David Zetland writes a well written nine page look at the limits of economics in at least the media and political level, and a look at the limits of what economic models have to offer most people. This will be a series of posts highlighting major points over time. The paper must be downloaded to read.
by David Zetland Wageningen UR – Environmental Economics and Natural Resources Group; PERC – Property and Environment Research Center
Economists Owe Ecology an Apology
March 9, 2013
…two substantial defects in how we understand and affect our economy and the ecology. The larger defect arises from a human tendency to simplify the world into “sensible” concepts that may be inaccurate. Although we might laugh at past versions of this mistake (a flat Earth at the center of the Universe, the spread of malaria from “bad air,” woman springing from the side of man, and so on), we continue to make it today when we underestimate the complexity of our human and natural worlds. That miscalculation leads to the second defect in which economists promote theories, observations and prescriptions that fail to include this complexity (or a humble acceptance of it), a problem that worried Adam Smith over 250 years ago:
The man of system…seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider…that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it…[Failure to acknowledge the motion of pieces means that] society must be at all times in the highest degree of disorder. —Smith (1759, pp. 233-4)
These disorders did not just manifest in human affairs (via Stalin, Mao and others)—they showed up in the natural systems that we neglected and misunderstood. Climate change—and the unprecedented threat to humans that it represents—has forced our eyes open, but we’re not yet wise (Peters et al., 2013; Marcott et al., 2013).
This apology is neither a wholesale rejection of economic thought and perspective nor an admission of error in our understanding of ecological values or human impacts on the environment. Life is complex. It’s an apology for the unintended damage that’s resulted from misapplying economic ideas: GDP fails to include non-market costs and benefits; transaction-based models mischaracterize dynamic relationships; aggregate social efficiency overlooks distribution impacts; technological advances can have substantial, unmeasured environmental impacts.
The rest of this essay will explain how we made these mistakes and how we can learn from them in facing a perilous future. This structure is not intended to provoke sympathy or excuse error. It’s just a way for us to reset a discussion that’s gotten tangled up in irrelevant details.