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VT GPI: Measuring Social Capital - YouTube
Presenter: Eric Zencey, PhD. Alternative Indicators: What should we measure in Vermont, USA? 9/23/2011 ...
The Other Road to Serfdom and the Path to Sustainable Democracy
Eric ZenceyUniversity Press of New England
Contents
• Introduction: The Weather on Factory Planet
• The Other Road to Serfdom
• Friedrich Hayek, Socialist and His Fallacy of the Excluded Middle
• What “Sustainability” Is
• Oil, Economic theory, and the Moral Culpability of a Discipline
• The Economics Textbook That Just Might Save Civilization
• Getting Over GDP• Industrial Civilization as a Pyramid Scheme
• The Financial Crisis Is the Environmental Crisis
• The Battle over the Environmental Kuznets Curve
• Revisiting “the Bet that Ruined the World”
• Freakonomist Cheap Shots Jane Fonda
• Got Terrorism? Blame Economists• Ending the Culture War
• On the Oklahoma Abortion Laws, SUVs, and Climate Justice
• What Green Might Bring
• Acknowledgments• Notes
• Index
Eric Zencey’s frontal assault on the “infinite planet” foundations of neoconservative political thought
Our planet is finite. Our political and economic systems were designed for an infinite planet. These difficult truths anchor the perceptive analysis offered in The Other Road to Serfdom and the Path to Sustainable Democracy. With wit, energy, and a lucid prose style, Eric Zencey identifies the key elements of “infinite planet” thinking that underlie our economics and our politics—and shows how they must change. Zencey’s title evokes F. A. Hayek, who argued that any attempt to set overall limits to free markets—any attempt at centralized planning—is “the road to serfdom.” But Hayek’s argument works only if the planet is infinite. If Hayek is right that planning and democracy are irreducibly in conflict, Zencey argues, then on a finite planet, “free markets operated on infinite planet principles are just the other road to serfdom.”
The alternative is ecological economics, an emergent field that accepts limits to what humans can accomplish economically on a finite planet. Zencey explains this new school of thought and applies it to current political and economic concerns: the financial collapse, terrorism, population growth, hunger, the energy and oil industry’s social control, and the deeply rooted dissatisfactions felt by conservative “values” voters who have been encouraged to see smaller government and freer markets as the universal antidote. What emerges is a coherent vision, a progressive and hopeful alternative to neoconservative economic and political theory—a foundation for an economy that meets the needs of the 99% and just might help save civilization from ecological and political collapse.
Endorsements:
“Eric Zencey brings a healthful shot of lucidity to the long-suffering, much-abused, reality-averse realm of economics. Real adults in a fully functional society have to know how things really work. This book gets around all the gaming, trickery, and wishful thinking to the fundamental question of how we might continue the practical project of remaining civilized.”—James Howard Kunstler, author of Too Much Magic: Wishful Thinking, Technology, and the Fate of the Nation and The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century
“What happens to the ‘free market’—and to people who depend upon markets for their survival—when essential resources are depleted, or when weather becomes so weird that crops won’t grow? Zencey reveals the failure of conventional economics in our dawning age of limits, then points the way toward a new economics that can better serve human needs while also maintaining a living planet. This should be required reading in every economics class.”—Richard Heinberg, Senior Fellow, Post Carbon Institute, and author of The End of Growth
Where Infinite Growth Meets Biophysical Limit
by Eric Zencey
Eric Zencey is the author of the recently released book The Other Road to Serfdom and the Path to Sustainable Democracy. This essay is adapted from Zencey’s forthcoming history of Vermont’s environmental movement, Greening Vermont: The Search for a Sustainable State, which he co-authored with Elizabeth Courtney.
To achieve a sustainable, steady-state economy, we’re going to have to limit matter-and-energy throughput in the economy to what the planet can sustainably give to us and what it can sustainably absorb from us. Against that physical limit, though, the economy continually exerts pressure: it’s structured for continual expansion of its matter-and-energy throughput, as we are encouraged to want, to seek, to produce and to own more and more and more. What we need are adaptive mechanisms that can reconcile the two.
One such policy adaptation is in place but hasn’t been fully developed or conscientiously applied.
