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A Stick in the Stocking: Santa’s Supply Shock

by Brian Czech

BrianCzechIt’s déjà vu all over again: another oil “supply shock.” Seems like we’ve had one every few weeks for the past few months. Santa stuck another one in the Christmas stocking, and by New Year’s Eve crude oil prices fell to Great Recession levels.

Frankly, though, an oil supply shock is hardly . . . well, hardly shocking by now! Furthermore, this is the kind of oxymoronic “shock” people enjoy, or at least most people in a growth-obsessed economy. We have a sudden increase in production and therefore drop in price, due mostly to OPEC. The drop in price sort of undermines the meaning of shock, no? Gas is below $2/gallon. “If such is a shock,” we say, “bring it on!”

Historically, though, the phrase “supply shock” would evoke deprivation, pain, and fear. In the 19th century the most notorious supply shock was the dramatic decrease in the availability of whale oil in the 1860s, due partly to the side-tracking of the New England whaling fleet during the Civil War. Sperm whale oil had been the predominant domestic fuel, used in household lamps as well as for heating, and adjusting to different fuels wasn’t easy.

In the 20th century, perhaps the biggest supply shock was the OPEC oil embargo of 1973. This time, there was no other significant fuel to adjust to, and the embargo resulted in a historic stock market crash. Now that’s a supply shock.

We can see from the examples that a supply shock tends to get its name from the “bigness” of the supply in question. A sudden shortage of smelt wouldn’t warrant a “supply shock” headline, because smelt are a bit player in the economy. A supply shock is more macroeconomic than micro. In the examples above, major fuels were the supplies in question.

Gas Can - Bryan Costin

Fuel isn’t just any commodity–dramatic changes in its supply can lead to supply shocks. Photo Credit: Bryan Costin

“Fuel” might sound like just another commodity, but the name says it all; it fuels the economy, not just smelt fishing. When the availability of fuel suddenly declines, that’s a shock indeed, a shock to the system, the economic system.

Oddly enough, this latest supply “shock,” resulting in a rapid drop in price, also caused a stock market tumble, just like the OPEC oil embargo. This time it wasn’t a full-fledged crash, at least not yet, but the Dow Jones dropped 315 points the weekend of December 12. We can chalk it up to the general insecurity caused by any major price shift, but we would be prudent to note yet one more case of Wall Street vs. Main Street. Here we all had cheaper fuel–with all that obviously meant for our household budgets–and Wall Street felt threatened.

It would be tempting to turn this into anti-Wall Street polemic, but the inequality of Big Capital is not even the main issue here. Rather, recent talk of “supply shock” is a wake-up call for the sustainability of Big Capital, the little man, and everyone in between. The latest news of cheap oil notwithstanding, we are moving inexorably into the era of Supply Shock, in which natural resources and environmental services become the limiting factors for human wellbeing; so limiting in fact that wellbeing declines quickly and ubiquitously.

Sure, at first glance Santa’s little “supply shock” of 2014 runs in the face of any limits-to-growth argument. But frogs feel fine as the water warms, too. When OPEC pulls out the stops for oil production, with whatever motives it might have–say for example to slap the Russian economy–it’s like a bigger gun to shoot ourselves in the foot with. In this case the gun is the global economy, and the foot is our climate, our biodiversity, and environmental protection at large.

And of course as the environment is whittled away from under us, so too is our kids’ and grandkids’ economy. A growing and then bloating economy is actually a threat to environmental protection, economic sustainability, national security and international stability.

I propose that we stop calling these short-term fuel gluts “supply shocks” and instead call them “supply parties.” We all know the parties must end, and the longer we party, the bigger the real shock, the after-shock, will be. When the suite of resources such as oil, natural gas, minerals, timber, fisheries, soil, rangeland–and oh yes, that cheap thing called “water”–are at a collective all-time low, relative to demand, and when climate change, biodiversity loss, and environmental unravelling are in full swing, and when our agriculture, extraction, manufacturing, and services are devastated by the loss of our natural capital, we’ll know we’re in the age of Supply Shock.

We’ll have been naughty, and Santa will have known. What’s that going to get us?

