From ENERGY AND THE ECOLOGICAL ECONOMICS OF SUSTAINABILITY
by John Peet
A MYTH IS a traditional story that offers an explanation of some fact or phenomenon. Myths are neither wholly true nor wholly untrue. They may have been more true in the past than now, but people act as if they are still true, even when they no longer really believe in them. Some modem usages of the word have connotations that suggest that myths are irrelevant or wrong, but this is not necessarily so. Myths are of considerable importance to people, and for some, they may reflect ultimate personal truth. The critical need is for people to be given the opportunity to find out which myths are meaningful and which are not.
THE MEANING OF MYTHS
A myth is a mental model with which people try to interpret reality and respond to it. Myths have value in enabling us to organize the way we perceive facts and see ourselves and the world. Myths speak through rich symbols, helping to bring order into what may otherwise be a chaos of personal experience. Whether true or not, myths help us make sense of what is going on around us. Myths can provide a valuable doorway into the value structure of a society or culture and may give insights that are difficult to achieve by more conventional means.
Some myths, like belief in fairies, are probably harmless. Others may be dangerous if they distort the way we see the world and the ways we deal with problems. How does one tell the difference? How does one help people recognize the existence of other perspectives of reality without offending deeply held beliefs? One good way to start examining a myth is to find out what it meant to those who created it (the process of exegesis). Many social and scientific myths of the twentieth century originated in the seventeenth and eighteenth centuries, so this is not difficult to do. The next task is to find out what the present-day followers of the tradition of a myth mean by it (the process of hermeneutics). The final task is to compare the myth with the reality it seeks to represent. This stage often runs into trouble with adherents because to them, a myth cannot be questioned without challenging the believer’s self.
Most myths present themselves as authoritative and able to account for facts, no matter how completely at variance they may be with the real world. A myth gains its authority not by proving itself but by presenting itself. And the greater the political authority that lies behind the myth and the more often it is presented, the less likely it is to be challenged. Such is the case with many political and scientific myths of the twentieth century.
Over the past two hundred years, Western societies have cast aside many of the myths and institutions that had served them for hundreds of years. The great belief systems-the idea of a divine lawgiver; the sanctity of the family kin group, or tribe; the rituals, customs, conventions, ceremonies, and festivals that gave meaning and purpose to the smaller communities of earlier times-are mostly in ruins. But in the haste to throw off apparently outmoded burdens, people also lost the valuable side of those myths and institutions. The feelings created by people’s confidence in their place in nature and in the stability of the social systems that supported them have been vandalized. Many people are left with nothing but the despair engendered by new myths that they do not understand, often because the myths have been imposed on them without explanation. 1
MYTHS OF THE WORLD VIEW
Throughout history, people have felt it necessary to organize life’s activities by constructing a frame of reference within which to fit them a world view that explains the hows and whys of daily existence. Such processes have been the essential ingredient of many cultures’ responses to the world they perceived. A world view is usually so internalized, from childhood on, that it is seldom challenged.
In the Western world, the belief that neutral and impersonal laws govern what can be done in society and the world is deeply embedded in technology and economics. 2 But if that sort of belief is dominant, things are taken out of the political arena that properly belong there. Such is the outcome of taking seriously many assumptions of mainstream political economics. In reality, most of the assumptions are myths: partly true and partly false. They must therefore be treated with considerable caution.
The Myth of Unlimited Resources
Perspectives on the use of resources and on technology’s ability to achieve anything we might want are clouded with scientific and political-economic myths. Consider, for example, the following statement “Through technological advance we [will] seek to simulate and redesign to our liking all biological processes, so that we may achieve ever more control over the conditions of life.” 3 Myths such as these are widely held, but their foundations are so weak that they need to be replaced with others to guide our thinking as we set our course toward the twenty-first century.
The Prime Myth
The prime myth in the context of this book claims that lower grade resources will always be available to humankind in a continuing and virtually endless sequence. 4
Since exploitation of resources always, and without exception, requires expenditure of available and accessible energy, as I pointed out in chapter 3, this myth is critically dependent on the continuing availability of energy resources. For that reason, I will reword it into a more specific form: Lower grade energy resources will always be available to humankind in a continuing and virtually endless sequence.
Nicholas Georgescu-Roegen, a trenchant critic of the myth, states: “The favorite thesis of standard and Marxist economists alike . . . is that the power of technology is without limits. We will always be able not only to find a substitute for a resource which has become scarce, but also to increase the productivity of any kind of energy and material.” 5 William Catton exposes further flaws in this “favorite thesis”:
Two non-repeatable achievements had made possible four centuries of magnificent progress. Those two achievements were ( I ) the discovery of a second hemisphere, and (2) development of technology that could unearth and exploit the planet’s energy savings, its fossil fuel deposits. [Humankind’s increasingly relentless search for new sources of energy and for more costly energy technologies expresses our wish to deny that achievements like those two were uniquely resultant from bygone circumstances. 6
Part of the problem of evaluating the prime myth is that economists usually think of resources in monetary terms-in other words, as homogeneous. The inadequate information supplied by market prices for resources means that conventional (neoclassical) economics is largely incapable of according resources-especially nonhomogeneous, nonrenewable fossil energy resources-the meaning they actually possess. 7
In order to give the prime myth the attention it deserves, we need to examine some of the myths on which it depends or that are used to derive policies stemming from it. These myths are deeply ingrained in the Western cultural tradition and are central to many areas of decision making. The reader is invited not to reject those that may be ill founded (and I strongly emphasize this point) but to treat them always as partial truths and partial perceptions of reality. They may be useful under certain limited circumstances, but they should never be used outside those narrow confines.
I would also make the point that by the term “resources,” I include ecosystem services along with the conventional meaning of extractable resources.
The Myth of Divine Authority
According to some writers, 8 Western culture, shaped by interpretations of the Bible, particularly the early books of the Old Testament, pictured humans as separate from all other creatures and dominating them. 9 Many still feel what is almost a divine imperative to “master” nature. It stems from a linear, hierarchical, authoritarian world view in which God is above, nature is below, and man is in between, set above everything but God (not forgetting that woman is set hierarchically below man). 10 The British theologian C. S. Lewis suggested that the truth is rather more prosaic: “What we call Man’s power over Nature turns out to be a power exercised by some men over other men with Nature as its instrument.” 11
Recent theological studies have shown that the belief of God giving man authority over nature is not necessarily supported by the Bible. 12 The dominant themes go far beyond what is gained from literal interpretation of specific verses (e.g., Genesis 1). In reality, there are two creation myths in Genesis: the “Yahwistic” (Genesis 2 4, in which man was created out of dust) and the “priestly” (Genesis 1:24, in which man was “given dominion,” etc.). The Yahwistic version, dating from around 1000 B.C., is closer to a holistic, “systems” view, but it was apparently superseded by the priestly version, dating from around 600 B. C. The latter clearly reflects dominance of political structures, which may have been as strong in the relationships between priests and kings in ancient Hebrew society as they are today between economists and politicians.
