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The Overlooked Anniversary: Forty Years Ago Congress and the President Called for a Steady State Economy

by Brian Czech

BrianCzechYou read that right. Pursuant to an act of the 93rd Congress, President Richard M. Nixon signed into law the establishment of a steady state economy. That law was called the “Endangered Species Act.”

Technically it’s true that we are closer to the ESA’s 41st anniversary (Nixon signed it on December 28, 1973), but to say we are still within the 40th anniversary of ESA is good enough for government work. Plus it seems more befitting when 2014 happens to be the 100th anniversary of the passing of the passenger pigeon. Martha, the last known passenger pigeon, died at the Cincinnati Zoo on September 1, 1914.

Too bad the passenger pigeon didn’t have the “opportunity” to be listed as endangered pursuant to the ESA. It would have been protected and it may have survived, if only on life support. The American economy wouldn’t have left it a lot of room; rather, just enough.

Of course, when the ESA was passed, no one announced it in terms of a steady state economy, for at least three reasons. First, the ESA’s influence on the rate of economic growth would be very gradual as the listing of species prevented a dam here and a power line there. It would have been inaccurate for Nixon to say, for example, “By September 1, 1974, GDP will stabilize.” Establishment of the steady state economy would take decades as dozens, then hundreds, then thousands of species were driven to the brink, then saved in the nick of time through the designation of “critical habitat” and other ESA protections. But make no mistake: With the stroke of Nixon’s pen, the American economy was slated to move toward a balance with the “economy of nature” and all its species, assuming the law was implemented.

The second reason is that few in Congress (if any) actually realized the ESA would lead to a steady state economy. It’s highly unlikely that Nixon did either. If you read the profiles of elected officials in the House, Senate, and President’s Cabinet, you’ll see there was–and still is–virtually no ecological expertise to speak of. Without understanding the economy of nature, and what is required to maintain its natural capital, one cannot grasp the economic relationship between Homo sapiens and the rest of the species. Only in an ecological curriculum, or at least a course in ecological economics, will you learn in no uncertain terms that, “Due to the tremendous breadth of the human niche, the human economy grows at the competitive exclusion of nonhuman species in the aggregate.” Without that knowledge, which is rooted deeply in physics and biology, our politicians are susceptible to whimsical notions of “green growth” and “de-materializing the economy.”

Third, if there were any politicians involved in the passage of the ESA who sensed the implications for economic growth, they wouldn’t have had the courage or integrity to reveal such an inconvenient truth. If we have learned anything from our political leaders–from Nixon to Clinton–it’s the depth to which they’ll drown the truth in order to maintain their positions of power. They also leave the heavy lifting of legislation to be done by future politicians, political appointees, and bureaucrats. Meanwhile the teeth of such legislation are filed down by budget cuts and hostile amendments.

In any event, and whether our politicians knew it or not, the ESA was as sure a prescription for a steady state economy as the American constitution was for a democracy. Think that’s a stretch? Think again. The word “democracy” is nowhere in the constitution. Indeed our founding fathers argued the merits of that newfangled idea. But the principles put forth in the constitution are all about establishing a democratic system of government.

With the ESA, it’s all about establishing a stabilized economy of nature. That doesn’t mean a landscape filled to the brim with bison herds or passenger pigeons, much less snail darters or Wyoming toads. Far from it. What it means, however, is “no species left behind,” even if many of them are perilously perched on flimsy branches of a tree of life top-heavy with human economic activity. What it means, therefore, is a steady state economy with stabilized human population and consumption, at a level pushing the limits of sustainability. That’s what the ESA is ultimately all about, whether or not the phrase “steady state economy” is used therein.

The ESA was too late for many species, and way too late for the passenger pigeon. Now consider a somewhat chilling thought: Does anyone alive today have any idea what we’ve been missing? Let’s get a sense of the magnitude of our ecological debt from the great French-American naturalist John James Audubon:

The multitudes of Wild Pigeons in our woods are astonishing. Indeed, after having viewed them so often, and under so many circumstances, I even now feel inclined to pause, and assure myself that what I am going to relate is fact. Yet I have seen it all, and that too in the company of persons who, like myself, were struck with amazement. In the autumn of 1813… on the banks of the Ohio… I observed the Pigeons flying from north-east to south-west… the birds poured in in countless multitudes… I traveled on, and still met more the farther I proceeded. The air was literally filled with Pigeons; the light of noon-day was obscured as by an eclipse…

In the more evocative style of Aldo Leopold,

The pigeon was a biological storm. He was the lightning that played between two opposing potentials of intolerable intensity: the fat of the land and the oxygen of the air. Yearly the feathered tempest roared up, down and across the continent, sucking up the laden fruits of forest and prairie, burning them in a traveling blast of life.

