Plea from Ecological Economists

Post-Covid world: ask the economists to tell the truth

The framework on which Ecological Economics is founded provides a privileged perspective for formulating policy indications for managing the Covid pandemic and fostering economic recovery.

First, Ecological Economics adopts the precautionary principle, as stated by Bob Costanza in the first edition of the journal Ecological Economics in 1989. The level of uncertainty we face today requires policies that minimize societal risk. The rapid spread of Covid19 around the world should have impressed upon policymakers, and people in general, the importance of espousing said precautionary principle. Had governments taken the early warning signs seriously, the epidemic would have not become a pandemic, and the economic crisis would have been much less severe.

Second, as Industrial Ecology has also been emphasising for many years, ecological economists know that the principle guiding any sustainability policy should be minimizing material throughput. GDP growth is based on accelerating the rate at which extracted materials become waste, thereby engendering environmental degradation and negative effects on our well-being and happiness.

Third, we are acutely aware of the limits and flaws of GDP as an appropriate indicator for measuring progress and assessing economic policy.

The deep economic crisis triggered by COVID presents us with the opportunity to radically change our economy and society. It is time for us to call for structural change, something that we have been hoping to attain for decades, and to which we have dedicated a great deal of research effort.

None of us needs convincing that the present socio-economic system must be changed. We are thus in the position of having to talk to the hesitant, to those who are still convinced by the ‘conventional wisdom’ that without an incessantly growing GDP we cannot have employment and well-being, that stimulating demand (and garbage generation) is the only way forward.

Paradoxically, first-year economics students are taught that economics studies the allocation of scarce resources among alternative ends, and that markets generate bad allocation of production factors due to externalities and public goods, leading to the production of too much of some goods and not enough of others. Prices are wrong, that is to say, they do not reflect the actual cost of producing goods, and hence the value that people attribute to them. Workers and other production factors should be reallocated so that the “right” quantities are produced at the “right price”. GDP includes anything that is traded on the market, without distinguishing between economic good and bad. GDP is not the right indicator, even from a strict Arrow-Debreu perspective

We recognise the many flaws in the neoclassical approach and that criticism of the current system goes far deeper than the problem of allocative inefficiency. However, we should at least try to break the mainstream schizophrenic position of macroeconomics supporting GDP growth while microeconomics invoking improvements in allocative efficiency. In reacting to the current rhetoric about how to re-launch the economy, while calling for a healthy transformation towards a less unsustainable socio-economic system, we believe that it is also helpful to convince the hesitant and the sceptical that GDP growth can be bad even from a mainstream point of view.

To this purpose, we have prepared a short plea, which is supported by a group of well-known scholars within our discipline and is AVAILABLE HERE.

We ask ecological economists to sign it. You can do it by clicking here. We will send it to several international institutions (e.g. EU Parliament and Commission) and spread it through the media.

Tommaso Luzzati* and Tiziano Distefano
Dipartimento di Economia e Management, REMARC and CISP – Università di Pisa, Italy
*Corresponding author, https://people.unipi.it/tommaso_luzzati/

A plea to politicians: ask the economists to tell the truth.

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6 Responses to Plea from Ecological Economists

  1. David Barkin says:

    Thank you for your responses. (and to Tommaso for taking the time to mail me directly). At this particular moment, I think that we have to insist on explaining how the commitment to GROWTH (as you put it in caps) is inextricably tied to inequality and life styles, that inexorably lead to more energy production, resource depletion, and environmental imbalances. At this moment, when the challenge of stimulating growth in the midst of the pandemic seems unrealistic, there is a growing realization that an offensive against inequality and inherited wealth might be an increasingly realistic solution to obtaining the resources required to assure people’s basic needs for sustenance and health (in contrast to trying to do this by ineffective policies to create jobs).

  2. Laura Rival says:

    Could we use this initiative as an opportunity to come together as a community and produce a stronger statement, which reflects our core values and commitments and stress the sense of urgency in the face of the climate change crisis of which the covid-19 is one of the manifestations?

  3. David Barkin says:

    I find this PLEA quite inadequate, given the depths of the current crisis. The problem is not only use of material resources, but the overall structure of production and the obscene inequalities that the current system accentuates. To focus, as this document does, on a critique of output measures and allocative efficiency misses a great deal of the problem. Is not part of the problem that the structure of the market and price systems themselves are aggravating the problem?

    • Dear David, You raise an important question and if you follow the link you can ask to edit the document. No doubt you have contacted the authors directly? Yours sincerely, Dr Boyd Blackwell, ANZSEE President

    • Clóvis Cavalcanti says:

      Dear David, could you suggest a new version for this plea, according to your vision? I agree with what you say. However, I feel inclined to sign the plea because we have to do something now. We cannot remain silent.

      • Tommaso Luzzati says:

        Dear David and dear Clovis,
        the first version of this document was much more comprehensive. The colleagues and friends who read it criticized a lack of focus. Accordingly, we reflected about what the MAIN message should have been to make an impactful plea. Clearly, we do not need to convince those who are already aware of the huge problems of our economic system.
        To have an impact, we need to talk to the hesitants and to the supporters of the current system. Hence we got to a single main message: “this economy is rotten, EVEN under a very mainstream point of view”, or, “if mainstream economists were consistent with their foundations, they would urge for an ecological transition”.

        We can change our society and promote a more just world only if general public understand that GDP does not necessarily imply wellbeing and employment, and that the environment is not Nature, rather where we live in.
        Nowadays, “the opium of the people” is GROWTHMANIA.
        As ecological economists, we have the moral obligation to break it.

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