Bring Back Hank Paulson — On One Condition

by Brian Czech

On and on the ironies go;
where they stop, nobody knows.
Biggest one last week for sho:
The Fed a-meetin’ in Jackson Hole!

BrianCzechThat’s right. The entity as responsible as any other in the world for eroding our green space, all the way from grampa’s farm to the Grand Tetons, had the gall to meet again last week (as they do every August) at the Jackson Lake Lodge. From the third floor of the lodge, the Fed overlooks the Tetons while shifting the global bulldozer into overdrive, mining the mountaintops, overfishing the oceans, and releasing carbon by the gigaton.

Lest this become a baseless rant, let us base the rant in facts and logic. The Fed pulls out all the stops to “stimulate the economy.” Meanwhile growing the economy — increasing production and consumption of goods and services in the aggregate — trashes the planet. Furthermore, the economy of our grandkids depends upon a healthy and stable planet. Therefore, at this point in history with endangered species proliferating, growing dead zones in the ocean, and climate change melting whatever glaciers are left in the Tetons, the Fed is doing far more harm than good by “stimulating the economy.” Not only are they hastening the demise of the planet, they’re pulling out the economic rug from the grandkids.

The only baseless part of the rant would be to blame the members of the Fed for their insufficient education and background in ecology, or the “economy of nature.” The Fed can’t help it that their minds were inculcated at places like the University of Chicago, Columbia, and MIT. These bastions of neoclassical economics were all subject to the corruption of economics that took place early in the 20th century as well-endowed economics departments were geared to push back the populist followers of Henry George (who was to the land baron what Marx was to the capitalist).

Not to get carried away, because these academic institutions produced brilliant thoughts, for sure. But in the economics departments, students like Ben Bernanke were told again and again and again that “production is a function of capital and labor.” If you’ve ever taken a course in economics, you know the equation: Q = F(K,L). Quantity produced (Q) is a function (F) of capital (K) and labor (L). It’s called the “production function.”

Well of course production is strongly influenced by capital and labor, but what about the other crucial factor, the land! The classical economists of the 19th century all talked wisely about land, labor, and capital. Somewhere in the transition to “neoclassical” economics, land was dropped from the production function, reflecting the efforts to avoid the federal tax on land rents made so wildly popular by Henry George and the populist movement.

So now the chickens are roosting right over our heads, and it’s not eggs they’re dropping. The pollution is piling up in lockstep with GDP, while the land and resources required for more production are drying up, literally. Water and oil are the two supply curves moving inward most ominously in this age of macroeconomic Supply Shock, but you can add to the list timber, soil, fisheries, minerals, and just about any other natural resource you can think of. That’s why it’s macroeconomic Supply Shock, not a measly little, flash-in-the-pan, fracking “supply shock.”

Who's doing the looming -- the central bankers or the Grand Tetons? (photo credit Reuters/Price Chambers)

Who’s doing the looming — the central bankers or the Grand Tetons? (photo credit Reuters/Price Chambers)

The Fed’s appalling lack of ecological expertise allows them to believe in academically deranged concepts like “green growth.” What we really need at this point in history is macroeconomic policymakers that are, first and foremost, economists of nature. These people must thoroughly understand the price we pay for growing GDP — especially the environmental price — if they are to formulate policies with positive and durable effects.

Assembling such a Fed won’t come easy and it won’t happen overnight. The landless production function is deeply entrenched in academic economics and economic policymaking. And let’s face it, the only alternatives to growth are de-growth (aka recession) and the steady state economy. Of those, only the steady state economy is sustainable in the long run. Adopting the steady state economy as economic policy will be one of the most revolutionary movements of the 21st century. It is a political bear.

Most rants, even well-based rants, aren’t worth their spittle unless followed up with helpful suggestions. It’s not enough to point out the necessity of a steady state economy, either. That’s the goal that must ultimately be adopted, at least to avoid (more) resource wars, but politically viable suggestions for the here-and-now are needed as well.

So in the context of Fed deliberations, in particular identifying the next Fed chair, we should ask: Who is a valid candidate that, with regard to the economy of nature, is not dumb, dumber, or Summers?