A full analysis must also combine major themes from both the Old Testament and the New Testament. These do not support the view that humans are above nature but suggest the contrary-that they are part of it. In Genesis 1, God declared plants and animals good independently of humans; they are therefore interdependent. 13 In a sense, God, humanity, and nature exist in a systems relationship. From a biblical viewpoint, stewardship is the primary function of humanity, whose function is to take care of God’s creation, giving special (but not exclusive) attention to itself, including future generations. Stewardship requires extending brotherhood and sisterhood not only to all existing people but also to future and past people, and to all other life forms, in appropriate degrees. 14
MYTHS OF ECONOMIC BEHAVIOR
It is part of the belief structures of most Western peoples that the world is proceeding toward a more “valuable” state as a result of the accumulation of knowledge and technology. Most also believe that the individual exists as a separate, autonomous entity, that people have always desired private property, and that competition has always existed. They believe that scientific observation is objective, that the natural world has a mechanistic order to it, and so on.
All of these beliefs are considered to be part of human nature and there. fore basic and unchangeable. When looked at from other viewpoints, however, they are seen to be only partly true and therefore are validly described as myths. Beliefs of individuals and small groups should always be respected. Myths of social systems should not, because they can be a means of oppression and control of the weak by the powerful.
The Myth of Primacy of the Individual
The conventional political-economic viewpoint depends on two crucial assumptions about the individual: that the individual is the best judge of his or her own interests and that over time, tastes (i.e., preferences) do not change-or, if they do, they change as a result of better information. These are often summarized as “the independence of individual preferences.”
Although these assumptions apparently have the status of received wisdom when seen from one viewpoint, they are at best half-truths. It may be politically expedient to declare that everyone is the best judge of his or her own interest, but few people would not want to undo many of their past mistakes. The fact that many apparently normal people subject themselves voluntarily to various forms of psychoanalysis, or indulge in the search for truth through religion, or follow the forecasts of astrologers, means that in respect to the larger questions that govern their lives, they are far from certain where their true interests lie. 15
The modem liberal view of the place of the individual in the marketplace expressed by such philosophers as Friedrich von Hayek, is interesting in this context. As described by Bruce Jesson, their view is that “true individualism . . . is a social individualism. It requires a society with a stable family structure, voluntary community associations, and conformity to tradition and convention . . . true individualism requires a rigid moral code and a sense of social responsibility. It bears little resemblance to the acquisitive, self-indulgent and amoral spirit of modem individualism . . . (which) is deficient in its lack of ethics.” 16
This model reflects cultural factors coming from groups rather than individuals. By breaking down group behavior into “socially responsible” individual behavior, one may pave the way for authoritarian controls on group action, nominally to increase individual freedom. Even though this may be done in the name of freedom, in reality it reduces the power of those with whom individuals are associated and on whom they may depend. Trade unions, under threat in many countries, are an example.
The assumption that the individual is in some sense supreme in the marketplace axiomatically leads to the conclusion that reliance on individual self-interest is the only requirement of the economic (and indeed the political) system. 17 But a free market assumes that people have equal access to information about what is taking place and that they are all sufficiently self-reliant to exist without buying or selling. This reflects a utopian situation, found only in some small communities (in which group cohesion is a central element of community structure). It has long been known by anthropologists, sociologists, and psychologists that in most societies, group behavior is markedly different from that of individuals. Long-term goals of families and communities take into account factors that seldom enter into the decision making of isolated individuals, and this is nowhere more important than in the context of relationships with the environment. 18
From the systems perspective, the view of economist Lester Thurow is helpful “Societies are not merely statistical aggregations of individuals engaged in voluntary exchange but something much more subtle and complicated. A group or a community cannot be understood if the unit of analysis is the individual taken by himself. A society is clearly something greater than the sum of its parts despite what the price-auction model would maintain.” 19
Conventional economics is mainly built on simplistic and outmoded concepts drawn from nineteenth-century behavioral psychology. When economists talk about “economic man”-Homo oeconomicus-they make assumptions about rational behavior, human needs, goals, and values that have been largely demolished by workers in the social sciences. 20 The demolition occurred mainly in sociology and adult education, by empirical testing (using the Popperian criterion of falsifiability) 21 and by use of more modem ideas of behavior, such as humanistic psychology 22 and the human potential movements. 23
The idea that the individual is the central (and sole) unit of decision making in society is rejected by many cultures. Indeed, the idea is in many respects deeply offensive, and it goes against centuries of their history. For settlers of (usually) European cultures to impose that ideology on people is yet another example of the long history of insensitivity and brutality that has characterized colonization. The idea also must be recognized as relatively new in human history, gaining its main strength from political theories of the seventeenth and eighteenth centuries in Britain and Europe. To many Europeans, the more cooperative social structures of the past may now be too far distant to be clearly remembered, but such is not the case in most other cultures. The dominance of European-based cultures enabled the ideology of individualism to be spread far and wide, but the historical fact of its acceptance does not prove it is “right”; the reality is that its supporting political, economic, and military structures were more powerful than those they supplanted.
The phenomenal successes of advertising, the vast amounts of money spent on it, and the involvement of psychologists supply evidence that up to a point, it is quite possible (and certainly very lucrative) to change people’s preferences. 24 The methods used owe more to psychological manipulation than to any inherent law of human nature in that planning is extended to the consumer to ensure that he or she will “want” what is produced.
The Myth of Rational Behavior
It is widely believed that some form of the “rational behavior” observed of particles in classical physics must also be present in human behavior. The idea of rationality in human behavior was in the eighteenth century, however, and still is, only an analogy with classical physics. Since the nineteenth century, the idea has been shown to be a very weak one. It is more a political theory, a code of human behavior, than a reflection of natural laws. Nevertheless, rational behavior is at the core of neoclassical economics and its modem offshoots. The approach is reductionist, looking at the individual in order to try to understand the economy. It relies on the assumption that a whole is the sum of its parts.
There are actually two quite different meanings of the term “rationality.”
According to Karl Popper, the rationality principle means that “having constructed our model, our situation, we assume no more than that the actors act within the terms of the model, or that they ‘work out’ what was implicit in the situation.” Popper makes it clear that the rationality principle “has little or nothing to do with the empirical or psychological assertion that [people] always, or in the main, or in most cases, act rationally.” 25
In other words, the rationality principle applies to the a priori domain of development of models. It has nothing to do with the empirical domain of observed human behavior. Popper goes on:
Rationality as a personal attitude is the attitude of readiness to correct one’s beliefs.
In its intellectually most highly developed form it is the readiness to discuss one’s beliefs critically, and to correct them in the light of critical discussions with other people. 26
I am a rationalist. By a rationalist I mean a [person] who wishes to understand the world, and to learn by arguing with others. (Note that I do not say a rationalist holds the mistaken theory that [people] are wholly or mainly rational. 27
The difference between the two meanings is vitally important, but they are commonly confused. In the general sense, rationality is an a priori concept, but when the word is applied carelessly to the empirical world, the result is the expectation of rational behavior (i.e., actions performed according to a model of behavior) rather than acknowledgment of the richly human, creative, intellectual behavior of a rational person, who takes a critical attitude to his or her beliefs.
