Toward a greener economy

Peter Victor, an economist at York University in Toronto and author of the forthcoming book “Managing Without Growth,” has a slightly different view. Yes, innovation theoretically could keep the economy humming along forever, he says. Unfortunately, that hasn’t happened.

“The pace at which we’ve become more efficient hasn’t kept pace with the rate of growth,” Professor Victor says. For example, prices for raw materials have gone down even as the environment has become increasingly degraded. This suggests a flaw in market pricing.

“We would have thought that the price system would have given us a signal that we were doing this,” Victor says. “And it’s not giving us that signal.”

This is a recurring complaint among environmental economists: The science of economics often treats economies as if they exist in a vacuum. Environmental costs – greenhouse gases, waste, overfishing – are rarely reflected in market prices.

That was fine in times past, when a large margin separated the edges of the human sphere from the limits of earth’s biosphere, says Robert Costanza, director of the Gund Institute for Ecological Economics at the University of Vermont, Burlington. But now the margin is much slimmer – perhaps totally gone – and omitting the true cost has become a liability.

“When the markets get out of kilter with reality, that’s what causes bubbles,” Professor Costanza says. He doesn’t advocate squelching the market, but guiding it – and not being guided by it: “The market is a good servant, but it’s a poor master.”

Ecological economists say we can start by examining economic yardsticks like Gross Domestic Product. GDP counts oil spills and other calamities that cost money to fix as additions, or positives. GDP has no way of counting important things like growth of leisure time or the contributions of stay-at-home parents.

“You get what you measure,” says Jim Barrett, executive director of the nonprofit Redefining Progress in Washington, D.C., which has developed an alternate Genuine Progress Indicator. “And we don’t measure things that matter.”

Shift tax from income to raw materials
Daly, a former senior economist in the World Bank’s Environmental Department, has other recommendations. Scarce re­­sources should be taxed at the point of extraction. Cap-and-trade systems should tax waste returning to the environment. Reduce personal income taxes to keep the overall tax burden the same. As Costanza says, “Tax bads rather than goods.”

These structures will drive the economy in the direction of frugality, which begets efficiency, says Daly. The economy’s emphasis will shift from production to service and maintenance, from “more and more” stuff to the same amount of ever-better stuff. In such an economy, companies would probably shift from selling products to leasing them. He points to Interface Inc., in Atlanta, a “closed loop” company that leases out carpeting and then gathers it for recycling when it wears out.

“We can’t live without polluting and depleting,” says Daly, “but it’s a question of keeping it within the limits of the biosphere.”

To this list Costanza adds the creation of new institutions to manage property owned by all, like air and sea.

“We need to develop new institutions that own global commons like the atmosphere,” says Costanza. “Right now, nobody owns the atmosphere, so dumping whatever you want into it is OK.”

Previous

1 | 2