GEOG 352

1. Days 3 & 4: The History of An Alternative Economic Paradigm and Discussion of Review of Paul Ekins GEOG 352

2. ALTERNATIVE MODEL SOCIETY ECONOMY NATURE, BIOREGIONS, ECO- SYSTEMS

3. Housekeeping Items • Any reactions to Raimo's talk? • Any responses to the You, Me and the SPP video that was shown last Thursday? • A reminder that Geography students are encouraged to attend the Western Division – Canadian Association of Geography conference at SFU, March 10-12. The GSU and the Department is looking into covering costs for students as much as possible, and there are also travel scholarships available through the Student Union and the Student Travel and Research Committee. The Department is also hosting a practice session for presentations on Friday, March 4th.

4. Housekeeping Items • The textbook is still not in. • Tim Jackson and Peter Victor will be discussing economic growth in Ottawa on Jan. 20: http://www.sustainableprosperity.ca/debate. CBC will broadcast (check the link for details). • We need to set up a schedule of book and case study presentations which are scheduled to begin next week, if at all possible, and on Thursday we will start forming up into debate groups and topics.

5. Raimo presented 10 principles of mainstream economics • People face trade-offs. • The cost of something is what you give away to get it. • Rational people think at the margin. • People respond to incentives. • Trade can make everyone better off. • Markets are usually a good way to organize economic activity. • Governments can sometimes improve market outcomes (not all economists agree with this or differ on the how). • A country's living standards depend on its ability to produce goods and services. • Prices rise when government prints too much money. • Society faces a short-term trade-off between inflation and unemployment. Any thoughts on any of these principles?

6. A Critique of the Assumptions of Traditional Economics • I hope you got a chance to read my review of The Living Economy, edited by Paul Ekins (not Elkins, as was stated in the review). • There are many assumption of traditional economics which can be held up to question, but the ones I would like to focus on here are as follows: • humans are utility-maximizing individuals [what about altruism?]; • self-interest (the “invisible hand”) tends to lead to an automatic increase in social well-being [the recent financial meltdown would suggest otherwise];

7. A Critique of the Assumptions of Traditional Economics • on a grander scale, that pursuit of 'comparative advantage' and increased trade leads to a rise in global well-being [true for some developing nations, but some have gotten more poor and have not gotten much benefit from their resources]; • that 'economic efficiency' tends to lead to enhanced social well-being [not when there are negative externalities]; • that when natural capital is depleted, other forms of capital can be substituted for it – i.e. technology will come to the rescue [no substitute for clean air, clean water, biodiversity, and certain natural resources]. • Any comments on any of these?

8. A Critique of the Assumptions of Traditional Economics • The starting-point of this course is that economic activity ('the economy': financial and physical capital, such as factories and inventory) is embedded in society/ communities (which embody social capital and human capital), which in turn are embedded in nature (natural capital). • Karl Polanyi, a 20th century historian, pointed out that capitalism and industrialism have had the effect of dis-embedding communities from nature, and individuals from communities, thus converting individuals into labour, and nature into land or natural resources. Both have been objectified. Can you think of examples, past or present?

9. The Living Economy ed. by Paul Ekins • The authors discuss what they see as the ‘three pillars’ of the “new economics”: satisfaction of genuine needs, reconceptualization of work, and self-reliance. How do we distinguish between needs and wants, and is it important to distinguish? If there are ‘genuine’ human needs, what are they? Do any of them relate to work? • How important is meaningful work and what makes it so? • A huge debate in economics revolves around whether com- munities and societies should seek to be self-reliant. What are examples and what are the pros and cons?

10. History of Alternative Economics • This review of the history of alternative (and mainstream) economics is based on the Lutz article, and some material by Frank Rotering. Anielski's book also discusses some of this. Please read Lutz if you have not already done so. • The origin of the word economics comes from the Greek word “oikos” meaning household. Aristotle and the ancient Greeks made a distinction between oikos nomos (managing the household) and chrematistics (making money for its own sake). For them, exchange should have an ethical base and not just occur to make people rich.

11. History of Alternative Economics • In the Middle Ages, traders and merchants were often looked down upon, and Church took a strong position against usury – excessive interest. Although the high Church leaders did not walk the talk, they advocated a focus on matters spiritual, not material. They also advocated, to some degree, social justice, and these themes have echoed into the 20th century with various papal bulls (pronouncements). However, the new Protestant faith tended to be more materialistic. Does anyone know why?

12. History of Alternative Economics • In addition, in the Middle Ages there were numerous religious holidays where people took time off from work (more than we enjoy!), and there were guilds of tradespeople who practiced mutual aid – taking care of their members and their members' families. • The mercantile doctrine – that countries (such as Spain, Portugal, Britain, and France, etc.) should amass precious metals and trade surpluses ('national wealth') coincided with the age of exploration and early colonialism.

13. History of Alternative Economics • The economists known as Physiocrats (1760s) took the view that agriculture and extractive industries (mining and forestry) were the basis of all wealth, and they also favoured a laissez-faire economic order. • Adam Smith was the father figure of (neo) classical economics, publishing his “The Wealth of Nations” in the same year as the American Revolution (1776). He advocated achieving public good through the expression of self-interest (the 'invisible hand'), and progress through a division of labour. He was an ardent exponent of growth.

