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Make It Forty-Four Shades of Green

BrianCzechLast month in “Forty Shades of… Less Brown?,” I described the principle of increasing marginal brownness. This principle establishes that the process of economic growth invariably entails an environmental “browning,” even though some growth regimes are less brown than others. The idea is to use the brown portion of the color spectrum in framing discussions of economic growth. Otherwise it is too easy to fall for the seductive and dangerous rhetoric of “green growth.”

Don’t let the title of this week’s column fool you. I haven’t been drinking the Green Kool-Aid. This week we’re using the green portion of the spectrum, alright, but in a surprisingly different context.

You may recall that I concluded last month’s column with a stunning observation from the Eastern Economic Association conference in Philadelphia. Despite the stereotype we have of economists as wild-eyed growth-at-all-costers, pumping their fists for perpetually increasing GDP, something new was afoot in Philly. In fact, the overwhelming majority of economists I spoke with agreed wholeheartedly that there is a fundamental conflict between economic growth and environmental protection. They acknowledged limits to growth and even concurred that wealthy nations, at least, should adopt the goal of a steady state economy!

“Proove it,” you said? I offered to do just that.

Proving it is easy, thanks to the CASSE position on economic growth. The CASSE position states precisely that there is “a fundamental conflict between economic growth and environmental protection.” It also states that a steady state economy “has become a more appropriate goal in large, wealthy economies.” Forty-four conferees signed the CASSE position right there in Philadelphia. So there’s your proof!

Only a few conferees that I spoke with declined to sign the CASSE position, at least for the time being. Even these few may lend their good names at some point. None were openly opposed to it, either, and it is not uncommon for a prominent scholar (the type I sought) or public figure to ponder the significance of a statement for some time prior to signing it. But for EEA leaders past and present (such as Ingrid Rima and Steven Pressman, respectively), the CASSE position contained little to even hesitate about.

So what’s going on here? What happened to our stereotype of the professional economist as denying limits to growth, based on simplistic notions of perpetual technological progress? After all, that stereotype is not without a basis in fact. Examples abound, and one of my personal favorites (in a sense) was the wackiness of one Robert Bradley: “Natural resources originate from the mind, not the ground, and therefore are not depletable.” This, while receiving the Julian Simon Award from the Cato Institute! (Simon is another story altogether, which I covered in Chapter 4 of Shoveling Fuel for a Runaway Train). The stereotype was not only well-deserved but proudly flaunted during decades of neoclassical nuttiness.

Therein lies a key word: “neoclassical.” This is the brand of economics most responsible for our stereotype. Neoclassical economics is exemplified and promulgated by the Chicago School, and it’s increasingly credited with a variety of crisis-causing shortcomings. A short list of neoclassical icons would include Frank Knight, Milton Friedman, and Alan Greenspan. Let it be quickly said that these are (or were) no dummies, but neither should they have been expected to know everything, or even something, about ecological affairs and long-run economic sustainability. And these are (or were) the cream of the neoclassical crop.

As a matter of lingo, at least in the U.S., the neoclassical brethren have recently been labeled “freshwater” economists by themselves and by journalists, indicating the prominence of Chicago and some other inland schools as bastions of neoclassical thought. This is probably a welcome development for many neoclassicals who would gladly trade the stigma of “neoclassical” for the cleanly sound of “freshwater.”

Our stereotype of the GDP Growthman, then, should have always been attributed primarily to neoclassical economists, not economists at large. The problem for sustainability is that the neoclassicals comprise a large and influential portion of economists, especially those appointed to government posts and those running the Federal Reserve System. That shouldn’t be a surprise, when you think about the influence of Big Money in government and academia. The historical linkage of Big Money and neoclassical economics is described in Mason Gaffney’s Corruption of Economics, among others.

But our focus is these other, non-neoclassical economists, so prominent at the EEA conference. Who are they? To start with, there are the Keynesians, neo-Ricardians, Austrians, Sraffians, Marxists, and Georgists (some of my personal favorites). There are also the “saltwater” economists who tend to synthesize neoclassical and Keynesian thought. There are numerous subdivisions among these broad categories, too, such as “red” Marxists, “green” Marxists, and even Marxists who conclude, like Marx did, that “I am no Marxist.” The point is that many, and perhaps a large majority, of these economists would reject the neoclassical notion of unlimited growth, if given the chance.