One could get the uneasy feeling that all the wonder of the Internet would pale under a pulsating sky of passenger pigeons. What would you rather do, surf the web or watch the traveling blast of life?  Yet that’s the type of trade we’ve made, or been subjected to: a constant replacement of the biological with the manufactured, including in the age of the “information economy.”

Passenger Pigeon - Seabamirum

What have we given up, and what are we giving up, to pursue continuous economic growth? Photo Credit: Seabamirum

In the 60 years between the last passenger pigeon and passage of the ESA, GDP grew from well under a trillion dollars to well over five trillion (all in 2014 dollars). To put that in simple ecological terms, millions of acres of wildlife habitats were converted to cities, towns, plant, infrastructure, and landfills. In the countryside, agriculture dramatically intensified, losing its habitat value. Much of the remaining, wilder acreage was polluted to one degree or another with the byproducts of economic activity.

For the most part those trends continue and, as if what’s happened on the ground isn’t enough, today in a 90% fossil-fueled economy we also have relentlessly growing greenhouse gas emissions, despite all the talk of technological progress and green growth. To add insult to injury, politicians continue to tell us that “there is no conflict between growing the economy and protecting the environment,” with political appointees parroting such pap and gagging the scientists who would raise awareness of the conflict. It’s easy to understand why Leopold said, “To be an ecologist is to live in a world of wounds.” The wounds are to the environment, to species, and to human dignity.

Yet that’s what we get when the primary policy goal is economic growth and when so many other laws, policies, and programs are tailored to the pursuit of economic growth. While the language of the ESA is still prescriptive of a steady state economy–perennial efforts to gut it notwithstanding–the ESA has as much chance of implementation as Obamacare would have under Ted Cruz. You won’t see a Tellico Dam being stopped by a snail darter any time soon, whether your president is Obama or Cruz.

Congress and presidents have never been more hell-bent on economic growth. The “Washington Consensus” might as well be the “Wall Street Consensus.” The score is kept in terms of GDP, and the only thing that can change that is a widespread paradigm shift away from economic growth–increasing production and consumption of goods and services in the aggregate–toward the steady state economy.

As the days grow shorter on 2014, with the 41st anniversary of the ESA approaching and the extinction of the passenger pigeon surpassing 100 years, let us commemorate things in the way that matters most for species conservation. Let us recognize the ESA as a prescription for a steady state economy, in balance with the economy of nature and its non-human species. The ESA needs this wedding–a wedding with the truth–before its anniversary can be truly worth celebrating.

The Visible Hand: Manipulating Market Prices by Influencing Laws and Regulations

by Max Kummerow

Recently a member of a mailing list for resource economists asked how to value endangered species given that they are not bought and sold in markets. A common method is to infer prices (“existence values”) by indirect methods such as answers to surveys (e.g., “How much would you be willing to pay to keep tigers from going extinct?”). An issue raised in the online discussion was whether species grow more valuable as they become more scarce and their numbers fall toward zero. If prices keep changing, what is the “right” price?

Thought experiment: suppose a keystone species is about to go extinct, but few people know about the threat. Oh, heck, let’s be more realistic. Leading ecological authorities believe that the effects of climate change will drive 1/3 or more of the world’s species to extinction by 2100 with unpredictable system-wide effects. Meanwhile, the owners of $17 trillion of fossil-fuel reserves are spending hundreds of millions of dollars to convince the public that the threats from climate change are overstated or non-existent (See Bill McKibben’s Rolling Stone article or Oreskes and Conway’s Merchants of Doubt).

How can we have any idea about fundamental values (that is, “correct” utility-maximizing efficient market prices) with so much misinformation floating around? Advertising creates a set of consumption preferences tilted towards items sold by companies more concerned about profits than benefits to society.

Prices depend on preferences, and preferences depend on information. Knowledge of the unhealthy and even fatal effects of smoking changed preferences about and prices of tobacco. Such changes would also occur over time as people gain knowledge about the threats of extinction and climate change.

By similar means, misinformation and strategic uncertainty lead to mispricing. If such mispricing in the carbon market continues, the predicted result is a “tragedy of the commons” (collective irrationality, market failure) with features like Miami, Washington, DC, and Los Angeles ending up below sea level, mass species extinctions, crop failures, etc.

Economic systems are complex, and many external costs and benefits are not factored into prices or people’s decisions in the market. Time lags add to the complexity. What if it will take 2,000 years before climate change makes the planet too hot for human life? Such a time lag makes it harder to come to the best decision about whether to build a new coal-fired power plant.