The Clean Water Act (CWA) of 1972 instituted a national cleanup of the nation’s waterways, which had too long been treated as an open-access sink into which anyone could freely dump wastes and pollutants. Under the CWA, wastewater treatment facilities were built or upgraded and point source discharges — those coming from a single facility — were regulated and controlled. Water bodies that were considered dead in 1972 made remarkable recoveries.
Even so, by 2002 the Environmental Protection Agency (EPA) had categorized over 20,000 bodies of water (more than 40% of all those it assessed) as “impaired” — too polluted to be used for their “designated beneficial uses.” Clearly, if water quality was to be fully restored, more needed to be done.
The main problem was and continues to be “non-point” discharges — the diffuse pollution that is carried into waterways by runoff from land. Anything that is put on land can and will find its way into our waterways. The most problematic pollutants vary from basin to basin. Some of the most troublesome: the oil, gasoline, and road salt that find their way into our soils, streets, and parking lots as we use automobiles; untreated animal waste, including the burdens produced in some areas by farm animals and in others by pets; and fertilizers and pesticides, used by suburbanites to feed their lawns and by farmers to increase their yields in order to feed us.
The CWA outlined the manner in which non-point pollution was to be judged and limited: states were to identify impaired bodies of water and then set water quality standards for them. EPA rules written in 1985 and 1992 offered further guidance: states were to identify the pollutants that cause the impairment, and for each of those pollutants they were to identify the Total Maximum Daily Load (TMDL) that the body of water could absorb without being impaired. Their work would be reported to and reviewed by the EPA. How TMDLs would be enforced — how the scarce capacity of waterbodies to absorb effluents would be rationed — was left to state discretion.
Behind the notion of TMDL is sound, steady-state thinking: the capacity of bodies of water to absorb pollutants isn’t infinite, and the limits need to be discovered and respected.
Implementation and enforcement of the new rules wasn’t immediate. Some states, faced with significant expense, declined to comply with the law. Some sued to have the EPA do the job. The scientific work has been slow going. Between 1996 and 2003, a total of 7,327 TMDLs were approved nationwide, representing just 17% of the 42,193 bodies of water listed as impaired.
In Vermont, the issue of TMDLs came to a head in 1999, and experience there may be a guide to promoting the implementation of this finite-planet idea elsewhere. The controversy began with an application from Lowe’s, Inc. to build a store in South Burlington. The company received the necessary stormwater permits from the state in July of 2001, despite the fact that the store and its parking lot would force acres of runoff into Potash Brook, an impaired waterway. The Conservation Law Foundation (CLF) immediately appealed the permit decision. The appeal said that under the CWA, additional pollutants could not be discharged into the brook unless a mitigation and cleanup strategy were in place — a strategy that would require determination of the appropriate TMDLs, which hadn’t been prepared.
There were no TMDLs for Potash Brook for a simple reason: despite its carefully protected (and generally well-deserved) image as an environmentally aware state, Vermont hadn’t calculated any TMDLs at all. Meanwhile, well over 1,000 state-issued stormwater discharge permits had expired and were up for review. The Conservation Law Foundation had brought to light a major problem in the way that Vermont was managing its water resources and had revealed that the state was violating laws established under the Clean Water Act. “Vermont’s Agency of Natural Resources,” said Chris Kilian, the CLF’s Natural Resources Project Director, “can no longer turn a blind eye to our serious water pollution problems. Rubber-stamping permits that will add more pollution is not acceptable.”
CLF appeals of the Lowe’s decision were pending when the two sides announced a settlement in May 2006. Lowe’s agreed to implement higher cleanup standards than the state had required. Measures included stormwater retention ponds and filtration systems for runoff not only for Lowe’s 12-acre site, but the entire commercial plaza of which the new store was a part. Taken together these remedies were designed to eliminate all impact on Potash Brook. As part of the agreement, Lowe’s agreed to monitor stream conditions both upstream and downstream of its discharge, to ensure that the “zero harm” standard would be met.
If the CWA can continue to encode finite-planet assumptions through its call for discovery of TMDLs of pollutants in the country’s bodies of water, and if those limits can be enforced through state action or by citizen lawsuits, one key element of a steady-state economy will be in place.