Buckle your seat belts and hold onto your hats, because we’re headed for a sharp curve. Believe it or not, I recommend the recruitment of one Hank Paulson for Fed chair. Yes, that Hank Paulson, formally known as Henry Merritt Paulson, Jr., past CEO of Goldman Sachs and Secretary of the Treasury under President George W. Bush. CBO (Chief Bailer Outer) of the biggest of banks.

Remember the criteria, though, including a realistic chance of appointment. Ideally we’d have someone like Herman Daly as Fed chair. But Daly is firmly retired and, as the icon of steady statesmanship, is yet beyond the political pale. Paulson is neither of these things, yet there is some hope that Paulson is starting to get it about the conflict between economic growth and environmental protection, economic sustainability, national security, and international stability.

Paulson grew up on a farm in Illinois; he’s got to know where the milk comes from. Before college, he wanted to be a forest ranger. Alas, he wound up getting indoctrinated in business administration at the same place Ben Bernanke was immersed in the landless production function (namely, Harvard).

But there’s a big difference between Paulson and Bernanke. Paulson is a self-avowed, die-hard conservationist. He drives a Prius, is an avid bird watcher, and was even chairman of The Nature Conservancy. Surely, looking out at the Tetons, across that idyllic Jackson Hole, Paulson would be questioning the merits of further growth in the age of Supply Shock. Surely he would bring these concerns to the rest of the Fed at their annual meeting and throughout their deliberations.

Of course, based on his earlier behavior under Bush, bailing out the banks that were “too big to fail,” it appears that the landless production function had beaten the common sense out of Paulson. But then it is also possible — this we can hope is the case — that Paulson did sense the trade-off between economic growth and environmental protection all along, but felt it was too soon politically to move toward a steady state economy.

Now, more than seven years after being appointed Treasury Secretary — after BP, Fukushima, and numerous other big failures in the economy of nature including several more of the hottest years on record — presumably Paulson has reconsidered what’s really too big to fail. President Obama should ask him. If the answer is yes, Paulson should be requested to serve his country one more time, this time by slowing that bulldozer down and protecting the economy of nature for the grandkids.

Bill Clinton, The Nature Conservancy, and The Old Win-Win Rhetoric

by Brian Czech

BrianCzechWhen The Nature Conservancy decides to talk, the environmental community listens. Even some of Wall Street listens. Despite TNC’s low-key approach, no other conservation organization is remotely close to TNC in political connection and resources. Therefore, one of the most influential environmental books of the year is likely to be Nature’s Fortune by virtue of the fact that the author is none other than TNC’s president, Mark Tercek.

It’s easy to like Mark Tercek, or at least to suspect he is likeable. His preface alone suggests this ex-investment banker from Goldman Sachs has become a passionate conservationist. The criticism to follow has nothing to do with Tercek or the true content of Nature’s Fortune. The problem is that the production of the book and the way it is being portrayed could have the ironic effect of doing more environmental harm than good.

It helps book sales to have a blurb from a past president — “William Jefferson Clinton” in this case — proudly displayed on the front cover. Yet for serious scholars of conservation, the blurb undermines the book like a rash blurting of Rush Limbaugh would undermine serious scholarship on balancing the budget. While a Limbaugh blurb is largely bluff, Clinton’s blurb is largely fluff.

It’s interesting that TNC’s own website for Nature’s Fortune does not include Clinton’s blurb. Evidently there is a tension with regard to the use of Clinton’s name vs. the spurious content of the blurb, which flies in the face of ecological economics and sound science.

One also has to wonder if Clinton really read the book, or simply used the opportunity to roll out one of his most famous win-win shibboleths. For those of us in sustainability science, some of the most reckless rhetoric of the 20th century was Clinton’s fallacious, “There is no conflict between growing the economy and protecting the environment!” If you were paying attention around the turn of the century, you would have heard this zany zinger uttered by one political appointee after another. Word in the DC beltway had it that appointees were instructed to issue this pap when it came to discussions about the environment and the economy.

For appointees on the side of sound science and integrity in public service — and for those with common sense — such political puppeteering must have been odious. But as they say, power corrupts, and appointees uttered the odious awkwardly and often.

