The New Environmental Economics. Eloi Laurent
“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.” But, in an earlier text, A Tract on Monetary Reform (1923), he was equally clear about his focus on short-term economic analysis: “The long run is a misleading guide to current affairs. In the long run we are all dead.” In this implicit attack on Ricardo, Keynes wanted to direct policy-makers’ attention to here and now social predicament and imbalances rather than the long-run equilibrium posited by neo-classical models. But in doing so, he also laid the ground for a disregard of environmental concerns in the name of short-term job creation and purchasing power increase, pitting prosperity against posterity. This alleged trade-off between social and environmental goals remains to this day one of the most solid obstacles to ambitious environmental policy. And yet, as the impact of climate change on human health around the world makes clear, in the age of ecological crises of which Keynes had no conscience or intuition, it is the short term that has become, in truth, a bad compass of current affairs.
In all fairness, Keynes did try to grasp long-run issues, most notably in his “Economic possibilities for our grandchildren” essay (1930). In this visionary text, Keynes predicts the spectacular increase of living standards in the twentieth century and equates it with the fact that, as he put it, “mankind” would be “solving its economic problem.” But he was, here again, deeply mistaken in arguing that “for the first time since his creation man will be faced with his real, his permanent problem – how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.” Alas, the “real and permanent” problem of humankind – to take good care of its habitat – is only getting worse. Actually, humankind has not solved its economic problem because it has not solved its ecological problem.
Notes
1 Physiocratic ideas first emerged in the Journal d’agriculture, du commerce et des finances, which started its publication in July 1765. 2 Analyse de la formule arithmétique du Tableau économique de la distribution des dépenses annuelles d’une nation agricole (Journal de l’agriculture, du commerce et des finances, June 1766). 3 The term is here used in its classical sense, which in America today is much closer to “libertarians.” 4 Jean-Baptiste Colbert (1619–1683) was the controller general of finance under King Louis XIV of France and carried out a vast program of economic reconstruction that consolidated France’s dominance in Europe. 5 According to the mercantilist doctrine, what is won by one country is lost by the other (zero sum game) in international trade, so it is wise to conquer (if necessary by force) new outlets and close as much as possible his own market to maximize the gain resulting from trade. 6 Among them French historian Emmanuel Le Roy Ladurie. 7 Steffen et al. (2015). 8 Absolute advantage in trade is based on the lower unit cost of production compared to another country in the production of the same good and implies a specialization in the production of goods in which this advantage exists. Comparative advantage, as formulated by David Ricardo, implies that even if a country is the most efficient in all productive activities, it is necessarily relatively more productive in some than in others. Trade is thus no longer based on an absolute comparison with the productive efficiency of the exchange partner, but on a relative comparison, within the country itself, between the different productive aptitudes. It is this comparison that will decide international specialization. The country will specialize in the production of the good for which it is relatively or comparatively the best. 9 Mill (1848).10 Rodrik (2016).11 “Without unequal priorities and capacities, there would be no trade, no specialization, no gain from cooperation. In fact, there would be no economics and [all economists] would be busy selling insurance policies. In fact, not even, because there would be nothing to ensure!” in Welch (1999).12 Available at http://wir2018.wid.world/.13 Wilkinson and Pickett (2009).14 They expand their argument in a new book, Wilkinson and Pickett (2018).15 Stiglitz (2012).16 For a synthesis, see Ostrom (2010).17 See Laurent (2014).
2 Humans within the biosphere: The paradox of domination and dependence
Over the last two centuries, humans have become the dominant force of the biosphere and de facto stewards of the Earth’s ecosystems. But biospheric principle of interdependence and collaboration of species fully applies to humans: There is no economy outside of our habitat. Hence the paradox of domination and dependence that defines our geological time, the Anthropocene, as literally an age where humans rule the Earth.1
As I have already pointed out in the Introduction of this book, economics and ecology share common roots. Economics is etymologically more than two millennia older than ecology: Aristotle and Xenophon coined the phrase using oikos and nomos to refer to the rules of management of the household, what we would now call microeconomics. When the German biologist Ernst Hæckel coined the word “ecology,” he did so using the same radical, oikos but pairing it with logos or science.2 Economics and ecology are thus, at their roots, compatible, provided that one understands that the rules of the small human household cannot be imposed on the science of the great natural household. The general framework of this chapter (and this book) is not the relationship between humans and Nature but between humans and the rest of Nature. What’s fundamentally new in this relation is the fact that today, after billions of years of evolution, the natural world depends on us as much as we depend on it. In other words, our time is marked by an aberration: Apparently, the human household has come to dominate the natural household, a reality illustrated by the growing pressure the human population is putting on ecosystems (Box 2.1).
Box 2.1 The population (on-going) problem
The fear of overpopulation occupied the heart of environmental conscience of the 1960s and 1970s, as evidenced by the reverberation of Paul Ehrlich’s (1969) book announcing the imminent explosion of the “population bomb.” As the author acknowledges today, the “bomb” has been partly defused by the decline in fertility rates in the developing world, a drop in which the education of women was the most powerful driver. The annual growth rate of the world’s population reached its peak (about 2%) in the mid 1960s, when Ehrlich’s book appeared, to be divided by almost two (about 1.1%) since then (see table below).
Population growth rate, 1950–2050 in % over 5-year intervals
| World | More developed regions | Less developed regions | |
| 1950–1955 | 1.78 | 1.20 | 2.05 |
| 1955–1960 | 1.80 | 1.17 | 2.08 |
| 1965–1970 | 2.05 | 0.84 | 2.52 |
| 1970–1975 | 1.95 | 0.78 | 2.37 |
| 1980–1985 | 1.78 | 0.58 | 2.15 |
| 1990–1995 | 1.52 | 0.42 | 1.81 |
| 2000–2005 | 1.25 | 0.33 |
1.47
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