From careful consideration of the emphasized sentence in the latter quotation from Popper, I am led inescapably to the conclusion that a rationalist should never believe in rational behavior! To do so is to accept a model as a standard for behavior rather than to observe critically the empirical reality of actual behavior. The two meanings are inherently in conflict, and Popper exposes the point very effectively: a belief in rational behavior is in itself irrational!
At the empirical level, the underlying assumptions of rational behavior are largely untested and probably untestable. Despite this, many economics textbooks still promote the model of rational Homo oeconomicus. That many economists recognize its inadequacies but continue to teach (and preach) the concepts gives me cause for concern about the scientific basis of political economic theories. (The economist Mark Blaug suggests that some economists play tennis with the net down!) 28
The imposition (e.g., through fiscal policies) of the requirement that people act in conformity with a model of behavior in order to gain access to some privileges of citizenship (employment, education, health care, welfare, etc. ) is inherently authoritarian and violent. It induces-and often forces- people into individualistic behavior against their natural instincts. Nor does the rational behavior model give adequate attention to changes in value over time, that is, to intergenerational equity. Deeply human ideas, such as leaving resources for one’s grandchildren or planning allocation by need rather than greed, have no clear place in its calculus; that sort of behavior is labeled as irrational. (Proponents of economic rationality commonly apply this label to those who disagree with them, especially to those who value the environment highly. )
In this context, it is worth noting that in law, there is the concept of the reasonable person, who (in contrast to the rational person) is: “a person who is not only protective of his/her own rights, but also has a fair regard for the welfare of others.” 29 The reasonable person is concerned with justice and fairness with equity rather than efficiency. Justice and fairness are absent in much of conventional economics, yet they are central to most people’s ideas about how society should be run. Humanistic economics is all about replacing the model of the rational person with that of the reasonable person.
The Myth of Bounded Rationality
More recently, concepts of rationality have been extended to include ideas such as bounded rationality, in which people make decisions without perfect knowledge. In some respects, the approach is an alternative world view to that of neoclassical economics, and it reflects the fact that human behavior consistently violates economic principles of rationality.
Basically, the bounded rationality approach acknowledges that people have limited cognitive capabilities. 30 This implies limitations in attention, perception, memory, and abilities to process information and communicate. Use of bounded rationality criteria results in simpler problem-solving approaches and attention to subgoals rather than overall goals. Altruism and opportunism are incorporated in some theories of bounded rationality. 31
From a systems point of view, the approach appears to be limited in application. It works only when a system can be broken down into its parts and each part studied separately (in systems terminology, such a system is loosely coupled). In real systems, feedbacks and nonlinearities are usually strong, and one cannot change one part without affecting another. The result is that application of the ideas of bounded rationality can result in suboptimization and system dysfunction. Thus, these developments appear not to have much relevance to practical aspects of policymaking. Rather than testable hypotheses (in a scientific sense), I see them as sincere attempts to correct the logic of rational behavior for obvious deficiencies. (Blaug, using Popperian arguments, warns against the use of “ad-hoc auxiliary assumptions,” or “immunizing stratagems,” when working toward verification of theories.) 32
The Myth of Freedom
It is a central belief of those of the mainstream market liberal political-economic viewpoint that freedom of the individual is the most important characteristic of a society. For these people, freedom is entirely an economic construct. Freedom exists in the unfettered market and ceases to exist if market processes are hedged about by regulation. 33 Freedom thus has a meaning akin to choice, the availability of alternatives in a marketplace.
For most people in society, freedom has entirely different meanings, few of them capable of codification. Freedom from hunger and want? Freedom of speech and of association? Freedom from arbitrary constraints? Freedom to be creative and artistic? These are not the same as freedom of choice.
Free-marketers hold to a negative freedom. “Freedom from…. ” What is important is freedom from restrictions that prevent them from getting on with whatever they want to do (mainly the accumulation of wealth). Positive freedom, on the other hand, is the more creative “freedom to . . . ,” such as the freedom to live within a context that encourages the pursuit of things spiritual and creative. The assiduous promotion of ideas of negative freedom, especially in the market liberal context beloved of Treasury officials and business roundtables, is yet another step in the attempt to mold Homo sapiens into Homo oeconomicus-“the human as consumer”-the manipulated market cipher who will always behave as markets require. “Freedom” in this con. text has many characteristics of a myth. It also involves the hijacking of a word with an old and honorable meaning into a new and dishonorable service.
The Myth of Universal Property Rights
A basic requirement of the market model is that anything individually owned is tradable. It is a small step to believe that in order to make full use of the “efficiency” of the marketplace, everything that possibly can be, must be in private ownership. 34
For many people, the idea that natural resources can be regarded as private property, let alone as tradable, is bizarre. When the first English settlers “bought” land from the Maori in Aotearoa-New Zealand, they believed that they were carrying out a simple transaction giving them ownership rights. 35 To many of the Maori (at least in the early years), the transaction had no such meaning; it was the exchange of the gift of the temporary use of land for other gifts, some of them monetary. 36 When the full weight of the colonists’ laws (and military forces) was used to enforce exclusive occupation, the Maori found out what had happened; it was then too late. North American Indians had comparable experiences, as did many of the indigenous peoples of Africa, India, and Asia.
Some extreme free-market proponents argue that “scarce resources” such as elephants would be better safeguarded by assigning people ownership of the animals than by collective action (e.g., cessation of the ivory trade). The idea is that if someone “owned” and “farmed” the elephants, and earned the resources needed to head off poachers, the elephants would survive. 37
I note that such suggestions usually come from people who live in societies in which the levels of wealth are such as to be the prime causes of stress on less-developed countries and their ecosystems, through their excessive consumption habits. 38 As a further, nontrivial point, in practice, the initial assignment of property rights in such situations tends to be associated more with local power ploys and corruption than with equity and long-term environmental factors. This outcome seems to be common to developed and developing countries and to political systems of both left and right.
In the systems context, hierarchies and nonlinearities indicate that all things are not equal and some take precedence over others. For social system stability, the rights of the collective must always take precedence over those of individuals; individual rights can never be paramount. To be more specific, the rights of some individuals must never be allowed to take automatic precedence over those of the collective.
The Myth of the Free Market
In practice, free markets do not exist. 39 What commonly happens is that some organizations and corporations become large enough to dominate production of their particular commodity (e.g., automobiles or soaps and detergents), in which case theirs is termed an oligopoly. In an oligopoly, all participants have a degree of common interest and none is willing to rock the boat; competition is polite, not predatory.
Nevertheless, most economists still see the market in the sense of the equilibrium price auction, in which the individual is a utility-maximizing consumer or producer within free markets that establish equilibrium prices for goods and services. Because so much of standard economic theory depends on this erroneous assumption, one must be careful not to ascribe power to the market that it does not possess, while acknowledging that there are indeed many socioeconomic functions that the market appears to carry out effectively and well.
As an example, in many countries, centralized planning has produced major blunders when governments became involved in projects in which the private sector declined to take part. This is usually taken as evidence that planning is inherently inefficient and that a market will do better. The first statement is probably correct (although planners are so subject to interference from politicians that one cannot claim the planning process itself was to blame). It is not axiomatic, however, that the conclusion is also valid; the world is full of stories of corporate blunders and cruelties. Real-life decision making is not the sole preserve of caricatures such as the individual on the one hand or the state on the other. 40
Further, according to some eminent economists, free markets do not work-indeed, they cannot work-in situations in which externalities are important. 41 As I have pointed out in several places in this book, externalities are everywhere, albeit seldom acknowledged.
