Friday, April 30, 2010

The Eco-Nomics of Eco-Activism

Have you ever noticed that the prefix, Eco, in Eco-Activism is the same as the prefix in Eco-Nomics. “Duh!”, you are probably saying, "but the Eco in Eco-Activism actually stands for Ecology. "

Well, economy and ecology are very similar words. The origins of the two words stem from the Greek words oikonomia for economy and from oikologia for ecology. The “nomia” in “oikonomia,” for economy, means management. The “logia” in “oikologia,” for ecology, means “the study of.”

The common Greek root word, or prefix, in both economy and ecology is “Oikos,” which means household or dwelling place. Thus, economy translates literally into “household management” and ecology translates literally into the study of houses, dwelling places or habitation. In Ecology we try and understand the household and in economics we attempt to manage it. However, the focuses of the two fields of study differ dramatically.

In Ecology, the dwelling place we are studying is the entire planet Earth. Ecology is a study of the whole system, called the biosphere, and attempts to study how different physical systems in the biosphere interact with each other. There are plant, animal, fungi and microbe kingdoms. These kingdoms exist in oceans, on land and in the soil, and in the atmosphere. Then there are various cycles that are studied in Ecology that track the movement of various Elements through the different kingdoms and systems in the process of living and breathing organism as they go through life from birth to death to decay. One such cycle is the carbon cycle that studies how carbon recycles through the entire system from plants to animals to soil and the atmosphere. Other important cycles studied by ecologists are the nitrogen and the sulfur cycles which study similar interactions between Earth systems including plants, animals, soil, oceans and atmospheres. All of these systems are contained in the biosphere that contains the entire cycle of life on our planet Earth and for the most part have been relatively stable over thousands of years.

Economics, which is the study of “household management,” has a much more narrow focus than ecology. Economics focuses on the human household and doesn’t account for how the human households interact with other life-forms on the planet.

Economics is split into two distinct fields, micro and macroeconomics. Microeconomics focuses on individual households and firms and their interactions in marketplaces. Microeconomics focuses on the choices households and firms make in markets. This is where we find the demand and supply curves describing different markets.

Macroeconomics studies our entire economy when all households and firms in the economy are added together. When looking at all the firms and households as they interact with each other in Markets, we can get snapshot views of the entire economy. This can tell us the size and the health of the economy through its size, which is measured by Gross Domestic Product (GDP). GDP can be measured in a number of different ways.
First, it can be measured by the total revenue of all firms. Firms produce goods and services to be sold in the market for which they receive Revenue. The total revenue all firms receive is equal to GDP. Second, GDP can be measured by total household spending. Household purchase the goods and services produced by firms by spending in the market for goods and service.. Total household spending is equal to total revenue received by firms and is also equal to GDP. In economics we always balance our accounts and total spending by households has to equal total Revenue of firms. Likewise, in the market for the factors of production. The Factors of production are Land, labor and Capital. Households supply land, labor and Capital to be sold in the market for the factors of production. Households receive Income from this market. And so we come to the third way to measure GDP which is that total household income also equals GDP. Firms purchase the land, labor and capital from the market for factors of production and pay wages, rent and interest for each of these factors. The fourth measure for GDP is through adding the total wages, rent and interest paid by firms in the market for factors of production which also must equal GDP. Total household income is comprised of all wages, rent and interest received from firms and thus the two measures must be equal.

This picture of the economy is self-contained. By balancing all the accounts it appears that it is sustainable and can go on forever as the flow of goods and services and the flow of dollars circulate between households and firms and the market for Goods and Services and the factors of production. The place for ecology in this snapshot view of the economy is off in the corner in the factors of production where it is represented by an endless supply of Land or resources.

The way economists manage the entire household represented by the entire human economy is by making it grow. All this is fine and dandy as long the economy remains small in comparison to the entire household or dwelling place for all of Earth’s inhabitants. But when the economy increases in scale or size, it eventually starts having an impact on the ecology, or the larger household called the planet. Eventually, the size of the human economy begins to have dramatic impacts on the systems studied in ecology, such as the carbon cycle, and on other plants and animals.

If we wish to grow the economy, we have to use more resources. We are presently in the midst of a recession. Unemployment hovers around 10% and most forecasts don’t predict significant improvements in the unemployment rate this year and perhaps not until beyond 2011.