But it’s not going to be easy to reach that point. TMDLs remain a controversial and difficult topic, as might be expected of a regulatory device that operates at the intersection of human ambition and biophysical limit. And the state-by-state foundation of the law may hamper its effectiveness. For instance, of the fifty water bodies in Vermont that are officially classified as impaired because of acidification, the source of the pollutant — acid raid — is well beyond the power of the state to control. And much non-point-source water pollution in Vermont has its origin in agricultural practices, which Vermont legislators and regulators are loathe to tackle. As the strong base of the state’s economy and as a prime preserver of the working landscape, farming provides all Vermonters with many benefits, and the environmental movement is unanimous in wanting to see a healthy agricultural economy in the state. But farming practices are responsible for 38% of the phosphate pollution that leads to regular algae blooms in Lake Champlain (making it the second largest category, after urbanization at 46%). The blooms can be toxic to wildlife, humans, and domestic pets, and they prevent recreational use of the parts of the lake that are affected. If Vermont is to achieve its water quality goals, it will have to enforce TMDLs for all waters that drain into its lakes, even if those limits require changes in agricultural practice. By 2012, Vermont had established TMDLs for roughly 60% of the waters that had been identified as needing them.
The concept of TMDLs can be extended to other sinks and pollutants. A TMDL could be set for diesel exhaust from trucks, limiting the amount to what a particular airshed can absorb without ill effect. Paired with a similar understanding of the limits of source services — like the maximum sustainable yield figures that can be calculated for forests and fisheries — TMDLs point to one way of achieving a balance between human activity and planetary systems.
The research necessary to determine a TMDL is costly, and comes at a time when public budgets are already being strained (by, among other causes, a declining energy return on investment for oil that means more and more of our economy’s energy is dedicated to getting that energy). If we don’t like the expense of government regulation, if it looks like we can’t afford all that governmental overhead, then we’ve basically got three choices: retreat into an infinite-planet state of denial and let our economy destroy our habitat; require private enterprise to fund the necessary research as part of the cost of doing business on what is undeniably a finite planet; or find ways (like a carbon tax or other uptake and throughput taxes) to meter inputs sufficiently to bring economic activity well within biophysical limit, thereby making the regulatory burden and research expense of TMDL enforcement less needed.
http://steadystate.org/where-infinite-growth-meets-biophysical-limit/
Neoclassical Economist Recants Key Article of Faith
by Eric Zencey
The element of the neoclassical model that has come under critical scrutiny in the Vermont press lately is the notion that GDP — a measure of the dollar value of all goods and services produced by the economy — is a practical and useful measure of economic well-being. It’s not hard to see why GDP is being re-thought: last month tropical storm Irene dumped tropical-rainforest quantities of water on the state in just a few hours, leading to major damage from unprecedented flooding. Rivers filled their flood plains and kept rising, sweeping away roads, bridges, and houses, ruining homes, lives, farms, and communities. The publicly owned infrastructure is being put back with great speed and efficiency (and should be in good shape for the upcoming foliage season, so if you’ve planned a visit don’t think that you need to cancel). That repair work is the source of some economic confusion. The construction industry had been slumping; now workers are busy, doing productive things, getting paid. Is all this public works effort a net benefit to the economy, or not?
GDP says yes, absolutely. Common sense — and steady-state economic theory — says no.
GDP smiles on this scene.
GDP gets it wrong because it fails to take into account the ongoing benefit we derive from the services of physical wealth that’s already in place — public and private infrastructure that is paid for and in use. My car is a capital investment that provides me with transportation services; if I own it, the only aspect of its delivery of services that shows up in GDP comes from the spending I do on operating costs and maintenance. And perversely, if gas prices go up so does GDP — telling us that because there’s more spending, the economy must be delivering more economic benefit. If I make the switch to renting a car rather than owning it, the rental fee shows up as a monetary transaction and gets counted in GDP — though there’s no net increase in the quantity of services I’m getting. Those services count in GDP only if I pay for them incrementally and continually (and don’t get an equity stake in my vehicle).