According to the economist Lester Thurow, who is critical of aspects of the market philosophy, free-market theory also extends far beyond the realm of conventional economics: “It is, in short . . . also a political philosophy, often becoming something approaching a religion.” 42
Free-market theory can also be expressed in mathematical form, which lends it the appearance of scientific truth and renders it incomprehensible to all but the initiated. This book is not the place to review these criticisms. Suffice it to record that the fundamental assumptions of market theory are considered by some economists to be so weak that it fails as a predictive tool or as a scientifically based theory. In short, it has many characteristics of a myth. This is not to say that the underlying qualitative model is not useful or important; the point is that it is not a reliable indicator of social behavior. It remains a means for gaining insight into some of what goes on in part of society, and it is a useful microeconomic tool.
The Myth of Utility
The core problem in economics is that of measurement of utility, the satisfaction obtained by an individual from the use of goods and services. The theories of economics depend on the assumption that each individual seeks to maximize his or her utility from a limited income. Since the utility an individual supposedly seeks to maximize cannot be observed or measured directly, and since the assumption therefore cannot be tested, the argument is tautological. The presumed existence of utility is rooted in political-economic beliefs and ideologies rather than empirical science. The fact that the problem is acknowledged by economists and then circumvented (or fudged) by imputing utility maximization from subsequent actions does not detract from this conclusion. 43 Lester Thurow writes:
No other discipline attempts to make the world act as it thinks the world should act. But of course what Homo sapiens does and what Homo oeconomicus should do are often quite different. That, however, does not make the basic model wrong, as it would in every other discipline. It just means that actions must be taken to bend Homo sapiens into conformity with Homo oeconomicus. So, instead of adjusting theory to reality, reality is adjusted to theory. 44
As an example, in modem economies, governments actually account for a substantial proportion of all transactions. Economic theories that attempt to describe the behavior of economies on the basis of individuals, each assumed to be maximizing his or her own utility, thus provide limited insight. The conventional response of free-market economists is, of course, to get governments out of supplying services so that the market can do the job. Thus, the economy is modified to fit the theory.
The Myth of Value
To most of us, some things or people in our lives or in nature are priceless. That does not mean that they have no value, nor does it mean that their value is infinite; it just means what it says-that they have no price! The idea that some things may not be capable of valuation in terms of cash seems to me entirely sensible, but it is inadmissible to conventional economists. It is central to mainstream economics that the price a good or service fetches in a marketplace is a measure of that item’s value to the buyer in his or her personal life. As the lawyer Richard Posner put it, “Value . . . is defined by willingness to pay.” 45
This sort of economics largely sidesteps the issues of ethics and equity involved with the ability to pay, which is of course related to the potential buyer’s level of wealth. In other words, it assumes a dollar is worth exactly the same to a billionaire as to a beggar.
It is a short step further to the associated assumption that the sum total (in dollars) of production or consumption in an economy (e.g., expressed as GNP) is a measure of the value of life-or of general welfare-in that society.
That view has been described as money fetishism, in which the abstract symbol becomes indistinguishable from the reality. 46 For example, since abstract exchange value flows in a circle in the neoclassical economic model, so must real goods and services. Or, since money can grow forever at compound interest, so too can real wealth. What is true for the token of wealth is held to be true for the artifacts of concrete wealth itself.
Since the “paper economy” offers more scope for “growth” than the real economy, monetary activity (in the form of mergers, takeovers, junk bonds, and tax avoidance) has in many instances become more profitable than production of the very goods and services that are essential for life in society.
Insofar as economics concerns itself with (and, in its application, depends on measurements of) monetary value measured in the marketplace and manipulated as abstract symbols or tokens in the paper economy, it concerns itself with only a tiny part of life’s value. This is not to say that market value is not important or useful, only that it is an inadequate measure of total value. The fact that such total value (or total welfare) cannot be measured is no excuse for not acknowledging its existence, nor, on the other hand, for claiming more for gross economic measures than they deserve.
The economist E. F. Schumacher put the problem into focus thus:
To press non-economic values into the framework of the economic calculus, economists use the method of cost benefit analysis. This is generally thought to be an enlightened and progressive development as it is at least an attempt to take account of costs and benefits which might otherwise be disregarded altogether. In fact, however, it is a procedure by which the higher is reduced to the level of the lower and the priceless is given a price. It can therefore never serve to clarify the situation and lead to an enlightened decision. All it can do is lead to self deception or to the deception of others; for to undertake to measure the immeasurable is absurd…. The logical absurdity, however, is not the greatest fault of the undertaking; what is worse and destructive of civilization is the presence that everything has a price or, in other words, that money is the highest of all values. 47
The Myth of Discounting
As we saw in chapter 4, a dollar in the hand today is worth more than a dollar in a year’s time, and a dollar in the future is worth less than a dollar today. This arises from the fact that money can be invested to produce a return and thus can increase in value over time. It is when this arithmetic is applied to real things that problems arise.
For example, it can be logically argued that if different people’s lives are of equal “value,” at a 10 percent discount rate, an action that would save I person’s life today is effectively of the same value as a similar action that would save 117 people’s lives in fifty years’ time (see table 7.1). Thus, it would be better, for example (if funds are scarce), to spend one’s money on saving 2 people today than 117 in fifty years. 48 Similar logic tells us that risks left to future generations, such as toxic waste dumps, are of insignificant importance to today’s decision makers. It can be highly “economic” (in cost’ benefit analysis terms) to save money today by leaving major problems for future generations to solve.
This arithmetic arises from the use of CBA in an area in which it has no validity. To discount physical and social things and people in the same care’ less way as is done for money in a bank account is absurd and immoral. It is yet another example of money fetishism and the fallacy of misplaced con’ creteness. This is a good illustration of why major issues, such as ozone layer depletion or accelerated global warming, must not be left in the hands of free-market economists.
The Myth of the Invisible Hand
Adam Smith’s doctrine of the invisible hand that guides each individual who acts in his or her self interest to promote the interests of the society in which he or she lives is strongly supported by many people today. 49 Followers of the doctrine forget, however, that the society within which Smith developed his theories was very different from today’s. In Smith’s time, there were strong social and community constraints on individual behavior, derived from shared morals, religion, custom, and education. 50 These are not present to the same extent today, and indeed there are strong forces opposing them. In Smith’s time, however, these social mores were so pervasive and so obvious that he would have felt it unnecessary to include them in his argument. 51 Two hundred years ago, for example, there was no question but that God was an all-powerful Being with the ability to affect the lives of each and every individual. It was a society in which self-interest included the responsibility before God to answer for life’s actions and transgressions on the Day of Judgment. To change Smith’s argument into a license for limitless self-gratification distorts his writings beyond recognition.