So what is the most recent version of Clinton’s win-win happy horsey that disgraces the front cover of Nature’s Fortune? “By breaking conservation down into dollars and cents, Mark Tercek shows that economic growth and environmental sustainability are not mutually exclusive goals. Nature’s Fortune takes a pragmatic approach to an important issue, and turns the conversation from ideology to arithmetic.” Yet Tercek shows no such thing.

Bill Clinton

“Economic growth and environmental sustainability are not mutually exclusive goals… but that depends on your definition of ‘environmental’.”

It’s true that Tercek breaks conservation “down into dollars and cents,” and he does take “a pragmatic approach to an important issue.” He does avoid ideology and he does utilize arithmetic. But no way does Tercek show “that economic growth and environmental sustainability are not mutually exclusive.” In fact, Tercek avoids the phrase economic growth, and certainly doesn’t define the term or describe the process of economic growth. He simply traverses the world, pointing out the essential economic values of natural resources. The fact that corporations, cities, and municipalities are capable of capitalizing on such value gets nowhere near a proof that economic growth may be reconciled with environmental protection.

It’s easy enough to see why politicians and even conservation organizations talk about reconciling economic growth with environmental protection. Economic growth is a long-sought, primary domestic policy goal, partly because it was indeed so appropriate for so much of the 20th-century world when nature wasn’t so scarce. Politicians are still so wedded to economic growth that we can forget about hearing from them about the trade-off between economic growth and competing goals such as environmental protection, long-term economic sustainability, national security, and international stability. Most conservation organizations won’t touch the conflict between growth and conservation with a ten-foot pole, either. TNC is no exception, and in fact would be one of the last organizations to acknowledge the conflict, with its close ties to Wall Street.

But let’s remember (since you won’t find it in Tercek’s book) that economic growth is simply increasing production and consumption of goods and services in the aggregate. It requires increasing human population and/or per capita consumption. It is measured with GDP. It is a rock-solid indicator of environmental impact, and there’s no way to reconcile it with environmental protection. “Green growth” is the oxymoron of the decade; less-brown growth is the best that could happen. Scientific, professional societies have taken the time to clarify this for the public and policy makers. And some of us have written extensively on this topic. We won’t get the imprimatur of Bill Clinton, though, because Clinton is the consummate win-win politician who will go to his grave as such. However, we will set the record straight with support from scientists such as E. O. Wilson, Jane Goodall, and David Suzuki, as well as the likes of common sense and integrity.

Having spent much of the past 14 years writing a book on the fundamental conflict between economic growth and environmental protection, on the heels of Ph.D. research on the subject, I have learned plenty about why and how the win-win rhetoric is promulgated. Books such as Supply Shock and Enough Is Enough should be leading the way in educating the public and policy makers about the real costs and benefits of economic growth. These are serious books by serious scholars of sustainability science. These are books that deal forthrightly with the fundamental conflict between economic growth and environmental protection, and they should be complemented by the likes of Nature’s Fortune, which helps to reinforce the primacy of natural resources in supporting economic activity.

Instead, serious sustainability scholarship in today’s bookstore is supplanted by titles gallivanting with presidential rhetoric that “there is no conflict between growing the economy and protecting the environment!” The win-win rhetoric makes for plenty of bookstore dollars, but only some cynical sense.

Supply Shock: The Journey

by Brian Czech

BrianCzechWriting a book is like going on a journey. You explore the terrain, make discoveries, meet interesting people, and maybe learn new languages. The longer the book-writing, the longer the journey.

Supply Shock was a long journey; here is a short travelogue.

I set out in the fall of 2000 to explore the world of environmental and economic sustainability: fresh, feeling strong, and relatively young (at least for this type of journey). Not only was I out to explore the world, but change it! I’d seen enough already to know my mission: revolutionize the way the world dealt with economic growth.

Two earlier journeys — Shoveling Fuel for a Runaway Train and The Endangered Species Act — had taught me quite thoroughly about the fundamental conflict between economic growth and environmental protection. That was plenty of learning for instilling the mission. But there was literally and figuratively a world to explore, to learn the ways of pursuing the mission.

