I recently participated in a panel put together by Boise State’s Hazard and Climate Resilience Institute as part of their Resource Nexus for Sustainability Grand Challenge. Together with 3 other economists (including the moderator), we met virtually to talk about the role of economics as a discipline for advancing the social goal of sustainability put in the context of the climate crisis. The name of the event was “Can economics help save the world?” (I’ll add the link to the video when it’s available.)
The discussion was pleasant, I think. Although to be honest, I can’t say I truly remember what went on. It was very dynamic and “real-time” in the sense that we tried addressing participant’s questions as they appeared in the chat–thus serving for a kind of authentically and beautifully chaotic episode of collective consciousness.
In preparation for the event, a few questions were distributed for panelists to organize their ideas around central topics chosen by the moderator. These questions were not easy and my answers to them kept evolving through the couple of weeks we had to prepare for the event.
So much of what I wanted to say may not have come across the way I wanted to or may not have been said simply by the very non-curated nature of live events. I want to post my evolving thoughts around these questions because the process of discovering those answers was truly edifying and spurred what felt like a moment of self-actualization. I’ll post them one at a time to keep things tractable, but I’ll add links to other reflections at the bottom of each commentary.
Without further ado, please join me in the discovery of some quite provocative questions put together for us by someone who genuinely was seeking to find new ideas and host a fun but illuminating discussion.
Question 2: Considering the interactions between the economy and the environment, what do you think the major contribution of contemporary economics has been in promoting the current state of affairs?
I think concepts like the “commons,” the “human development index,” the “social cost of carbon,” and measures of inequality like the “Gini coefficient” or the “Palma Ratio” are very important contributions of economics. They illustrate the importance of governance/management, goal setting and choice of metrics, of getting prices right, and of considering distributional outcomes.
I can talk for ever about each one of the four, but the summary is that they show economists CAN(!) think holistically and in terms of systems and that we have tools for managing social and environmental resources. Tools that are way more flexible and versatile than markets or government regulation. (I will add my definition of each one of these for those who aren’t already familiar with these concepts.)
If I had to pick only one to talk about would be the concept of the “commons.” In part because that work traces back to Elinor Ostrom, who is an amazing female scholar and the first of (2) women to get the “Nobel Prize” in economics—and a very relieving exception among Nobel Prize recipients. (For those do not know, the Nobel Prize in economics is not a real Nobel Prize. It’s a private effort by some bankers in Sweden and it consistently favors their worldview, not really contributions of economics to the world.)
The commons are these widely misunderstood resources. Commons are shareable resources, of nature or of society, that people—we the people—chose to manage through self-organizing rules and institutions: not necessarily relying on markets or a government. So, these are managed resources by what I’ve seen other fields call community-based collaborative management groups or coops.
The commons are amazing because they allow for grass-roots structures that promote collaborative governance. The allow the co-creation and co-production of goods FOR THE COMMUNITIES THAT ARE INVOLVED. Instead of selling the commons to allow individuals to profit and instead of labeling them as public lands for state agencies to manage, I think we need more commons for the people to manage, they provide opportunities for the “invisible handshake of social norms*” to deliver rules and expectations that can improve the well-being of a community in a more resilient and equitable fashion than either markets or governments can. (*I should add a related note to this post on the famous, and perhaps widely misunderstood idea of the “invisible hand”.)
Comment on the “Tragedy” of the Commons: As a related note, I find it important to share that when Garret Hardin described the tragedy of the commons, he talked about resources that were not commons at all! They were open-access resources that were not being managed. So, the whole tragic story is based on a false premise. Garret Hardin talked about how grazing land and fish stocks tend to be over-exploited by individual users and so are depleted for all, and the recommendation was that to manage such resources required either government regulation or better yet private ownership. In fact, Garret Hardin famously never observed/studies an actual example of the commons before pushing his theory.
In contrast, Elinor Ostrom did study the evidence and looked at hundreds of examples of managing the commons. It turns out they have lots of potential. We need to bring the commons back on stage: the market can provide the private goods for those willing AND ABLE to pay, and the government/state can provide the public goods for all citizens. We need all three realms.
The real tragedy is that the commons have been mistakenly deemed as predestined to catastrophe and the narrative has pushed to sell them! That’s how the privatization efforts have really been justified land-grabs. I love the idea of the commons. They are a space for the invisible handshake of social norms to work its magic and give a space for creativity and co-creation of goods the communities involved want! It cannot be more democratic than that.
The Human Development Index is a way to measure well-being by putting in an index performance metrics on education, health, and income. As it stands is not great, but it shows that economists can look at things holistically… or at least in an integrated manner. It shows that we thing beyond GDP-per capita as a proxy for measuring whether people are living better lives. (Just to clarify, I don’t like the word “development,” it’s the modern word for “colonization.” Why should we say a community where people live with less than $1/day than a community where they live with $50/day a day if the firs community is rural and its members don’t pay rent and grow their own food and have a harmonious relationship with nature while the latter has been pushed to live in shanty town, have no running water, are exposed to pollution and toxic waste, and can’t afford to live with dignity?) So, I like that things like the HDI represent that we (economists) can look at a dashboard of metrics to get a better idea of how a community is doing and whether economic institutions and activities are helping that community achieve better quality of life.
The Social Cost of Carbon is the benefit to society from removing one metric ton of CO2 from the atmosphere. Honestly, I think the numbers are not interesting*, but the idea that it encapsulates is what’s useful: it implies there is a common social goal and that actions in one place have consequences elsewhere, and that these consequences can manifest in multiple ways and be associated with a cascade of events. It’s useful because it forces us to use our systems-thinking. I like this idea because it allows economists to discuss matters of environmental justice, sustainability, and ultimately what are the social values we want to use to organize our economies: what gets produced and who gets what and why.
* It is not interesting in part because the models we have for getting at it, while elegant and sophisticated, miss the point by design. The number is not what matters but what matters is bringing the discussion to the table and invite to the table all affected voices.
The Gini coefficient and the Palma ratio (ratio between the income share of the top 10% and that of the bottom 40%) are possible ways to measure inequality. I like the Palma ratio better as it overcomes some of the Gini’s over-sensitivity to the changes in the middle of the distribution. But essentially, they summarize the dispersion of whatever you are measuring (e.g., income, access to land, access to public services, vulnerability to climate risk, etc.) across the entire distribution of that that you are measuring. And they give you a sense of how unequal is the distribution of [fill in the blank]. Based on the 10% emitting 48% of carbon in the atmosphere and the bottom 50% emitting 7%, we can think of a Palma ration of about 6.85 (48/7). If it was perfectly equal, the ratio should be 0.2 (10/50).
laura villegas ortiz 