The invisible hand must be acknowledged as a partial truth-in other words, a myth. Some form of invisible-hand model is probably valid to describe some of what happens in a village marketplace of the type Smith described. But the belief that the sum total of market actions, each derived from individual self-interest (in practice massively influenced by advertising and distorted by externalities), in some way adds up to a guarantee of the best interests of society as a whole stretches the imagination to the breaking point. Group identity, collective responsibility, and respect for common property are also known to be critically important cultural components of any stable society. Important areas of human social activity (concern about the distant future; respect for land, resources, and environment; spirituality; etc.) have little to do with independent individual preferences. 52
Markets must always be held accountable to the greater social interest, something that may be forgotten by those caught up in the excitement of economic reform. 53 The greater environmental interest is no less important.
The Myth of Competition
According to the political-economic world view, competition is the normal way in which people and animals interact. Economists are beginning to acknowledge, however, and social scientists have known for a long time, that a more basic mode of interaction among people is cooperation, within small and large groups. This is especially true in the context of people’s attitudes toward their environment. 54
It is even more true in ecological systems, in which competition among animals or plants may be obvious to the onlooker but cooperation is the dominant process in ecosystem stability. In many cases, cooperation is far more efficient than competition in terms of the output gained from a given set of inputs. The motives behind cooperative behavior may in some cases still be those of a form of self-interest; group cooperation may be a better and more efficient way than individual competition of achieving species advantage. 55 However, that is not the same as atomistic self-interest in free-market economics.
For powerful groups in society, the whole point of competition is to create an unfair market. According to some economists, many important markets are oligopolies anyway. 56 To the extent that the “free” market exists, it does so in villages or in situations in which production is a function of large numbers of small producers such as farmers, motor repair shops, and small businesses.
The Myth of Efficiency
According to lawyer Richard Posner, “Efficiency means exploiting economic resources in such a way that human satisfaction measured by aggregated consumer willingness to pay for goods and services is maximized.” 57 Efficiency is defined in economics with respect to the presumed existence of an optimum allocation of resources, nominally best achieved through the actions of a marketplace. It is known, however, that even in the limited context of economic theory, optimum allocation depends on the initial distribution of resources among members of society. As an example, a Pareto optimal distribution is achieved when resources cannot be reallocated to make at least one person better off without making someone else worse off. But the prices that are determined in the free market, and that determine the final allocation, are themselves preempted by the initial allocation. In a market in which there are a few rich people and a lot of poor people when trading starts, the final allocation of wealth will be very different from that in a market in which everyone had the same resources at the start. As an economist put it, “A Pareto-optimum is said to obtain when nothing more can be given to the hungry, the cold, the ragged and the homeless without incommoding the glutton, the miser, the usurer and the play-boy.” 55 A similar situation arises in the context of ownership and use of natural resources, including ecosystem services.
Imperfect markets are the norm; free markets are figments of the theoretician’s imagination. Anything like a free market usually results in large, powerful firms taking over or putting out of business smaller, weaker ones. Al though this is often claimed to be the result of “efficiency,” other arguments suggest that it has more to do with the economic muscle of large organizations. The idea of economic efficiency has so many unknowns that it remains unvalidated in practice, although undisputed in theory. The term is also used widely by politicians but in most cases as an almost meaningless buzzword.
None of this is to suggest that markets have no place. On the contrary, no matter how imperfect, markets often have an extremely useful function in allocation of resources. The point is that any such achievement of the market
has to be acknowledged as being, at best, one of obtaining an improvement in allocation, not of achieving an optimum. Determination of whether an improvement has actually taken place involves empirical political and social measurements, not a priori arguments.
The systems approach cautions us against falling into the trap of suboptimization. The whole of a system is always more than the sum of its parts. If links among parts of the system are ignored or oversimplified, it is easy to optimize only one or more subunits, to the detriment of the whole. The function of most optimization studies in economics is to seek an improvement (e.g., in allocation), on the assumption that all other things remain unchanged. This assumption is more often than not heroic in practice.
The Myth of Stability
It is assumed in much of conventional economic theory that the world is an unchanging, static system, or else it is only slowly changing. In discussions of growth, for example, it is believed that steady growth is a natural state of economies. Nonlinearities, time delays, and the distinction between stocks and flows are seldom taken into account in these models. From systems considerations, it is clear that these assumptions may be very misleading in practice. The historical record of social and natural systems is actually one of change. Change has sometimes been slow, but it has often been sudden and unpredictable. Wars, floods, famines; the changing habits of consumers, producers, and investors; stock market crashes; technological and business innovation; and political follies of every description are factors external to economic models that influence them in countless ways. Human history is more turbulent than is commonly acknowledged, and static and other simple models are rendered less real because of it.
The Myth of Substitution
Most economists have sufficient faith in the free-market price mechanism to assert that it will prevent any resource scarcity. They believe that as the price of one resource rises due to scarcity, another will step in when the price is right and take over the market. In the short term-say, until the early years of the twenty-first century-they are probably right. In the longer term, I believe there is increasing evidence that they are badly wrong. 59 I showed in chapter 6 that the theory of the free market has serious deficiencies in the field of energy resources. There is also some empirical evidence to support a lack of faith in the theory.
The proposed substitution of crude oil by shale oil has been investigated in some detail in North America over many years, and the conclusions are highly relevant to this discussion. The fallacy in the traditional economic substitution argument arises from a problem of logic, which has been clarified by the engineer Malcolm Slesser. 60 It was asserted in the early 1970s that shale oil production would be economically viable when the price of conventional oil reached $6 per barrel. The assertion was made on the implicit as’ gumption that the shale oil facility could be built with the cheap oil. In other words, it assumed the same energy base for industries in the economy and the same price structure as at the time of the assertion. Obviously, while conventional oil at $2 was available, no one would build a shale oil facility producing at $6. Unfortunately, when conventional oil rose in price above $6, it was no longer possible to build a shale oil facility that could deliver product at $6. When reevaluated, the new shale oil price was found to be $5 above the new crude price.
This behavior is consistent with the biophysical systems perception of the world but not with the political-economic approach. It is worth noting that conventional economic theory has been unable to explain many effects of the oil price rises of the 1970s. According to economists at Resources for the Future “Neither energy’s share of GNP nor the slow rate at which energy consumption patterns change accounts for the sharp changes in production, productivity, unemployment, or inflation that occurred in 1974 and 1979. It appears that something amplifies the effect of oil price swings.” 61
The substitution argument is questionable in the context of accessibility of primary energy resources. It has even less validity in the context of such global problems as destruction of the ozone layer, global warming, and buildup of toxic wastes. Prices in the marketplace are relevant to short- and perhaps medium-term decisions, within a static context. They are crude but useful means for allocating a given resource flow from nature among alternative uses in the service of a given population of already existing people with a given distribution of wealth and income. 62 Market prices should not be allowed to decide how fast a resource is used or how to distribute resources among different people or generations. William Rees suggests that “Perhaps most important in the long run are the philosophical arguments against market approaches. 63 ‘Commoditizing’ the ecosphere is a technical solution that merely extends the materialist world view without questioning society’s fundamental values and assumptions. If the world is to be salvaged the motivation will flow more from changing attitudes than it will from improved economic incentives.” 64
MYTHS OF MARKET FAILURE
Much of what humankind regards as important has nothing to do with any kind of market. Mark Sagoff comments that in many situations, there are no relevant markets to have failed-these include situations involving “matters of knowledge, wisdom, morality and taste that admit of better or worse, right or wrong, true or false, and not mere economic optimality. Surely environ’ mental questions-the protection of wilderness, habitats, water, land, and air as well as policy toward environmental safety and health-involve moral and aesthetic principles and not just economic ones.” 65
The term “market failure” presupposes that whenever market forces do not produce the best possible allocation, it is an exception to the rule. Since the existence of the market is questionable in the first place, this presupposition makes use of a circular argument in which exceptions to a rule are explained in terms of the rule itself. Even if we accept the presupposition, we should still, to be logical, describe what the market is aiming to achieve-efficiency, equity, sustainability, and so forth. Although seldom specified, the market, and therefore its failure, means something different in each case. 66
THE MYTH OF ENERGY AS COMMODITY
To many mainstream economists, energy is simply a commodity whose attributes, although unique and important, do not distinguish it in any significant way from other commodities, such as water, steel, butter, or carrots. Thus, energy should not be singled out for individual care and attention. 67
This view reflects a basic misunderstanding of the science of energy in that it does not distinguish between two markedly different meanings of the word “energy.” The everyday meaning relates to the fuels wood, coal, oil, and gas. These are often referred to as energy, but they are more correctly termed sources of potential energy, or energy carriers. The scientifically important meaning relates to energy as the generalized attribute of physical transformation and change.