Not that I got to see much of the world literally. As Herman Daly put it in the foreword to Supply Shock, this was a book financed by the “Czech Foundation” — my nights, weekends, and leave from the “day job” with the U.S. government. No gondolas in Venice on this journey. However, I did spend at least a little time on focused study and conferencing in places as far flung as Poland and Ukraine, India and Thailand, Brazil and Colombia, with odd stops at places like the London Zoo (to speak about biodiversity loss) and La Décroissance conferences in Paris and Barcelona.

More importantly, however, I toured the worlds of the “worldly philosophers,” as Robert Heilbroner called the classical economists. The vessel of choice was the classic text, complemented by the invaluable exegeses of the economic historians. I toured their worlds as well as those of the Marxists, Georgists, and just about every other economic scholar united with an “ist.”

supplyshockBut the journey was far from restricted to the hallways of economic history. In fact, I spent much more time in the raw elements of physical and biological science, collecting the theoretical rare metals needed to patch up the holes in the conventional worldview of economic growth. The rarest of all was the one required to demonstrate, once and for all, that there is no reconciling the fundamental conflict between economic growth and environmental protection. (You’ll find it in Chapter 8.)

Sailing back and forth between the two continents of science and economics, I encountered diverse islands populated by anthropologists, theologians, the Council of Economic Advisers, national income accountants, World Bank demonstrators, politicians of all stripes, political appointees of all philosophies, and the UN General Assembly. They were all part of the journey; all part of Supply Shock.

For the most part it was a lonely journey, rowing upstream one day and riding into the wind the next. Hardly anyone out there in the political world wants you coming to their town on words of “limits to growth” or “steady state economics.” Virtually all politicians, most political appointees, and a lot of publishers allow only the happy horses of win-win rhetoric. There are precious few campsites for the truth about why we can’t have our cake and eat it too. For one cold and weary rider, New Society Publishers was green grass, fresh water, and dry firewood.

Now if you are an unlucky rider — I mean author — the keyboard eventually becomes an unwelcome sight. This is not a happy development. This is like the steering wheel looking bad to the race car driver, or the fly rod looking ugly to the fisherman. Ruthlessly enough, however, thumbs, wrists, and elbows tell you it’s time to hole up for the proverbial winter. It’s either that or learn voice recognition softwear – “correct that… software.”

If you’re just lucky enough, however, your book is done before then. So, directly from the intellectually herky-jerky throes of voice-recognition learning land, I offer my opinion that it is time for you to go out and grab your own copy of Supply Shock. In the reading another journey begins — your journey.

Bon voyage!

The Triumph of Fantasy over Science, Part 2

Restoring Science as the Basis for Economic Policy

by Rob Dietz

Right now “economics” means “neoclassical economics,” especially in the halls of government and business boardrooms.  At the same time, ecological economics remains an under-appreciated and under-utilized sub-discipline of economics. To reverse this situation, such that when people talk about economics, they’re talking about ecological economics, we need to address the three factors described in Part 1 of The Triumph of Fantasy over Science:

  1. The psychology of inclusion drives people to follow the dominant economic philosophy (neoclassical), even if it comes straight out of Fantasy Camp.
  2. Neoclassical economics has become entrenched in the culture.
  3. The fanciful stories that support neoclassical theories are more emotionally compelling than the logic (straight out of Science Camp) that underlies ecological economics.

Overcoming these three factors requires three countermeasures.

Countermeasure 1. Frame the limits to growth and ecological economics in a way that prevents people from feeling threatened.

For decades, the denizens of Science Camp have been broadcasting messages about the shortcomings of neoclassical economics and the problems posed by its obsession with growth. To a lesser degree, they have also been promoting ecological economics (and its focus on well-being) as a positive alternative. But to bypass protective cognition — the defense mechanism that allows people to accept faulty premises — Science Campers need to frame their ideas differently.

Many people, when confronted with the possibility that the economic paradigm they’ve embraced may be harming society and causing significant environmental damage, react defensively. I know that I’ve been called all sorts of names (even the “C” word — communist) for presenting an alternative economic view. The key to disarming the defensiveness that comes along with protective cognition is to focus the conversation on needs that all people share (e.g., subsistence, security, and participation) and how an ecological economy can meet these needs without growth. Such framing can dampen denial and open minds.