Species extinctions may be portents of broader problems (e.g., climate change), akin to canaries in a coal mine. The same factors driving them extinct — various impacts of growing human populations and economies — may be driving us extinct in the longer run. Does it make sense to value threatened species without considering the linkage to these other related problems? An endangered species itself might be worth $1, yet the factors driving it toward extinction might cause $100,000 worth of damage over the long run, or maybe even infinite damage from our point of view if extinction extends to humans. We need a better benefit-cost picture — a larger, genuine, and more complete accounting.

Another major problem with prices is that they only reflect the preference of those who hold power in markets. Perhaps polar bears should have standing when it comes to determining prices. They are intelligent, sentient beings with the most at stake when ice melts, so maybe their preferences ought to be factored into decisions about the Keystone Pipeline and exploitation of tar sands oil. What about future generations? Nobel Prize winner Joseph Stiglitz called this problem “incomplete markets” leading to market failure and universal mispricing.

There are some things markets do very well, but only if the institutional framework (rules of the game) ensures that prices reflect all costs and benefits. Laws, lobbying, culture, taxes, regulations — all kinds of institutions collectively created by societies — have enormous influences on market prices or even the existence of markets. So, to some degree, through these institutions, we choose price levels through a “visible hand” of policies and institutions. Stiglitz points out that the deregulation policies that led to the Global Financial Crisis of 2008 did not come out of nowhere, but rather from intense lobbying by stakeholders at banks and other people whose profits were restricted by regulations — a situation in which prices were set by something like a visible-policy hand instead of the invisible hand of the market.

Because of the difficulty of getting prices right, we might do better to regard creation as sacred and take the conservative position of Aldo Leopold who said, “The first rule of intelligent tinkering is to save all the parts.”

Valuations always depend on preferences. Economists call prices “revealed preferences.” If we “prefer” to settle for a world without many wonderful creatures, then we won’t attach much worth to them. But if we value them for their intrinsic beauty and their relationship to us (we do share DNA with every living thing), then we’ll attach more worth to them. So rather than measuring values, perhaps we should be trying to create value by improving preferences.

Examples of worldwide mispricing and market failures that need institutional corrections include:

  • Energy — too cheap due to climate change, extinctions, and negative effects on future generations.
  • Having children — too cheap since growing population will raise real prices of land, food, and energy, and contribute to climate change and other global environmental problems.
  • Endangered species — too cheap because ecosystem interrelationships are poorly understood, and indirect effects could be enormous.
  • Economic growth — overvalued because growth negatively affects aggregate utility and public goods (“the commons” such as air, water, soil, species diversity, ecosystem health, and climate) once we begin to reach the limits to growth.

Most economics students are still taught that following market price signals leads to the best of all possible worlds (market efficiency and maximum aggregate utility). But the examples of under- and over-valuation contained in the short list above suggest that humanity is headed for trouble if we choose to let market prices and self-interested institutions’ manipulation of prices control outcomes. The markets we rely on fail to generate utility-maximizing prices for goods and services and for the future of humanity. Thinking of ourselves as an endangered species, what is it worth to keep us alive?

Max Kummerow has a Ph.D. in urban and real-estate economics.  He is currently studying population issues in Perth, Australia.

Remembering History

Comment to Tim Murray and Tom Butler

by Lisi Krall

It is worthwhile to recall history as we ponder Tim Murray’s proposition that we direct our “energy into stopping economic growth” rather than saving “the environment piecemeal” through conservation efforts.  It’s enlightening to go back to Thomas Jefferson just to gain some perspective on what happened when the market economy was fertilized with the industrial revolution.  Thomas Jefferson, writing in preindustrial America, thought one of the attributes of our nation that would enable us to “become happy and prosperous people” was the fact that we possessed “a chosen country, with room enough for our descendants to the hundredth and thousandth generation.”  Do the math, because it gives you some perspective on Jefferson’s world.  Apparently Jefferson thought we had a big enough unsettled country for agricultural expansion to take place for 20,000 years.   Clearly, Jefferson didn’t anticipate what was coming.  The pace and reach of economic expansion were beyond anything he could have imagined as he looked westward from Monticello at the turn of the 19th century.  Yet little more than a century after Jefferson wrote these words the country had become an industrial giant and most of the land had been given over to private ownership.