To grow an economy we have to increase GDP. Increasing GDP means more jobs for people and greater incomes. Many things can increase GDP including cleaning up after an environmental disaster such as Chernobyl, Bhopal or Exxon Valdez oil spill. The ironic thing about keeping our economy healthy is that the current crisis that we are experiencing from the large oil spill in the Gulf of Mexico caused by the explosion of an off-shore British Petroleum drilling site, will actually increase the size of the GDP. Cleaning up environmental messes produces jobs and puts people to work.

To put more people to work, we have to create goods and services to trade in marketplaces and this is impossible to do without using more resources or factors of production. We will need more coal, minerals, food, fossil fuels, etc. And from the increased use of these resources, in addition to producing more goods and services, we will produce more pollution, or what we call negative externalities in economics. These pollutants include greenhouse gases such as CO2. Thus the economy has a significant effect on the carbon cycle in the biosphere. As our economy grows we also destroy more habitat contributing to the disturbing increase in extinction rates we are currently facing on the home or dwelling place we call Earth.

Eco-activism pits environmentalists against economists. The dilemma we face is the tradeoff we make as a society between protecting the environment and growing the economy. Our economy requires us to use resources as a factor of production, so we need to manage the use of these resources in a more sustainable way

Sometimes we hear economists and politicians refer to the “Green” economy as an alternative to the traditional economy. The hypothetical green economy will produce less negative externalities, or pollution, and proposes a solution for how can we grow our economy without producing more carbon that contributes to greenhouse gases causing climate change or global warming. The only means for doing this is to use less fossil fuel. One way is to make our economy more efficient. We need to produce more goods and services using less factors of production, specifically fossil fuels. We could have a fleet of vehicles with higher mpg, more mass transportation and less use of personal vehicles, better insulated houses, etc. However, Hybrid and electric vehicles come with batteries made with heavy metal pollutants such as lead and mercury and will need to be recharged on the electric grid requiring the use of more coal to power our electrical power plants. For our electrical power-plants we can find substitutes for coal or fossil fuels that don’t produce carbon such as nuclear, wind and solar. However, each of these substitutes comes with a new set of pollutants that, in some cases, such as nuclear, may be even more harmful than the production of CO2.

What this shows us is that even a “green” economy doesn’t necessarily remove us from the tradeoff between protecting the environment and growing the economy. One of the most perplexing problems we face in the world today is how do we continue with our present lifestyles while allowing more people to join the standards of livings that are common in affluent developed countries around the world, such as the United States, how we can do this while protecting our environment from more harm.

An honest economist would tell you that we cannot, that we need a new model for “household management.” There is a tradition of this in economics. Economics used to be referred to as the dismal science, because Thomas Malthus and David Ricardo proposed such concepts as the law of diminishing returns and studied population growth in relation to a fixed set of resources. Malthus and Ricardo were answering social utopians of their day who proposed that human society could live in harmony with each other without all the poverty that existed in the world at the time. What Malthus and Ricardo did not predict or understand was the ability of the economy to grow.

The question we need to ask now is how much further can the economy grow and how much impact can the biosphere take in regard to the various cycles affected by the growing human economy. I think most of us know intuitively that we are near the limits of this growth.

Most economists today, however, are not in the tradition of Malthus and Ricardo. Instead, they believe in the Utopian vision of modern economics represented by the self-contained and sustainable system found in economic theory that demonstrates a healthy economy. Unemployment? No problem, grow the economy. There is debate for how we should grow economy among economists (should we increase government spending, or cut taxes? print more money or raise interest rates?).

A requirement for Eco-Activism should be to understand not only Ecology or the study of our dwelling place planet Earth, but also economics and household management. But, this also means expanding economics narrow focus of the human economy into a wider focus of the human economy in relation to all other living systems in the biosphere.


Richard Loggins said...

You know, Iv'e been wandering, since May 21 is Judgement day and all, whether making posts on blogs is really worth the trouble.


Anyhow, if I don't here from you by then, take care. Hope to see you on the other side in you're brand spanking new eternal spirituel body.

Heck yeah.

Andy B said...

Woah RIchard. What's up? I'm thinking of starting another blog. Just thinking. I don't know how to do this shit though.