For example, one time I was part of an “economic vitality” team tasked with providing ideas to a city council about how to achieve a prosperous local economy. The team included a sustainability guru, a business owner, a representative of the Chamber of Commerce, and a banker, among others. In one of our first meetings, I gave my standard spiel about the difference between a prosperous economy and a growing one. Since it was a small group seated around a table, I could see right away the misgivings some of my teammates had about my ideas. The banker must have set the world record for quantity of disapproving head shakes. We ended up butting heads for the next several meetings until I tried a different approach. I drafted a short document about our “areas of agreement,” which focused on the city’s needs. By steering the conversation toward things we all hoped to achieve in the city’s economy, such as available jobs, meaningful work, sufficient infrastructure, healthy ecosystems, and local production and consumption, we were able to have a constructive discussion and develop useful strategies for the city.  Once the walls of protective cognition have been toppled, people can access their considerable capacity for logic when assessing policy options.

Countermeasure 2. Use student demand to supplant neoclassical economics in universities.

Since this countermeasure focuses on university economics, let’s use a couple of standard economic graphs. First let’s consider the production possibility frontier for teaching in economics departments (see graph). An economics department can offer only a certain amount of economics courses, defined by the production possibility frontier. If it is spending that “certain amount” on neoclassical economics, then it can teach very little ecological economics. The goal is to move along the curve from point A (where we currently reside) to point B where we want to be.

Now let’s use supply and demand to see how to move from A to B. The quantity (and price) of neoclassical economics offered by universities is determined by student demand and departmental supply (see graph). To lessen the quantity of neoclassical economics supplied, students need to lower their demand for it. This is a natural place to start, since neoclassical economics offers students very little in the way of long-term prospects for healthy and happy lives. Student uproar over the downsides of neoclassical economics is already percolating, and activists have begun organizing efforts to increase demand for ecological economics.

If students decrease their demand for neoclassical economics, then the quantity supplied will decrease.

For example, Adbusters started a campaign called Kick It Over that invites students around the world to join the fight to revamp Econ 101 curricula and challenge the myopic views of neoclassical professors. Another outstanding effort is Kate Raworth’s work with Oxfam on the “doughnut economy.” Raworth is trying to unseat neoclassical orthodoxy and replace it with an economic framework based on meeting society’s needs within nature’s limits. Besides offering a sound premise for structuring the economy, she suggests that students engage in a guerilla campaign to rewrite economics textbooks.

As students decrease their demand for neoclassical economics, casting it into the dustbin of obsolescence, economics departments will move along their production possibility frontier to point B where their core will become ecological economics. At that point professors will focus their research on how to achieve sustainable and equitable well-being, and new generations of students will be grounded in the principles of Science Camp.

Countermeasure 3. Tell a better story.

Rob Hopkins, the founder of the Transition Towns movement has poked fun at the standard Science Camp story. He says, “Environmentalists have often been guilty of presenting people with a mental image of the world’s least desirable holiday destination — some seedy bed and breakfast… with nylon sheets, cold tea and soggy toast — and expecting them to get excited about the prospect of NOT going there. The logic and the psychology are all wrong.” We need to tell a more inspiring story about the transition to a steady-state economy.

That’s exactly what CASSE authors have been up to, and two new books will be available in early 2013.  Enough Is Enough (by Dan O’Neill and me) and Supply Shock (by Brian Czech) will serve as a one-two punch to knock out the neoclassical obsession with growth. These two books can accompany the ecological economics textbook by Herman Daly and Joshua Farley to provide options for new economics courses along the path from point A to point B on the production possibility frontier.  As more such books and resources come out of Science Camp, professors, politicians, and pundits will have fewer excuses for remaining in Fantasy Camp.

From reframing to organizing, from protesting to storytelling, there’s a lot of work to do to get past the collective mental block and start walking a sustainable economic path. For decades, we’ve shown ourselves to be incapable of accepting facts, unable to modify failing social institutions, and unwilling to adjust our lifestyles. But now is the time to overthrow the academic programs and economic institutions that got us into this mess in which we undervalue our most important assets. Now is the time to tell the story of ecological economics — the hopeful story of long-term prosperity on a healthy planet. Now is the time to demand the economy that we want and that the planet needs.