Specific fuels can be treated as (substitutable) commodities in many situations, but energy itself cannot. The laws of thermodynamics apply not only to heat and work processes in machines but also to the heat and “work” associated with chemical and biochemical transformations of all types. Thus, the laws apply to the processes of photosynthesis, growth, decomposition, and decay in the natural world; to the processes of circulation and precipitation in the global atmosphere; and to the processes of production and consumption in an economy every bit as much as to the processes in the mechanical worlds of physics and engineering.
THE MYTH OF ENVIRONMENT AS COMMODITY
My government’s philosophy was given in the following statement: “To give the environment a fair hearing, and represent it across the entire alignment with development, you have to communicate in economic terms.” 68 Conventional economics asserts that if the environment and its resources can be seen as similar to other goods or services (like cheese, toothpaste, or carrots), the market is the appropriate place for valuation to be carried out. This approach has a number of fatal flaws. 69
The first is that the “prices” of widespread child abuse, or of losing the Amazon forests, for example, are not available; there are no markets in which they may be “valued.” Economists then have to invent a “shadow price” to take them into account. But these shadow prices are only estimates of transactions associated with the events-for example, hospital and/or psychiatric counseling costs (in dollars) of treatment of a physically or psychologically abused child. 70 They in no sense evaluate the misery and hurt experienced by the child. Nor do shadow prices evaluate the long-term loss of social income or ecosystem services from the absent forest, let alone the cost of restoring something whose loss may be intolerable and/or irreversible.
The second flaw comes about by virtue of the fact that no numerical value can possibly take account of people’s spiritual relations with their environment or with one another. To attempt to reduce emotions and spirituality to numbers leads to the debasement of everything.
PROBLEMS IN ECONOMICS
It will be apparent that there is a great deal of concern about the validity of much of standard economic theory. 71 This comes mainly from within the economics profession itself; in these pages, I have only reported a few of the criticisms that economists have been making of their own discipline, since 1970 at least. 72 The critic Irving Kristol recently commented. in reviewing a book by Lester Thurow, an economist who is critical of many current theories, that “on the one side, he shows that much of what passes for ‘scientific methodology’ in economics is pretentious pseudoscience. On the other, he reveals to what extent economists propel themselves into a muddle by a simple-minded identification of homo oeconomicus with homo sapiens.” 73
Much of theoretical economics has ceased to be related to real human societies. 74 This is part of the reason why mainstream market liberal economics on the one hand and anthropology, sociology, and psychology on the other have drifted so far apart. The latter are based largely on empirical observation; the former, largely on a nineteenth-century logical-mathematical approach. The economist Peter Wiles has commented, “The main thing that is wrong with economics is its disrespect for fact.” 75 That same economist also commented that “it is perfectly possible for a science to be sick, and ours is now.” 76
Marilyn Waring has pointed out that since early this century, the standard economic approach has been first, to observe facts in order to gain an insight into economic relations; second, to deduce the general laws of political economy from premises drawn from the prior observations; and third, to test the laws by inductive verification. 77 This method is contrary to the requirements of modern science. The ultimate empirical test of a hypothesis is whether its propositions correspond to reality (using the criterion of falsifiability). In a priori science, all that is required is that the deductions from a given set of axioms are logically correct. 78 So long as the axioms of mainstream economics remain divorced from the reality they claim to represent, their results will be unacceptable to those who study, let alone those who suffer from, their outcomes.
The Myth of Objectivity in Economics
Economics is so closely related to political theories that many of its practitioners fail to remember the ideological underpinnings of their studies. 79 The economist Mark Blaug suggests, for example, that the scope of positive economics is smaller, and that of normative economics larger, than is frequently claimed by economists. 80 It is also common, as Mark Lutz and Kenneth Lux write, for the positive “is” analysis to be carried on, perhaps unconsciously, to the normative “ought to be” conclusion. 81
Robert Kuttner points out:
The study of who gets what and why, unlike the study of plants or planets, cannot help being an ideologically charged undertaking. Despite the laborious techniques and scientific pretensions, most brands of economics are covertly ideological.
Marxian economics, with its labor theory of value, assumes the inevitability of class conflict, and hence the necessity of class struggle. Keynesianism, with its conviction that industrial capitalism is systemically unstable, offers an equally “scientific” rationale for government intervention. Neoclassical economics, with its reliance on the efficiency of markets, is an embroidered brief for laissez-faire. 82
As D. Paarlberg puts it, “It is impossible to give the right answer to the wrong question; the tragedy is that we spend so much of our time asking the wrong question and trying to answer it.” 83
THE PLACE OF ECONOMICS
It does not in any way follow from these arguments that I believe conventional economics has nothing interesting, useful, or important to say about socioeconomic policy. I cannot emphasize that point too highly. But what conventional economics has to say-according to many critics from within the profession itself-is of a general nature and is not easily translatable into the specifics of policy. This is why, when it comes to policy matters, economists are often in disagreement. Interpreting information about what is happening in the economy is an art, not a science.
Let us not forget that economics as a discipline is very young. In many respects, it is conceptually at the stage physics was in the Middle Ages, before Galileo showed that the sun, not the earth, was at the center of the known universe. 84 Economic laws are mainly generalizations, perceptions of regularities of economic behavior that are in reality conditioned by cultural and social relations and institutional settings. 85 If we realize this, we will see the predictive capabilities of economics in a more realistic and modest context than that engendered by computers and stock markets.
The main purpose of economics is to gain insight into the workings of economies, not to develop theories for every action and reaction. 86 In such matters, a mixture of intuition, imagination, worldly experience, a good sense of history, and plain common sense is more important than any sophisticated acquaintance with theory, mathematics, or computers. 87
In practice, many elaborate models of politics and economics are inherently and deeply flawed in their basic structures. 88 They are incapable of giving other than a rough indication of what might happen in the future, and then only with the proviso that other things remain equal. Given the known indeterminacy of socioeconomic systems, that proviso cannot be valid in practice. It is therefore not possible to set a specific question to a model and expect a demonstrably valid answer.
