Our planet is threatened by a wrong belief in a wrongly formulated growth

1. Our planet is threatened by a wrong belief in a wrongly formulated growth Speech for the congress Jenseits des Wachstums, Berlin May 20-22 2011

2. What is economics? • Briefly: economic theory deals with the problems of choice with regard to the use of scarce means for the satisfaction of wants. It is about scarcity. A good is scarce when something must be sacrificed to obtain it. • All economic action is directed to satisfy wants, that is to welfare. Welfare is a personal not measurable experience

3. What is economic growth? • Economic growth is increase in welfare • Welfare is dependant on more factors than only growth of production e.g. employment, labour conditions, income distribution and the possible uses of the environment. • Because welfare is inmeasurable we use measurable factors that arguably influence welfare: indicators • The identification of economic growth with growth of production as measured in national income (NI) is theoretically wrong and threatening the possible uses of the environment

4. What are environmental functions? • The environment = the non human made physical surroundings (NHMPS) that encompass a number of possible uses, called environmental functions on which humans are completely dependant • Competing functions are by definition scarce and consequently economic goods • For scarce goods it holds true that more of the one means less of he of the other. So ceteris paribus (e.g. technology) more production means less environment and vice versa • Life support systems including ecosystems can never completely be replaced by technology

5. Valuation: a practical solution for an insolvable problem • To determine the extent of loss of function we must know its value • This requires data of both preferences (demand) and opportunity costs (supply) • Because preferences can only partially be determined valuation is impossible. It follows that the correct prices of produced goods are also unknowable. Assumptions can be made. • From this it follows that both environmentally sustainable national income (eSNI) and NI are fictitious

7. The figure shows the relationship between ecology and economy and how costs in physical units can be translated into costs in monetary units The d-curve (demand) reflects the costs of compensation and restoration of damage, the s-curve (supply) reflects the costs elimination of the burden The d’-curve is the demand curve in the case of assumed preferences for environmental sustainability The intersection points E and F correspond with the minimum of the added total costs

8. B-D is the distance to be bridged to attain environmental sustainability Seven ways to combat the wrong identificationof production growth as measured in NI and economic growth • First way: publish a series NI ex asymmetric entries (asyms). • Environmental functions are collective goods that remain outside the market. Their loss remains correctly outside the NI because they are not produced.

9. However, it is not correct to enter expenditure on their restoration and compensation as value added, because they are costs. These are asymmetric entries (asyms). • Second way: publish a series of environmentally sustainable national income (eSNI) • eSNI is a production level by which vital functions remain available for future generations • eSNI shows the distance between the current and a sustainable situation

10. Third way: show the necessity of drastic changes in price ratio’s. • The bulk of NI growth is generated by industries that cause the greatest losses of function, both in production and consumption. • By their enormous increase in productivity their volume increased and their prices decreased as did the price ratio’s between burdening and environmentally friendly products. • For attaining a lasting sustainable situation it is necessary to internalize the costs of environmental restoration in the prices of the burdening products, e.g. by imposing levies. As a result the price ratio’s between burdening and friendly activities will increase

11. Fourth way: refute the statement that production must grow to finance safeguarding the environment, using amongst others the following arguments. • (1)This would require technologies that simultaneously : are sufficiently clean, do not deplete renewable natural resources, find substitutes for non-renewable resources, leave the soil intact, leave sufficient space for plant and animal species and are cheaper than current technologies. • (2) The bulk of NI growth is generated by the most burdening products. • (3) Reducing the burden by decreasing population leads to a lower production level

12. (4) Applying technical measures has a negative effect on NI growth because more labour is needed for the same product. • Fifth way: refute the fallacy of a conflict between environment and employment. • The production and consumption of the same amount of goods requires with safeguarding the environment more labour than without. • Sixth way: point out the consequences of unsustainability occurring already today

13. Deforestation has contributed to flooding, causing loss of harvests, houses and infrastructure and to erosion leading to loss of soil. Greenhouse gases and deforestation have caused reductions in local rainfall, thus causing droughts. Overfishing has led to loss of fish species. Seventh way: refute the proposition that saving the environment is unpayable. Biking is cheaper than driving a car. Heating one room and using a sweater is cheaper than heating the whole house. Beans are cheaper than meat. Raising two children is cheaper than ten.