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Economics and sustainability or the need for more complexity

Dr. Joachim H. Spangenberg Professeur invite, Université de Versailles Saint-Quentin-en-Yvelines, France Vice President, Sustainable Europe Research Institute, Vienna, Austria. Economics and sustainability or the need for more complexity.

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Economics and sustainability or the need for more complexity

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  1. Dr. Joachim H. Spangenberg Professeur invite, Université de Versailles Saint-Quentin-en-Yvelines, France Vice President, Sustainable Europe Research Institute, Vienna, Austria Economics and sustainabilityor the need for more complexity Presentation at the 2nd Conference Integrative Approaches Towards Sustainability Jurmala, Latvia, 11-14 May 2005

  2. Sustainable development is a process, and sustainaility its objective, based on extending the spatial and temporal perspective in all directions, while integrating the dimensions. The four dimensions are The natural environment (environmental dimension) Society and its systems of rules for decision making (institutional dimension), The population and its capabilities (social dimension) The economy (economic dimension). Terminology

  3. Economic criteria Social crit. Economy Societal-institutional criteria Environm. criteria Natural environment Economic criteria Social crit. Environm.criteria Societal-institutional criteria Population Institutions, society Dimensions and their Interaction – nouns and adjectives: the prism

  4. Quality of life for this generation, future opportunities for those following us (the key categories in the Brundtland definition) are aggregate terms, undefined for the micro level. Not (individual or representative) agents and their motives are analysed, but the results of complex systemic interactions. In sustainability analysis, micro models must be founded in macro theory, not vice versa. Sustainability is a macro phenomenon

  5. …a quantifiable permanent income, …earned from at best four capital stocks (man-made, natural, human and social capital), …which can be monetised, …and their use is optimised in terms of maximum revenues over the life time of a (immortal?) capital owner. Standard economics assumes

  6. …it is based on assuming strong comparability or even commensurability in all four dimensions, …at best, it adds the dimensions; all options are defined with reference to the economic process, i.e. disintegrated, including the complementarity identified by ecological economists, …its models are deterministic or at best dynamic, but not based on self organising, let alone evolving systems (evolutionary economics cannot predict), …and thus its methodological tool box is not suitable to analyse problems of sustainable development (nor other processes of co-evolution). It’s not suitable, as…

  7. …is not defined and makes no sense in most other relevant disciplines, …is not applicable in real world projects, …is heavily contested in politics. Substitution is not a distinguishing feature of different kinds of sustainability. The weak/strong debate does not reflect sustainability, but the complexity deficit of economic theory (see prism). Weak vs. strong sustainability is NOT the question; substitution…

  8. analyses the level of system complexity and provides information about the resulting characteristics of system behaviour, to determine the appropriate level of complexity for any model capable of explaining the system and the question to be analysed (e.g. how complex a model must be to properly describe the evolution of an economy). It can be used to specify the level of complexity in a given set of economic models, based on the assumptions they incorporate, and thus to explain Which kind of systems they can adequately model and which they cannot. Cybernetic system analysis

  9. Undetermined systems, only the border between the system and its environment is unambiguously defines: no statement on system development possible. Evolving systems, the components can be identified and distinguished, their interaction is context dependent: learning development. Self-organising systems, the system elements are identical to a representative agent, their behaviour follows a normal distribution: stochastic development. Dynamic systems, the interaction of system elements is standardised: starting conditions and system rules define a pre-determined development. Deterministic systems and equilibrium models: reproducible results are determined by the assumed system parameters:no development. Five levels of complexity

  10. The economy is (like society, environment and population) an evolving system. Economics works with (mental and electronic) models which are valid only with strong limitations in scope and time. A disequilibrium theory of co-evolving systems is needed as the basis for the economics of sustainability. Result

  11. Characteristics ofresulting orientor the environment Normal state Existence, reproduction Resource scarcity Effectivity Diversity Capability to act Variability Security Change Adaptability Other actor systems Co-existence Orientor Theory analyses the conditions for sustained viability of evolving systems, considered equivalent to system sustainability.

  12. The Institutions of Society/Social capital The economy must not undermine the sustain­ability of the societal institution system. Every economy needs suitable institutional conditions to be economically sustainable. The Population/Human Capital The economy must not weaken human system sustainability. An economically sustainable economy needs human resources. The Environment/Natural Capital The economy must not threaten the sustainability of natural systems. Environmental sinks and sources are indispensable for a eco­nomically sustainable economy. The Economy… … must not risk its economic sustainability – thus it must also be environmentally, socially and institutionally sustainable. Orientors for all dimensions apply Source: Martin O’Connor, modified

  13. Deriving criteria: e.g. the economy

  14. Social Capital . Human Capital Natural Capital . The Economy e.g. the eco-nomy, cont.

  15. …the predictability of results in its deterministic systems, …the timeless reactions (the situation before and after any action taken can be compared), …the resulting availability of cost-benefit-analyses, …and thus the guaranteed existence of an unambiguously “optimal solution”. None of these characteristics is available in complex evolving systems. It will not be easy to convince decision makers to use more adequate concepts. Standard economics is attractive due to…

  16. Good bye • Thank you for your attention. • For further information and • to download publications • you are invited to visit the • Sustainable Europe Research Institute at:www.seri.de Dr. Joachim H. Spangenberg SERI Bad Oeynhausen, Germany Joachim.Spangenberg@seri.de

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