The same miscounting happens with the services provided by (non-rental) housing, roads, bridges, etc.: the ongoing benefit is simply not counted. GDP is an indicator for amnesiacs. It has no memory, no room to allow that the economy has been operating for quite a while and has produced forms of durable wealth — things like buildings and bridges and roads and communications systems — that continue to be useful long after they’ve been paid for.
So, when disaster leads to major new spending, a by-the-book accounting has to say: GDP is up, so we must be better off. The downside — the loss of wealth (and the loss of services derived from that wealth) can’t show up in the books because it wasn’t counted in the first place. Disaster looks to be good for business, good for the economy, good for us; within the limits of neoclassical concepts, tools, and analysis, when we repair storm damage the result is “net positive.”
Will Vermont end up net positive in economic benefits as it repairs the damage from Irene? There are additional complexities when we ask such a question about a particular location or region, and the answer is “it depends.” The net economic effect of damage and repair for any one location depends in part on where the funding comes from — whether it is raised within or outside the economy being considered. (At the macro level, there is no “outside,” and the answer is no.) If Vermont’s repairs are paid for with money from outside the state — from the Federal government, say, through FEMA grants — disaster repair might or might not have a net positive effect in the state; it may or may not exceed the loss of wealth from the disaster. If there is a net positive effect, the surplus comes either from deficit spending by the central government, or through direct transfer of resources (through Federal taxes) from other states. If it’s a transfer, it represents loss of purchasing power and economic activity in the areas from which the money is transferred: there’s been no net gain in the system, just a shift in who benefits and who pays. If the funding comes from deficit spending, the stimulus may be just what’s needed to put people back to work, but there is still a shift: the transfer is inter-generational rather than geographic. Wealth creation that might have occurred later, benefiting a future generation, has been brought forward to benefit us.
This wouldn’t be a problem in an economic system on an infinite planet. In a world without resource constraints, deficit-financed investment can always increase the amount of production in the future, and the deficit can be repaid from that increase. Thus, on an infinite planet it would be possible for both the present and the future to benefit from our deficit spending today. But on our planet, with an economy built beyond the limits of what’s sustainable, expanding production today diminishes the wealth and well-being of people in the future. On a finite planet at maximum capacity, there’s no room to expand the economy’s ecological footprint without causing harms and losses, and economic growth today is a transfer of wealth and well-being from the future to the present.
Casting up GDP accounts, even when corrected this way, doesn’t begin to measure the personal and social costs of the damage — people’s loss of livelihoods and secure expectations, their loss of the personal effects that help define them and their familial and community relations, and sometimes — as when farmland is poisoned by toxins in floodwaters and herds and breeding stock are swept to their deaths — their loss of a known, satisfying way of life in a familiar landscape. When those softer, less quantifiable costs are included, it’s very hard to think that the catastrophe in Vermont had any sort of net positive benefit.
But economics as neoclassicists practice it slices off those less quantifiable aspects of well-being and looks at cold, hard cash. In those strictly monetary terms, disaster looks good for business, and more business looks good for Americans. That’s the flaw in GDP that one neoclassical economist has recanted in his latest appearance in our local media.
I interviewed this particular economist by phone in 2009, when I was putting together an op-ed piece on the shortcomings of GDP for the New York Times. When I asked the professor about the perverse way GDP tallied the results of Hurricane Katrina ($82 billion in property damage, so an $82 billion boost to GDP if all the damage were to be repaired), he defended GDP. “That figure is going to include a lot of improvements,” he said. “Those people are getting new cars, new carpets, new refrigerators.” Notice that this way of thinking gives a disciplinary seal of approval (“100% rational behavior”) to a very uneconomic, irrational exchange: you’d be crazy to pay the cost of complete destruction of your household in order to get incremental upgrades of some of the things it contains.
While it isn’t always possible to map theoretical insight directly from individual households to the larger household of planet earth, here I think we can. Because GDP doesn’t count the flow of services from existing household wealth as an economic benefit, GDP fails to treat destruction of that wealth as a cost item, and so it treats reconstruction of that household wealth as a net gain. Ditto when we look at the whole system: in the planetary household GDP fails to count ecosystem services as a benefit, and so fails to count ecosystem destruction as a cost item, and so makes continual economic growth look like a net gain. Because of our shoddy accounting, we’re destroying the ecosystems that support civilization, often to get nothing more than an incremental upgrade to the wealth we already have. At some point, we’ve got to admit that this is uneconomic, irrational: crazy.