Ecosystem Services: The Traveling Salesman and the Trophic Conundrum

by Brian Czech

Some scholars make a living valuing natural capital and ecosystem services, with trips the world over pointing out the value of standing forests, free-flowing watersheds, coastal wetlands, and all those other “funds” of ecosystem services. Foreign governments, think tanks, and universities pay handsomely for such talks.  It’s a good gig for those who can settle for telling half a story.

Meanwhile the inconvenient truth languishes in obscurity. Our traveling scholars won’t be seen uttering the phrase “steady state economy,” at least not in public. They know it goes against the political tide, which is still coming in for economic growth. Grants go to those who don’t go against growth.

That’s why, after such scholars come through your town or country, you’re left to figure out the big picture on your own. By the time you realize that all the talk about ecosystem services and “green accounting” boils down to the need for a steady state economy, you’ll be left to do the heavy political lifting, too. The traveling scholar will be long gone; probably on another flight to a hefty honorarium.

Let’s get one thing straight: ecological microeconomics — deriving the value of ecosystem services — does have an important role to play in the quest for sustainability. But performed out of its macroeconomic context, all the talk of ecosystem service values is like the din of drums without the melody of a guitar. It’s hard to make sense of.

For the sake of all sustainable, I’d like to propose a new rule; namely, that no talks on valuing ecosystem services be given (especially for big bucks) without a healthy dose of ecological macroeconomics. Without explicitly pointing out the limits to economic growth and the need for a steady state economy, the speaker leaves the audience with a dangerous ambiguity. Suckers and scholars alike are led to believe they can save the world as long as they get the prices right for ecosystem services. Of course, some of the audience will “get it” — it being the need for a steady state economy — but too much ambiguity remains to turn the tide toward steady statesmanship.

This is no hypothetical matter. We see examples abounding. Take the National Wildlife Federation (NWF), which recently adopted a resolution calling for reforming GDP, which is the indicator of economic growth. NWF fully recognizes that GDP is a poor indicator of human wellbeing because it doesn’t account for many things — such as wildlife conservation — that are important to humans. They recognize that growing GDP has amounted to declining biodiversity, among other things. That’s why it is quite logical to surmise that NWF gets the need for a steady state economy.

But no, NWF clarified that they only call for reforming GDP and not for a steady state economy. Apparently they think that, by getting all the prices right for ecosystem services, GDP will be wildlife-friendly and we can have economic growth and wildlife conservation ever after. (Actually, at least one of the NWF delegates who advanced the NWF resolution was motivated by steady state economics.  We know that because he’s a CASSE chapter director! For NWF executive leadership, however, apparently it’s all drums and no guitar.)

NWF would do well to consider Herman Daly’s metaphor of the plimsoll line, the marking on a ship that tells captain and crew when to stop adding cargo. Loading beyond the plimsoll line is so dangerous that it was outlawed. To the NWFs of the world, ecological macroeconomics has a message: when you’re loaded to the plimsoll line, it doesn’t matter if you add a green puppy or a gray pig — you’re sunk!

Failure to see the forest for the trees would be greatly alleviated if only our traveling salesmen of natural capital accounting were to couple the incomplete truth (micro) with the inconvenient truth (macro). I’ll make it easy for them by offering up the “trophic conundrum” model from my upcoming book, Supply Shock. The model illuminates the inconvenient truth that all the valuation exercises in the world won’t save us from the tradeoff between economic growth and environmental protection.

We see from the model that as the natural capital supply curve shifts inward (from S1 to S2), the price of natural capital and ecosystem services increases (from P1 to P2). That’s basic economics. What is not basic (conventional, neoclassical) economics, but rather ecological macroeconomics, is the trophic theory of money, which tells us that the supply curve shifts inward as an inevitable function of economic growth.  That’s because economic growth entails the transformation of natural capital into more goods and services, plus manmade capital and waste.

We can do all the green accounting in the world, but the only way to stabilize prices of natural capital and ecosystem services — the only way to achieve sustainability — is to establish a steady state economy with stable population and per capita consumption. Meanwhile the only way to establish a steady state economy is with more, and clear, articulation of this inconvenient truth. Otherwise, with nothing but ecological microeconomics, we’re just pricing to peddle. We’re not conserving, sustaining, or telling the whole truth.