Of course, we also have ecological economics, for which limits to growth is the starting point and top priority for analysis and policy reform. The fact that there is a limit to economic growth is not an “assumption” in ecological economics, but a scientifically sound and nuanced conclusion, and other topics in ecological economics must square therewith. I hesitate to list ecological economics among these other schools of thought, though. Ecological economics doesn’t yet have the historical cachet or the strength in numbers, certainly not of the Keynesians, Marxists, or neoclassicals. Nor does it have a strong presence in the policy arena, yet.

Perhaps more importantly, unlike these other traditions in economics, ecological economics is as much ecology as economics. It is sometimes described as a “transdiscipline,” transcending even an “interdisciplinary” approach of combining environmental and economic concerns. Ecological economics is not just about applying another twist from the social sciences to economic affairs. Rather, it is about basing the social science of economics on a solid foundation of natural sciences, especially physics and ecology. At this point in history, with a crowded planet replete with climate change and a burgeoning list of endangered species, falling over like canaries in the coalmine, ecological economics should become a presence in conventional economic affairs.

That brings us back to the EEA. Unlike the American Economic Association, historically dominated by neoclassical economists, the EEA is known for its openness to the various schools of thought. Economists of all ilks, including neoclassicals but not excluding the others, assemble at the annual conference. In Philadelphia, for example, Gregory Mankiw gave the presidential address, marking his exit as the figurehead of the EEA and making way for the presidency of Duncan Foley.

Foley is a free-ranging, highly respected economics professor with a remarkably diverse approach that defies categorization. Meanwhile, Mankiw is squarely in the neoclassical hall of fame. A leading author of neoclassical textbooks, Mankiw served as the Chairman of the President’s Council of Economic Advisors under George W. Bush. Yet, when I talked with him about the CASSE position on economic growth, even he seemed curious and willing to consider the merits. This may reflect the saltwater in his intellectual veins. It might reflect a healthy dose of common sense, too. Perhaps this neoclassical icon will be a CASSE signatory at some point.

Although the neoclassical stereotype has a basis in fact, some benefit of the doubt should be allocated to the neoclassical forebears. After all, the Knights, Friedmans, and Greenspans of the neoclassical world cut their macroeconomic teeth in an age dramatically different from ours. Even conservation heroes such as Rachel Carson and Aldo Leopold, mid-century contemporaries with the neoclassical icons, weren’t talking clearly about limits to economic growth. You can almost read about it between the lines (especially the last lines of Leopold), but explicitly describing the conflict between economic growth and environmental protection is only a recent development, even among the ecological professions. Furthermore, it’s slow going there, too. One organization, the Ecological Society of America, is still sipping the “sustainable growth” Kool-Aid (sickening a considerable share of members in the oxymoronic process).

The point is that neoclassical economists should not get all the blame for promulgating economic growth beyond the optimum, also known as “uneconomic growth.” The fact is, many of them may be undertaking a paradigm shift and may soon shed the stereotype they inherited. Mankiw, for example, didn’t get where he is by being oblivious to world affairs or unable to adapt. If a scholar and leader of his ability had received his education in the ecological sciences along with economics, he conceivably could have been a steady state economist on par with Herman Daly. The CASSE blog might be called The Daly News and Mankiw Views. Furthermore, to the extent that Mankiw and other prominent figures in neoclassical economics are noting the world around them, and are “shocked” (as Greenspan allowed) in retrospect by the shortcomings of neoclassical economics, it isn’t too late for them to part with their perpetual-growth past.

While talking with Mankiw in Philadelphia, I noted the stark contrast with the conversation I’d had with Robert Lucas (the Chicago School growth theorist) after his presidential address, for the American Economic Association. I asked Lucas if he thought there was a limit to economic growth, and he automatically replied, “No, that’s what technological progress is for.” It was as if I had tapped his knee with a rubber hammer, and his perpetual-growth kick was instantaneous. This may not be entirely a matter of his freshwater, neoclassical lineage, though. It’s been 8 years since I questioned Lucas, and a lot of economic and ecological crises have probably shaken the faith of neoclassicals in the intervening years. Certainly a lot of faith in the neoclassical school has been shaken, which presumably would engender some re-inspection of neoclassical theory.

If Lucas is impervious to critique, or too stubborn to re-inspect his neoclassical paradigm, and fails to apply his renowned calculus to growth limits, he will forfeit what could otherwise be a grand finale of applied and important mathematics. Instead, he will be a last bastion of an unsustainable, stereotypical, 20th century neoclassical mistake. Other economists that have thought their way through the perpetual-growth nonsense, identifying the key ecological principles with due diligence, will take his place in the annals of economic thought.

