice so many economists freely offered in the trade debates: beware of protectionists who out of irrational fears put their own interests ahead of the interests of the larger society.

Herman E. Daly is professor of ecological economics, School of Public Affairs, University of Maryland, College Park, Maryland 20742-1821, U.S.A. David C. Korten is president of the People-Centered Development Forum. This article was prepared and distributed by the PCDForum based on arguments presented by Daly in Surviving Together, Winter 1993.

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