This far the go-to economist didn’t go, at least not as he was quoted in the paper. But fixing our accounting system is a commonsense idea that subverts infinite planet thinking, and in what he did say the neoclassical economist showed that he had taken the first step on that path. He allowed that Tropical Storm Irene wasn’t an economic boon to Vermont, because “there’s a tremendous amount of wealth that’s destroyed, and that’s not a good thing.” Having recognized the existence of that already-built wealth, he should be ready to take the next (logical!) step: start measuring that wealth and start counting the services we derive from it as part of our economic benefit. That means getting beyond GDP, which focuses on the now, the moment, the instantaneous rate of change in our market-based economic activity.
Getting off of GDP and implementing an accounting system with a memory will prove to be the first step on a path to broader changes. If we take into account the services we derive from our considerable stock of built wealth, and also take into account the services we derive from our considerable-but-declining stock of natural wealth, we’re led by inexorable logic to re-evaluate the concept of economic growth. When we have a system of economic accounting that includes all costs and all benefits, it will be easier to see that much economic growth is uneconomic, because it costs more in degradation of ecosystem services and other costs than it brings in benefits. Once we get over GDP it will be easier to see that the only sane, sustainable economic doctrine is one that calls on us to live within our current solar income, a steady-state flow of matter and energy through the economy. By then this truth will have become self-evident: on a finite planet, we can’t grow the economy’s ecological footprint forever.
If, thanks to unprecedented storm damage, neoclassical economists are led to reject the valuations offered by GDP and follow their thinking to this conclusion, then unprecedented weather events like Irene may yet prove to have a net positive economic effect: they will have nudged economic theory onto the path to a sane, rational, sustainable, steady-state economy.
http://steadystate.org/neoclassical-economist-recants-key-article-of-faith/
September 23, 2011
As I see it, there is no one magic bullet, no one single thing that everyone MUST do immediately. And yet action must be taken and taken right now. It's a problem.
I think of this problem in terms of Archimedean levers, and places in the system that are fulcrum points: places where a bit of concentrated effort can have an amplified effect. What those fulcrum points are for each of us depends on where we are, what our skills and strengths are, and which levers of power and influence we can get our hands on.
That said, we still face choices. I think that one of the strongest, most powerful leverage points is changing the basic indicators we use to measure progress and well-being. We have to start counting the costs of climate change and other ecological degradation as costs when we sum up our economic accounts.
This is accomplished in any number of alternative indicators, such as the Genuine Progress Indicator that is gaining increasing use. (See the version implemented in Maryland.)
From business comes the truism, "You get what you measure," and for years we've been using GDP, a measure of the commotion of money in the economy, as the value we seek to maximize. So, no surprise: We have an economy in which the money goes around faster and faster in bigger and bigger amounts, but the average quality of life doesn't improve or even declines.
It has become abundantly clear that increasing the commotion of money no longer necessarily improves our standard of living. We need to maximize not GDP but the economy's sustainable delivered well-being. Before we can maximize it, we need to measure it.
One of the strongest leverage points is changing the basic indicators we use to measure progress and well-being.
This is a strategic change, and once it's implemented it will make the battle over climate change, and every other particular struggle over ecological degradation, much easier to win. The effort to implement a new indicator may not appear to be immediately productive, but it is absolutely necessary.
Foresters have a saying that applies here: The best time to develop a better indicator, like the best time to plant a tree, is 20 years ago; but the second best time is right now.
So, my counsel: Inform yourself about alternative indicators like the GPI and Gross National Happiness. Join the movement. Contact local and state and federal officials to educate them about the need for a better indicator, one that counts all costs and all benefits of economic activity, instead of counting just the dollars that change hands.
Talk to your neighbors and friends and get them aboard. Work to demand, develop, and implement quality of life surveys in your community, surveys that take account of the benefits that come from a stable climate and other ecosystem services. Work to get the results of these surveys used by policy makers.
When we begin to measure what matters instead of the commotion of money, we will have taken a strong firm step toward a sustainable, livable world.
http://www.policyinnovations.org/ideas/briefings/data/000227
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