That brings us back to the EEA conference and the conclusion of this week’s Daly News. The professional economists, professors, and students populating the EEA were fun, smart, and even inspirational to be with. In turn, many of them were inspired by the CASSE mission, with forty-four of them signing the CASSE position on economic growth. That included Georgists, Keynesians, Marxists… even some neoclassicals of a “kinder, gentler” sort for the 21st century. So it is a pleasure, a fond memory, indeed an honor, to conclude by celebrating the fine, forward-thinking members of the EEA. Although the right color to use in economic growth discussions is brown, a good way to describe the EEA economists is with forty shades – actually, make that forty-four shades – of green!

Forty Shades of… “Less Brown?”

BrianCzechVarious subjects compete for this week’s Daly News, coming on the heels of the Eastern Economic Association conference in Philadelphia. “Forty Shades of Green” comes to mind, with all that we hear these days about “greening” the economy. Green jobs, green technology, green sectors… even “green growth.”

Sure enough, at the outset of the EEA conference was a talk on “Green Consumerism.” However, I took special note of the subtitle, “A Path to Sustainability?” The most noteworthy part was the question mark. In a political economy seemingly drunk on green beer, the question mark suggested some sobering skepticism.

I wondered if the question mark was just a typo. After all, this was a conference of professional economists, widely known for denying any conflict between economic growth and environmental protection. Yet the authors, Paula Cole and Valerie Kepner, described in some detail the inanity of spending our way into a sustainable economy, as well as the shenanigans pulled with the word “green.” They questioned the use of “green” to describe any kind of consumption. They concluded that “greening” an economy really entailed a lessening of consumption.

So maybe it’s time to employ another portion of the color spectrum in reference to economic growth. If green sends the wrong message, perhaps “brown” is the word. Instead of green growth, brown bloating.

Some consumable goods are less brown than others – think Honda vs. Hummer – but even a unicycle requires natural resources for its production. Manufacturing the unicycle entails pollution, too. It just doesn’t square to call an expanding unicycle sector a “green” phenomenon. Even compared to Hummers, unicycles are less brown, not green.

The service sectors fit in with the browning process of economic growth. From driving trucks (quite a brown service) to answering phones (less brown, on the surface), material inputs and pollution are part of the deal. We also have to remind our green beer-drinking friends that much of the phone answering is in service to the trucking sector. In more general terms, the “information economy” is an economy where growing quantities of information feed the already-brown sectors. If we don’t remember this, the Green Sheen Machine will continue to get away with talk of “de-materializing” the economy, lulling citizens and policy makers into leaving environmental concerns for tomorrow, while we experiment with “greening” our growth today.

We shouldn’t be surprised if they start talking about “green population growth” for green jobs and green consumerism. After all, cheaper labor and more consumers is what the corporate marketer wants. So we also have to remind our green-beer guzzlers that Hummer drivers and unicycle riders alike – indeed any producer or consumer of any good or service – must be fed, clothed, and sheltered. Population growth, which is often encouraged or defended for the sake of economic growth, entails the production and consumption of more food, clothing, and shelter. It’s not always and everywhere bad, but it’s never, nowhere green.

What about technological progress? The development of new technology in the brownest sectors might slow the slide toward dirty-coal black, but it doesn’t move us to the green part of the spectrum. That is because of the overlooked, tight linkage of research and development with economic growth at pre-existing, admittedly brown levels of technology. This ballooning, brownward spiral is more fully described here. New technology can be a very good thing, but in the service of economic growth, it does no better than lessen the rate of browning.

From the supply side and the demand side, then, economic growth starts with a tinge of brown and gets browner by the unit. We might call this the principle of increasing marginal brownness. If we must get “green” into the terminology, we may refer to economic growth as exhibiting the principle of diminishing marginal greenness.

But back to the Eastern Economic Association… Although I was right about the intent of Cole and Kepner, I turned out to be wrong about many other authors at the conference. I thought that, aside from a few strays, they would all be pumping their growth fists, “green” or not. Instead, almost all of the economists I spoke with – and I spoke with dozens – agreed that there is in fact a fundamental conflict between economic growth and environmental protection! These were professional economists, economics professors, and top-notch grad students in economics. They agreed that in large, wealthy economies, a steady state economy has become a more appropriate goal than economic growth.

“Prove it,” you say? I’ll do just that, next month in The Daly News.