There is one exception, however, and that is where legal and/or fiscal mechanisms are set in place to require or induce people to behave “rationally.” In other words, a model will “predict” accurately if people are required to modify their behavior to satisfy the requirements of the model. I suspect that many current policies are being prepared in the expectation that they will be backed by legislative and fiscal powers to achieve their end result. The resultant (and inevitable) social conformity will be the logical consequence of following policies built on assumptions that elevate the idea of “freedom of the individual” to its peak. This outcome is described as “economic imperialism” by some authors. 89
This discussion exposes a fundamental problem relating to the place of markets. Democracy is usually defined in terms of freedom, but in practice, the “free” market is inherently incapable of achieving what I (and many others) believe democracy is all about.
A WIDER PERSPECTIVE FOR ECONOMICS
It has been suggested that mainstream economists ought to be less reductionist and more alert to the sociological, political, or even aesthetic dimensions of the human condition than they are. A clearer understanding of the relatively modest potentialities of their discipline alone will make them better economists. To quote Thurow again, “If economists are to be charged with any crime, it is not that of knowing too little relative to what they can know, but with the crime of being too certain about what they think they do know.” 90
Since there are real physical and ethical constraints on the options available for human economic development, it is also important for politicians to embrace the view that noneconomic scientific tools may be of comparable importance (and may even be the most important) in areas where they seek advice on the social resolution of resource allocation problems. As the economist Charles Perrings points out:
Once we begin to conceptualize the behaviour of economy-environment systems over time, unprotected by the assumption that the price system contains all the information we need to know, we find not the comfortable order of stable or relatively stable equilibria but a seemingly chaotic drive to change, paralleled only in the recent findings of physicists investigating the time behaviour of structures far from equilibrium. More important, we observe little warrant for the simple Smithian faith in the invisible hand that underpins the market solution, and no war rant at all for the argument that forward markets will compel private interests to secure the information that renders the price system complete. 91
“Economics” has the same linguistic root as “ecology.” Interpreted narrowly-as the currently dominant viewpoint requires-economics reduces everything and everyone to economic neuters: items of production, consumption, and exchange in an imaginary marketplace. Interpreted broadly and humanistically in its equally valid meaning of “loving care of the household,” it could incorporate a systemwide meaning that encompasses the stewardship role of humans in our relationship with all things in the global household. It is my fervent hope that the profession of economics will rapidly move in the latter direction. In the words of Boris Pasternak, “What is laid down, ordered, factual, is never enough to embrace the whole truth; life always spills over the rim of every cup.”
Myths of Science and Energy
THE PHILOSOPHER OF science Karl Popper once said, “Science must begin with myths, and with the criticism of myths.” 1 With the passing of many old myths, a new set has emerged. Trust in science (“scientism”) is one. In this myth, science has the last word in establishing answers to questions, ultimate truth is revealed by science instead of by, say, the Bible. The accounts of Genesis were the ultimate truth of creation until a century ago; they still are for many people, for whom biological evolution is a myth.
There are many other myths in science and technology. In order not to be overimpressed by so-called scientific views and opinions, it is necessary to review some of them to obtain a more balanced view of the strengths and weaknesses of science, especially as applied to human affairs and policymaking. That some of these myths are more often held by nonscientists does not invalidate their discussion here, because they are commonly associated with science and technology.
THE MYTH OF LINEARITY
Much of what is known in science has been built around simple models in which cause and effect are related through what are called “linear” mechanisms. In other words, if whatever causes an effect is changed by a given amount, the effect changes by a proportional amount. If an electric heater is switched from half to full power, for example, twice as much heat is given out.
This sort of relationship-that of direct proportionality-is in fact very common, but only up to a point. Beyond that point, the effect may be quite out of proportion to the cause. Take the biblical story of the straw that broke the camel’s back. Every individual straw added until that point added an equal amount to the load, with steadily increasing (but reversible) stress on the animal’s back. But then another factor came in-the camel’s back, unable to take any more weight, broke. The linear relationship that had been valid up to that point suddenly failed; the relationship became nonlinear (actually, discontinuous) and irreversible.
In nature, this sort of thing is normal. Up to a point, which usually cannot be predicted in advance, the system may respond in a way that is repeatable and even reversible. Beyond that point, it does not-its behavior is unpredictable and irreversible. This is a normal characteristic of complex systems such as dissipative structures; it is also a characteristic of virtually all structures and processes known to humanity. As the threshold of nonlinear behavior is approached, much of classical science (and most of standard economics) becomes inapplicable. The claim made in the nineteenth century that “nature does not make jumps” has been shown time and time again to be erroneous. 2 For example, the cost to a person of taking just one more step may be to fall over a cliff or be hit by a truck!
For these reasons, it is important not to extrapolate. That something has happened reliably up to a certain point is no reason to suppose that going beyond that point will give rise to the same effect. It may do so, but it may not. Without a detailed study of what happens beyond the point at which one’s existing knowledge runs out, extrapolation is dangerous; it may break the camel’s back, or it may not. Only by doing several (presumably fatal) experiments to determine the breaking load of camels’ backs is it possible to know how heavy a load other camels are likely to be able to carry-and then only approximately. Extrapolation is inherently a risky business. Many disasters have occurred because scientists and technologists pushed components and systems beyond the point at which their knowledge was reasonably certain. Less well known, but nonetheless real, are the social disasters produced by application of political-economic theories of human behavior to societies and economies beyond the point at which knowledge was reasonably reliable.
THE MYTH OF SCIENTIFIC OBJECTIVITY
One would hope that all scientists are indeed experts who attempt to be objective in their pronouncements. Alas, the evidence is clearly to the contrary. There is a long history of gullibility, ignorance, and stupidity among scientists. 3 It usually results from their taking on responsibility for pronouncements in areas beyond their expertise. This in turn is a consequence of many of them having an inflated opinion of their ability to determine the truth of a situation from what is often nothing more than a cursory study. 4 The ability of many experts to ignore anything but their own world view may not be readily apparent, 5 but when a scientist takes on the role of advocate and makes authoritative-sounding claims without presenting clear supporting evidence for them, one should beware. 6
Science is supposed to be objective. That means that when applied meticulously, the scientific method is a step-by-step approach to the study of something, with testing of hypotheses at every stage. In practice, science is carried out not by robots but by people. It is thus less than perfect and more than just a method. It is a creative, and intensely human, activity.
Scientists and technologists like to picture themselves as rational, pragmatic beings who are unswayed by emotion or dreams. Paradoxically, they have also been responsible for large numbers of technological fantasies: moon landings, aircraft powered by nuclear reactors, spaceships powered by atomic bombs, biological weapons, psychosurgery to cure undesirable behavior, feeding the poor of the world by using more fertilizers and hydroponics, “Star Wars” defense systems, and so on. Some of these dreams have been achieved-at a price Others are so flawed in their views of the real world that they may never succeed. 7 Engineers and economists are perhaps more to blame than most in this context. Narrowness of vision and understanding and arrogance in dealing with others are not peculiar to them, however; such failings are commonly found in all of the professions and show up the dangers inherent in specialization.
