YOU CAN'T EAT GNP By Eric Davidson Perseus 247 pp., $24
It's easy to make fun of the "dismal science." World-class economist Kenneth Boulding once said that "anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist." More recently, energy guru Amory Lovins of the Rocky Mountain Institute quipped that "economists are those people who lie awake nights worrying about whether what actually works in the real world could conceivably work in theory."
All very funny, except that the cost of valuing everything only in terms of dollars and cents makes no sense in the real world of life on the planet. Or to put it another way, neoclassical economics - upon which most political and social decisions are made today - amounts to an equation with very large holes in it.
As Eric Davidson points out in "You Can't Eat GNP: Economics as Though Ecology Mattered," some of these literally are holes - in Earth's protective ozone layer, in the blank spots among the list of living species where those now extinct used to reside, and in the clearcuts where healthy forests once stood.
Davidson, a senior scientist at the Woods Hole Research Center, takes on what he calls the "fallacies" of those economic descendants of Thomas Malthus, David Ricardo, and John Stuart Mill. In lively and illuminating fashion, he shows how the business of buying and selling not only ignores the environment but is a major detriment to it. In other words, the "invisible hand" of the marketplace - the self-interest which Adam Smith said would produce the greatest benefit for society - amounts to a thumb in the eye of nature.
The essential problem, according to Davidson, is that the benefits of environmental protection - clean air, clean water, healthy forests and prairies - "are left out of the balance sheet entirely because they are too difficult or impossible to calculate." At the same time, the costs of such protection - cleaning up oil spills and other pollution, for example - are easy to calculate because they come straight out of profits.
"With the costs easy to tally and the benefits often practically incalculable, is it any wonder that the environment usually comes out on the short end of cost-benefit analyses?" he writes.
This is changing to a certain degree. A new generation of "ecological economists" has begun to see that GNP (gross national product), which includes the monetary worth of all goods and services, is not the best way to measure societal or even economic well-being. Many businesses, including some traditionally big polluters in the manufacturing sector, are factoring environmental protection into company goals. Government regulation has been a big part of that. But 30 years after the first Earth Day, this also reflects more enlightened public thought regarding the environment.
Still, argues Davidson, there must be constraints on economic growth if "sustainability" is to be achieved. (That's the buzzword describing a state in which economy and ecology - both rooted in the Greek word for "home" - remain in balance.)
The author's short list of remedies is filled with potential political landmines: Stop building roads, eliminate tax deductions for more than two children, reduce taxes on income and increase taxes on consumption, eliminate government subsidies for things like big water projects and industrial fishing fleets.
These would involve major shifts in public policy, not to mention the special interests that would fight to maintain their present advantage. (The decades-long gridlock over restoring Columbia River salmon in the Pacific Northwest is a perfect example.) But it also would require lifestyle changes for all of us. Which, as Davidson points out, is a challenge that presents many opportunities.
*Brad Knickerbocker is on the Monitor's staff.
(c) Copyright 2000. The Christian Science Publishing Society