14. History of Alternative Economics • His doctrine of the 'invisible hand' notwith-standing, Smith had ethical components in his work that have been largely overlooked by modern economists. • Just before the turn of the century, approximately two decades later, Thomas Malthus published his essay on population. Although he was a strong, even vicious, supporter of existing hierarchies, he was the first modern economist to suggest that there were limits to growth – in this case, prophecying that food production would not keep up with population. In the short term, he was proven wrong. Any ideas as to why?

15. History of Alternative Economics • Jean-Baptiste Say and David Ricardo were also important originators of classical economics, the latter having popularized the notion of comparative advantage, which is the idea that some nations can produce a good more cheaply or easily. Even if other countries can almost match the price, it may be to their advantage to trade for it and produce something in exchange that they have an advantage in. • John Stuart Mill (mid-1800s) was also a supporter of laissez-faire, but he was also sympathetic to socialism and was one of the first to advocate the possible desirability of a steady-state economy.

16. History of Alternative Economics • Both before and during Mill's era, there were the utopian socialists who had various schemes for achieving human happiness through various cooperative and communist means. One of these, Robert Owen, practiced enlightened capitalism, making sure his workers were adequately clothed, housed and educated. He also helped found Britain's system of consumer co-ops (the “Rochdale model” – and indirectly, producer co-ops – which have since spread all over the world. • A contemporary of his, Henry David Thoreau, would prove to be a major influence on Gandhi.

17. History of Alternative Economics • Marx and Marxist communism grew out of the utopian socialists, but went in a very different direction – advocating a state-managed economy under the control of the dictatorship of the proletariat. • Marx and his supporters fought a running battle with anarchists, Bakunin and Kropotkin and others, who wanted to achieve social and economic equality but without political slavery, and who advocated various mixes of small-scale private property, co-ops, and worker-managed enterprises federated at a variety of scales.

18. History of Alternative Economics • John Ruskin, the English philosopher, in his 1860 essay “Unto This Last,” argued that there were higher values than growth and production for their own sake, and argued that economies should serve and not destroy beauty and nature. • John Jevons, in the 1870s, argued that England would run out of the coal to support continuous industrial expansion. • A decade later, Rudolf Clausius formulated the 1st and 2nd laws of thermodynamics so important to ecological economists, and in 1902 Leopold Pfoundler calculated the carrying capacity of the Earth for human beings.

19. History of Alternative Economics • In 1920, a chemist, Frederick Soddy, argued that all real wealth derives from solar energy (and resultant plant productivity), a point made earlier by the founder of urban and regional planning (and trained botanist), Patrick Geddes. As he wrote, “by leaves we live.” For him the economy was inherently green. • In the 1930s, John Maynard Keynes, while accepting many parts of classical economics, rejected strict laissez-faire, and argued that in recessions, governments must generate new demand through interventionist spending.

20. History of Alternative Economics • Gandhi, in his social justice and anti-colonial activism, was much inspired by Ruskin. As he famously said, “live simply that others might simply live.” • He also was an advocate of what he called “bread labour” -- namely, that everyone should do some essential work, be it growing food, baking bread, spinning cloth, or looking after children. • Gandhi is not primarily known for his economic thought, but he is known for a number of aphorisms which have influenced later thinkers and activists, such as: • no wealth without work • no commerce without morality • as the ends so the means. (He was an opponent of both Communist and free market fundamentalism and a strong believer in appropriate technology and self-reliance.)

21. History of Alternative Economics • Ecologists – such as Frederick Osborne and William Vogt – followed in the late '40s and '50s and attempted to draw attention to the world's growing ecological problems, though without success. • In the '60s, Kenneth Boulding and Barbara Ward –now largely forgotten – developed the metaphor of “spaceship Earth”, meaning that we have to carefully steward the resources of the planet because, like the supplies on a spaceship, they are limited. They contrasted this with the “frontier economics” of the past – the view that nature's resources are limitless.

22. History of Alternative Economics • In 1971, Nicholas Georgescu-Roegen published a seminal essay that argued that, according to the 2nd law of thermodynamics, all economic activity is linear, not circular. • Since then, there have been a number of seminal thinkers: E.F. Schumacher, Hazel Henderson, Herman Daly, Bill Rees, and many others. • In 1973, E.F. Schumacher published Small is Beautiful (one chapter was entitled “Buddhist Economics”) which directly challenged conventional economics, and Hazel Henderson began writing books that tried to turn economics on its head.

23. History of Alternative Economics • In 1977, Herman Daly – one of the most important figures in ecological economics – published Steady-State Economics and, in 1989, For the Common Good with John Cobb, Jr. He has since been joined by Paul Ekins, Bill Rees, Robert Costanza, Juan Martinez-Alier, and many other key thinkers. • This work was supplemented by Community Economic Development (CED) [see bibliography], which looks at how economic activity in communities can benefit or least not damage the wider social and ecological context, and even enhance it and ensure greater community control.

24. Principles of Ecological Economics • The economy is an open subsystem of the natural environment, and also of society; thus, its healthy functioning depends on natural and social capital. • Nature, and also the economy, is subject to entropic decay. • Economic activity should be guided by ecocentric, as opposed to anthropocentric, principles, and should also aim at sustainably meeting basic human needs. • The scale of the economy is limited by the carrying capacity of ecosystems and the biosphere. • There are limits to which human and physical capital (ingenuity and technology) can substitute for natural capital. • Markets can achieve efficiency, but not necessarily achieve equity or optimal scale (throughput).