Are we consuming too much?
"Sustainability" is a well-known word by now. It refers to some quality of the way we are using resources, spending money, and increasing the Earth's population. Sustainable use means that our children will continue to be able to enjoy the fruits of the Earth to the same degree that we do.
But is this sort of thing measurable? What does it really mean, this word "sustainable," and is it just one more thing for different political parties or countries to define differently, ultimately rendering it meaningless and cheapening it to mere marketspeak?
Kenneth Arrow of Stanford University and many interdisciplinary colleagues have authored an interesting paper that attempts to quantify sustainability. It also attempts to solve many of the (well-known, and long-ignored) problems with the definition of GDP, Gross Domestic Product.
Here it is: Are We Consuming Too Much?
I don't understand all the deep economic equations. But I was intrigued by this description of the paper by Alan AtKisson:
It's fascinating stuff from a policy perspective. Lest you think it is getting too theoretical to actually matter in the real world of hurricanes, oil spills, and impending Water Wars, note that Sweden already has teams of researchers working on applications of the theory to be tested in actual cities and regions of that country. Some governments are taking this stuff seriously and working on ways to implement changes.
I think what catches my eye about this area is how it brings economics closer to the real world (and vice versa). I have never liked the fact that economics is called a "science" because there is no experimental foundation (it's all theory), and none of the "truths" you can derive through the equations seem fundamental in the same way that, say, the law of gravity is fundamental.
I still don't think "sustainability economics" is closer to being a science, but folding in the effects of real climate change, actual watersheds, genuine levels of soil toxins, and other factors that are not arbitrary like a price is arbitrary, seems to ground the economics in a more satisfying way. It starts to feel solid, rather than more like handwaving, to me.
The GDP is a nearly meaningless number, and yet we base all kinds of stuff on it. It's ghastly. Maybe having something more concrete will lead us to wiser, more sustainable monetary practices also.
But is this sort of thing measurable? What does it really mean, this word "sustainable," and is it just one more thing for different political parties or countries to define differently, ultimately rendering it meaningless and cheapening it to mere marketspeak?
Kenneth Arrow of Stanford University and many interdisciplinary colleagues have authored an interesting paper that attempts to quantify sustainability. It also attempts to solve many of the (well-known, and long-ignored) problems with the definition of GDP, Gross Domestic Product.
Here it is: Are We Consuming Too Much?
I don't understand all the deep economic equations. But I was intrigued by this description of the paper by Alan AtKisson:
"Are We Consuming Too Much?" is a paper that attempts to answer that fundamental question on a global scale, in pure economic terms. It was completed in 2002, but not published till 2004 in the Journal of Economic Perspectives. (It took that long to convince the editorial board to publish an inter-disciplinary paper.) "Are We Consuming Too Much?" also introduces the basic principles of Inclusive Wealth, together with the first attempt to use it with real-world data. [...]
What exactly is "Inclusive Wealth"? It is an attempt to measure the the change in value over time of all the critical capital stocks in an economic system, at constant prices. Natural resources. Ecosystems. Manufactured capital. Human welfare. Human knowledge. Inclusive Wealth is "inclusive" for two reasons: one, because it tries to include everything that actually matters in economic development (which is a first, even for economics); and two, because it includes the interests of future generations. This is a genuine economics of sustainability.
For the big-name team of economists and ecologists who thought this up, sustainability can be defined this way: the value of your wealth, in all its forms, should not decline over time. The next generation must inherit watersheds that still work, infrastructure that isn't collapsing, a store of knowledge (and healthy people who know the knowledge) that's getting bigger and richer instead of smaller and stupider, and so on. You measure sustainability by figuring out whether all those capital stocks are maintaining or increasing their value, continuously. If they aren't, it's time to change your course ... or perhaps to learn to fiddle, so that you are ready for when Rome starts to burn.
The important distinguishing feature of this method is the use of accounting prices, or what we mortals might call the "real price". Such prices reflect the actual cost of replacing the asset (what it would actually cost to replace a ruined water source, for example) and do not vary with changes in valuation by the market.
It's fascinating stuff from a policy perspective. Lest you think it is getting too theoretical to actually matter in the real world of hurricanes, oil spills, and impending Water Wars, note that Sweden already has teams of researchers working on applications of the theory to be tested in actual cities and regions of that country. Some governments are taking this stuff seriously and working on ways to implement changes.
I think what catches my eye about this area is how it brings economics closer to the real world (and vice versa). I have never liked the fact that economics is called a "science" because there is no experimental foundation (it's all theory), and none of the "truths" you can derive through the equations seem fundamental in the same way that, say, the law of gravity is fundamental.
I still don't think "sustainability economics" is closer to being a science, but folding in the effects of real climate change, actual watersheds, genuine levels of soil toxins, and other factors that are not arbitrary like a price is arbitrary, seems to ground the economics in a more satisfying way. It starts to feel solid, rather than more like handwaving, to me.
The GDP is a nearly meaningless number, and yet we base all kinds of stuff on it. It's ghastly. Maybe having something more concrete will lead us to wiser, more sustainable monetary practices also.
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