It was this pace of economic expansion coupled with a mostly wild country that gave rise to the conservation movement in the United States.  It quickly became abundantly clear that in the wake of our great economic experiment, nothing would be sacred and there was much to lose. In the United States, the conservation movement literally grew out of the rapacious speed and reach of 19th and 20th century capitalism and in this sense was very organic.  The preservation arm of the conservation movement became manifest in a wilderness ethos.  The wilderness ethos spoke to something foreboding about our so- called economic progress, the fact that we clearly had the capacity to put an end to the magic and pulse of a mostly untrammeled country in no short order.  The conservation movement, especially the preservation branch of that movement, helped us to think more critically about the meaning of progress and the place of humans on the earth.  Preservation was a cultural response to the most egregious impulses of capitalism.   It was a cultural meditation and institutional grappling with what a healthy human ecology should look like and when it was necessary to stop so-called economic progress for the sake of something more important.  It led John Collier to comment:

The profit-motive finds no use in Wilderness; and Wilderness can perish utterly in its remote silences, without bringing the profit-seeking temple down in ruin on men’s heads. Wilderness therefore, as a symbol of all in the human aspiration and caring which holds itself out from the profit-pursuing imperative, can safely be crushed down.  One after another of the absolutism of profit-pursuit has been somewhat tamed, somewhat restrained, during the century behind us.  There remains Wilderness, as a fact and an aspiration: Wilderness, which by its very definition says to the money-profit motive: You shall not enter here.

We might ask ourselves whether we would have the same impulse to stop economic growth were it not for all the preservation and conservation that has heretofore taken place.

I don’t think there’s any question that the form the preservation movement has taken has been historically conditioned.  Preservation has functioned on the basis of setting aside wild places and otherwise leaving the economic engine of capitalism in place. No one would disagree with the fact that we’ve reached a different historical moment where those involved in preservation and conservation need to be more vocal about ending an economic arrangement based on growth.  In fact, the limits to this historically specific preservation strategy have been understood for quite some time.  In the mid 20th century Aldo Leopold makes a “plea for the preservation of some tag-ends of wilderness, as museum pieces, for the edification of those who may one day wish to see, feel, or study the origins of their cultural inheritance.”  Clearly he understood the limitations of this approach.  Yet it is one thing to acknowledge this and another to claim, as Murray does, that if our energy “to save the environment piecemeal had been put into lobbying for a steady state economy, development pressure everywhere would have ceased, and habitat would be safe everywhere.”  Tom Butler is right, “there is no way to prove or disprove this opinion,” but I would offer that history tells us that preservation has made a remarkable difference, not only in the integrity of that which has been preserved, but also in extending a cultural ‘habit of thought’ and cultivating a wilderness ethos.

Tim Murray is correct in his sense that if we can’t stop the growth machine we are going to lose the war.  But as Tom Butler points out, what we preserve can at least provide “the seedbed of recovery for wildness to begin the long dance of evolutionary flowering again after this dark episode of human-caused extinction.”  And ending our efforts to preserve and conserve would be, as Butler also tells us, “an ethical breach with our fellow members of the biotic community.”   We stand a much better chance of winning the war by our preservation and conservation efforts, by retaining something of the pulse of the wild places on earth.  In the shadow of these places we continue to cultivate an awareness of limits and can at least measure the extent of our loss.  In a world where the when-to- stop rule is vague, these are not insignificant contributions to changing our path.

I would also add that we seem to have made little headway in our economic discourse on the issue of ending growth.  I doubt very seriously this has had anything to do with the time and energy spent on conservation and preservation. In fact, it’s likely that the efforts at preservation and conservation have had a more profound influence on our thinking about the limits to economic expansion than anything else has.  Rather than target our frustration about the lack of movement on the no-growth front at the conservation movement, we might do better to analyze why so little progress has distilled from our no-growth rhetoric.

I have no doubt the historical moment has arrived where the preservation movement needs to speak out more explicitly about the problem of economic growth in an effort to save what is wild.  But it is equally important that those who speak out against economic growth bring the loss of the wild and the need for a healthy human ecology to a central and pivotal focus in their discussions of scale.  No-growth discussions about optimal scale don’t elaborate on how much of what is wild should remain wild, instead, these discussions deal in the vague world of costs and benefits and promoting development without growth. These discussions evaluate whether we’ve gone beyond an optimal scale when “the cost to all of us of displacing the Earth’s ecosystems begin to exceed the value of the extra wealth produced” or when the benefits of growth are overshadowed by the costs. Without greater clarity on the true meaning of development and optimal scale we no-growth advocates might succeed in orchestrating a perfectly domesticated steady-state world, where we are all half crazy for want of a diverse and magical external world to resonate with our genome and our psyche.

Lisi Krall is a professor of economics at the State University of New York at Cortland, a member of CASSE’s executive board, and the author of Proving Up: Domesticating Land in U.S. History.