Capitalism, Economics & the Environment

[Michael]

Question:

Can capitalism cope with the environmental challenge facing the planet?

I've put this thread in the Economics section and not in the Environment section because it is the economic theory side of the issue that I think is most in need of exploration and discussion. Besides which, discussions of the science of environmentalism is outside my 'intellectual comfort zone' entirely.

For the purposes of this thread, let us assume that there is a general trend of environmental degradation presently occuring and projected to get worse over the course of this present century. If you want to dispute that general argument about the environment, please feel free to create another thread for that. :)

For this thread, the topic is about capitalism and/or capitalist economic theory and how it can deal with environmental 'externalities' (environmental degradation in particular). Traditional or classical economic theory tends to have some 'built-in' biases that make its predictive models to favor pro-capitalist outcomes no matter what the environmental inputs or out-comes might be. I consider this a 'problem' that is in need of a solution.

Here's a fairly good article (http://links.org.au/node/1053) that explores precisely this issue. I'm not endorsing every word, opinion or data-point given in the article, though it is certainly a well-sourced one and I do generally agree with the argument made. Rather, this is the general idea expressed in the article that inspired me to make this thread.

* * *

It seems to me that the greatest present challenge to our capitalist system of production are the present trends showing increased environmental degradation of the planet - which can be represented as depleted natural resources or in harmful climate change.

Classical economic theory, which is our generally ruling economic paradigm, appears to have a serious blindspot with regard to addressing this issue. It seems as if classical economic theory itself may be structurally or inherently incapable of dealing with the human issue of environmental destruction.

How can classical economic theory address the potential for 'bad things' that have no market? How does one represent the value of polar ice-caps - or polar bears? Without properly pricing this 'value', economic models tend to produce data that just ignores the problem. We need an economic theory that can take account of the value of 'things' that have no real trade-market value.

Anyone have any ideas?

[Lily]

I'll admit I don't know much about classical economic theory, but I do know this much: in our economy a tree is a raw resource used to make napkins. We don't ask many questions about what happens when that tree is not longer where it once was (although that's getting a bit more attention), much less what resources or waste goes into or comes out of producing that napkin. We in the West go to the store and buy the napkin (advertising tells us the best one to buy). What economic model would change that non-thinking?

Now, we have the rapid rise of the middle-class in a whole bunch of other places in the world -- China, India, S. America, Middle East, etc. -- who are following in our footsteps. They want that white napkin, too. And many of these countries seem to have adopted the same market-driven economy we have here. All of this new wealth hasn't seemed to equate to new ways of doing things; it's just produced more things.

Polar caps aren't sexy. For that matter, neither are polar bears. The 30-second spots aren't changing anybody's mind. I think the average Joe is completely overwhelmed even thinking about the problem of global warming and scared to death of the impact that any of it might have on his standard of living. Voila! Denial. Is it any surprise that our economists are whistling past the graveyard?

Thomas Friedman, in his book Hot, Flat, and Crowded, writes "The Stone Age didn't end because we ran out of stones." His point being, we need a new revolution, new ideas and most of all, we need to try harder. He states we cannot regulate ourselves out of the coming enviornmental destruction. We need engineers and scientists and thinkers. Out with the old, in with the new. Somewhere there are students of economic theory who are taking all of this into account. They will graduate, look for jobs and for now, be ridiculed and silenced for trying to change the system. But, I have faith in serendipity and great minds. Someone will break through.

[andrewl]

Here is a perfect example of an "economist in wonderland".

http://www.capitalism.net/articles/Environmentalism%20Refuted.htm

From the article:

"We are already familiar with the fact that an outstanding characteristic of natural resources in the first sense, that is, of natural resources as provided by nature, is that none of them are intrinsically goods—that their achievement of goods-character awaits action by man. A further, equally important characteristic of natural resources as provided by nature, and which now needs to be stressed as strongly as possible, is the enormity of their quantity. Indeed, for all practical purposes, they are infinite. Strictly speaking, they are one and the same with all the matter and energy in the universe. That is the full extent of the natural resources supplied by nature.
Thus, in one sense, the sense of useable, accessible natural resources—that is, of goods as Menger defines the term—the contribution of nature is zero. Practically nothing comes to us from nature that is ready-made as a useable, accessible natural resource—as a good in Menger’s sense. In another sense, however, the natural resources that come from nature—the matter, in the form of all the chemical elements, known and as yet unknown, and energy in all of its forms—are virtually infinite in their extent. In this sense, nature’s contribution is boundless."

[Americano]

Here is a perfect example of an "economist in wonderland".

http://www.capitalism.net/articles/Environmentalism%20Refuted.htm

From the article:

"We are already familiar with the fact that an outstanding characteristic of natural resources in the first sense, that is, of natural resources as provided by nature, is that none of them are intrinsically goods—that their achievement of goods-character awaits action by man. A further, equally important characteristic of natural resources as provided by nature, and which now needs to be stressed as strongly as possible, is the enormity of their quantity. Indeed, for all practical purposes, they are infinite. Strictly speaking, they are one and the same with all the matter and energy in the universe. That is the full extent of the natural resources supplied by nature.
Thus, in one sense, the sense of useable, accessible natural resources—that is, of goods as Menger defines the term—the contribution of nature is zero. Practically nothing comes to us from nature that is ready-made as a useable, accessible natural resource—as a good in Menger’s sense. In another sense, however, the natural resources that come from nature—the matter, in the form of all the chemical elements, known and as yet unknown, and energy in all of its forms—are virtually infinite in their extent. In this sense, nature’s contribution is boundless."



Not too surprising, he's a fan of Ann rand, Von Mises and would have anti-capitalist regardless of ilk sent directly to the gallows.