THE MYTH OF THE TECHNICAL FIX
In the book The Next Hundred Years, prepared in 1957 by several eminent technologists with the assistance of executives of some of the United States’s largest corporations, the authors provided the following vision of what they called an emerging “technical-industrial civilization”:
If we are able in the decades ahead to avoid thermonuclear war, and if the present underdeveloped areas of the world are able to carry out successful industrialization programs, we shall approach the time when the world will be completely industrialized. And as we continue along this path we shall process ores of continually lower grade, until we finally sustain ourselves with materials obtained from the rocks of the earth’s crust, the gases of the air, and the waters of the seas.
By that time the mining industry as such will long since have disappeared and will have been replaced by vast, integrated multipurpose chemical plants supplied by rock, air, and sea water, from which will flow a multiplicity of products, ranging from fresh water to electric power, liquid fuels, and metals. 8
It was believed that the main obstacle to attainment of this resource El Dorado was not a shortage of resources (nor the threat of overpopulation) but a lack of enough trained scientists and engineers to build and maintain the technical wonderworks needed by the developing countries. It was a time when there were “no problems, only solutions.” Many scientists and engineers would now assert, however, that in reality there is no complete technical or economic solution to the resource problems that face us. I have discussed several aspects of this in previous chapters. There is also no simple solution to problems such as the tragedy of the commons. The solution can come only from an ethical or moral base.
Jacques Ellul, a trenchant critic of unthinking use of technology, suggests, “History shows that every technical application from its beginning presents certain unforeseeable secondary effects which are more disastrous than the lack of the technology.” 9 He also suggests that “every successive technique has appeared because the ones which preceded it rendered necessary the ones which followed.” 10 Although these claims might seem somewhat overstated, it is true that neither the full extent nor the nature, let alone the approximate sum of external costs, of major developments is known. No method exists to give more than a rough estimate of the cost of even the direct, short-term external consequences of new technologies. When indirect effects are concerned (good examples being accelerated global warming and destruction of the ozone layer), conventional methods are powerless. Thus, no possibility exists for Ellul’s claim to be validated. It remains a somber warning, for which there is significant circumstantial evidence and which should not be ignored.
THE MYTH OF CHEAP ENERGY
Countries with large reserves of fossil fuels or hydroelectric potential are often encouraged to use their “cheap energy” as a means of encouraging rapid economic development. Although such countries may indeed have cheaper resources than many others, it is a fact that no country incorporates the environmental or social externalities of fuel use in the price of its resources, and thus all of them distort the economics of fuel supply. Thus, consistent undervaluing of resources becomes part of economic policy and prevents decisions being made that have the potential both to improve overall economic efficiency and to protect local and global environments. In reality, there is no such thing as cheap energy; it is the social and environmental costs of its supply that are artificially cheapened in many economies.
THE MYTH OF RENEWABILITY
Many people believe that some forms of energy (the renewable ones) are more environmentally benign than others. This is generally true, since hydroelectricity and wood fuel can usually be produced with lower pollution and environmental damage than can coal-fired electricity and oil fuels. Nevertheless, the assumption that resources such as these are entirely benign is more than a little naive.
Hydroelectric dams create substantial damage to local soil and vegetation systems and to river ecology, both before and after construction. The indirect effects of production of the cement, steel, and machinery used in their construction create other problems further back in the economic system. Hydroelectric dams also have a limited life. Depending on the characteristics of the river that supplies them, they can be expected to silt up, perhaps as soon as a decade after construction. The electricity produced from them may be renewable for a while, but the river itself is irreversibly changed.
Fuel production from trees is another example. Wood production from a forest appears, on the surface, to be possible in perpetuity. After all, if the forests have been in existence for millions of years, can this situation not continue forever? The answer lies in the fact that in its natural state, a forest is approximately a closed system, in that mineral matter and soil remain within it (water, oxygen, and carbon dioxide obviously enter and leave the forest system via air movement). When a tree dies, it decomposes and in doing so provides food for a myriad of bacteria, fungi and other organisms, and small animals, which in turn provide food for higher animals. The end result is that the minerals, the trace elements, and a great deal of organic matter are recycled back into what is a complex ecosystem for use by the next generation of plants, organisms, and animals. When timber is removed from the ecosystem for use in an economy, via sawmills or pulp mills, the recycling process stops. Unless the timber that is removed is only a small proportion of the total biomass of the forest ecosystem, the system can suffer severe, possibly devastating, damage. Thus, extractive wood production is not normally renewable in the long term, although it may appear so within the limited lifetime of individual decision makers. The ecosystem itself seldom survives regular timber extraction.
THE MYTH OF SUSTAINABILITY OF INDUSTRIALIZED SOCIETY
If we cannot rely forever on stock fossil and other energy resources, only the sun is left (together with wind, rain, and other solar-related flows). Can one conceive of a developed, industrialized society that takes all the energy it needs, directly or indirectly, from the sun? This question is at the center of a great deal of current research work in many countries. No unequivocal answer can yet be given.
The biggest problem we face is that it is not clear whether it is possible, using purely solar energies, to carry out many of the energy-intensive activities that we now depend on. Smelting of iron and manufacture of liquid fuels are obvious examples. At present, it is only by using fossil fuel to construct plant and machinery that these processes are carried out. In other words, we cannot yet see how it is possible for a society to make everything from solar’ derived energy flows if that society continues along the industrial path. No matter what directions are chosen, for some time to come societies will have to use stock resources, if only to make the equipment that will enable solar sources to be harnessed (using steel, copper, glass, etc. ). Provided this use is at a modest level, there should be no significant problems either of supply or pollution.
In short, the use of solar energy as the sole primary energy source for a technologically advanced consumerist society has not yet been shown to be viable. It is therefore vital that we start to move toward making careful use of the valuable stock resources we now have, to ensure that at least some will be available for future generations for as long as possible. In this way, breathing space will be available to examine options for future social and technological developments. Regrettably, the standard political-economic world view denies the possibility that humankind will not be able to achieve any technological feat that may be needed, and in the meantime, resources are being used without any thought for the future.
THE PLACE OF SCIENCE
Science is the attempt to be objective about the study of nature. Scientists themselves, however, are only human. For this reason, the process of scientific endeavor has always had, and always will have, a substantial element of human subjectivity. According to the critic Stanislav Andreski, “The natural sciences did not advance in virtue of the universal appeal of rationality. Their theological, classicist and metaphysical opponents were not converted but displaced . . . scientific method has triumphed throughout the world because it bestowed upon those who practiced it power over those who did not.” 11
The place of science in human decision making is to help people understand why things happen. It can also help distinguish what is possible from what is not. I feel this is the most important contribution that thermodynamics and systems theory can provide in the field of resource use. Thermodynamics sets limits to social phenomena through its ability to predict constraints on the use of energy sources and materials in economic processes, now and in the future. Regardless of how economic value is established, the economic process cannot violate natural laws. Nevertheless, thermodynamics does not govern decisions within the economic process; it is a constraint on some important aspects of the social valuation (price) mechanism, not a direct determinant of it.