Hey -- what’s with the partial nudity?

That’s just how Robert Nadeau regards economists. Because, according to his recent article in Scientific American, economists are scientifically ignorant. That’s why, on his view,

Unscientific assumptions in economic theory are undermining efforts to solve environmental problems.

Essentially, Nadeau’s argument isn’t that economic theories are inconsistent. Only absurdly incomplete. As if mainstream economists were describing nothing but straight narrow portions of spectacularly long winding roads. Thus, particularly when it comes to ecological impacting, economists mislead us. Their theories can’t lead us anywhere we need to go.

Economic theories are misleading rather than explanatory due to how absurdly incomplete they are. Nadeau is calling for economic upgrades:

Because neoclassical economics does not even acknowledge the costs of environmental problems and the limits to economic growth, it constitutes one of the greatest barriers to combating climate change and other threats to the planet. It is imperative that economists devise new theories that will take all the realities of our global system into account.

Some economists might not take Nadeau’s threat to tinker economics lying down, though. “Bender”, for instance, commented that,

In an article purportedly discussing economic analysis and environmental policy neither externality nor externalities ever appeared! I don’t know which is more depressing, that someone could be stupid and ignorant enough to produce this tripe or that the Scientific American has sunk so low as to publish it.

How pedantic. That's exactly what Nadeau's talking about -- how overwhelming economic externalities like ecology are getting. But Nadeau not utilising the specific terms “Bender” recognizes resulted in “Bender” utterly missing Nadeau’s point. Standard economic theories mislead us precisely because environmental crisis constitutes such overwhelming externality.

Nadeau’s right, of course. We are rushing full steam and toxic waste to being overwhelmed. Not just economically.

But should economists seek to internalize theoretically and factually overwhelming externalities like environmental crisis? No. By no means. Absolutely not. There is no economic solution to our problems. Rather, let’s better appreciate how limited and incomplete economic theories are -– and let’s start looking way past economics for what it means to be more natural. What it means to be at all natural.

Can we do that? Toronto living is just about the most economically affluent anywhere –- ever. We expect some economic turbulence ahead. Will we be willing to look past it –- for what it means to be more natural? Or do we remain forever fixated on economic maximizing -- regardless how affluent we get? Regardless the cost to everything natural so precariously remaining?

[Peter Fruchter teaches in the Division of Humanities at York University.]

Screenshot from here.

1. “Externality” isn’t a pejorative. It’s just something external to the equation at hand. I seem to recall, taking economics at UofT, learning about various measures of biodiversity and how to work with them. I suppose you could term that an attempt to quantify externalities, so as to eventually “internalize” them. Of course it’s tricky, given that if you do the calculations simplistically you end up coming to the conclusion that better the world lose polar bears than a couple varieties of slime mould.

   Economic maximizing doesn’t necessarily mean trying to extract the most cash from the earth. Rather, it’s trying to end up with the best outcome, based on relative valuations.

   Posted by Wrenkin  on  04/10  at  02:22 PM

2. “Externalities” have a peculiar meaning in environmental planning and environmental economics, and challenges arise when efforts are made to quantify them in order to force a fit into the standard calculus of economics.

   Externalities such as pollution, extinction, desertification, biodiversity and habitat loss are difficult to measure in part because they unfold across time and space in a much larger and less linear manner than the standard algorithms can account for. This, I think, is part of Nadeau’s point.

   It might be said that all economic effects diverge in a non-linear manner, but the additional challenge of ecological consequences is that they may not be made to fit so easily into the relativity framework Wrenkin accurately associates with economic maximization.

   The core problem: the ‘values’ we assign to ecological impacts (including both harm and the costs of mitigation) may not be truly amenable to being traded off against other consequences (such as shareholder gain). How might this difficulty be addressed? There are several options, two of which stand out to me:

   • Economists can play with the math, perhaps by assigning environmental impacts a larger ‘value’ in economic calculations than they are assigned typically in order to ‘balance’ or re-balance whichever cost/benefit equation is used. Environmental economists used to call this ‘full-cost’ accounting, which focused on drawing up longer and longer laundry-lists of externalities to quantify and calculate.

     OR

   • We might drop the relativity games entirely and acknowledge that perhaps environmental impacts cannot simply be traded off against other gains. Perhaps the environment might be assigned an absolute value—or something even larger. Maybe we might assign to it a principle, such as “thou shalt not destroy.”

     It seems to me that Nadeau suggests that an awareness of the second option might be used to rehabilitate the first. Like Peter, I’m not so sure this can possibly be enough. The problem isn’t just with the way we deploy economic analysis—it’s that we fixate on economic analysis as the basis and end for all valuing, including ecological valuing.

     Not when we can’t possible recalculate the equations quickly enough to halt the grievous and perhaps irreparable ecological harms we’ve been perpetuating in the name of economic maximization. What is needed isn’t a change in the algorithm but a change of mind. And that’s more likely to receive its intellectual push from within the realm of philosophy than economics.

     Posted by Amy Lavender Harris  on  04/11  at  05:43 AM

   • Nadeau only attempts to criticise “neo-classical” economics, based on comparisons to 19th century physics. On that basis, of course it sucks!

     Why not look at how economists have developed the subject over the last hundred years, and the efforts they have made to incorporate environmental issues?

     Posted by  on  04/25  at  07:17 PM

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