Declaration by Canadians for Limits To Growth

This declaration developed by a group of current and past CACOR members s a call to Canadians to join us in acting to reverse humanity’s enormous demands on our planet. Such an effort calls for understanding, courage, empathy and cooperation and must necessarily be led by governments. If the nations of our planet do not act soon to greatly reduce our numbers and our consumption, nature will act to do it in its usual ways.

Declaration of Concern by Fred Thomson

Fred Thompson, well-known futurist, was motivated by concern for the multiple global issues critical to the survival of our civilization to propose a global manifesto. This “Declaration of Concern” lists the issues of primary concern with a summary of the Facts and then Action Required. Readers are encouraged to reproduce the Declaration freely with due credit for its source.

Book Reviews

Can We Manage Without Growth?

        What Peter Victor says

Fred Thompson reviews Peter Victor’s Managing without Growth: slower by design, not disaster

A professional engineer, BASc. University of Toronto, Fred Thompson was active in industrial engineering and management consulting in the private sector, then in the federal government in the Economic Council of Canada and as futures advisor in the Privy Council Office. He is founder of Futurescan Consulting,  was President of the Canadian Association for Futures Studies and is the author of Looking Back on the Future (1992), the story of the futures movement in Canada, and of “A New Ethic for Humankind” (2009).  He is also a former webmaster of CACOR. Please read Mr. Thompson’s review and give us your ideas.  Ed. CACORzine

        Fred Thompson

Victor, Peter A. Managing Without Growth – Slower by design, not disaster Edward Elgar Publishing, Inc., Northampton, Mass., 2008

Peter Victor is a Professor of Environmental Studies at York University, Toronto.  He explains his motivation in publishing the book as:  AI became increasingly interested in the shortcomings of neo-classical economics and capitalism, especially in relation to the connection between the economy and the environment.@  He explains this at some length, and in the process covers all the issues of which most futurists are now aware.  Growth and Progress are intertwined but the pace of change and so-called Aprogress@ has been greatly accelerated since the Industrial Revolution.  He notes that traditional economics is an open system but the Earth is a closed system. 

What makes the book unique is the development of two computer models he calls HappyGrow and LOWGROW based on Canadian data, starting from 2005 and extending to 2035, and from all this he develops a range of scenarios.

For the HappyGrow group he develops five scenarios:

1. The same
2. Rich and poor
3. Use and status
4. Public good
5. Mixed

In the Conclusions he does not recommend any one preferred scenario but comments with “HappyGrow can help us think about the world and better understand how it functions.”

For the LOWGROW model he develops six scenarios:

1. Business as usual

2, No growth, Adisaster@

3. Low, then no growth, high investment, low trade

4. Low, then no growth, low investment, high trade

5. As in 3, with greenhouse gas tax

6. As in 4, with greenhouse gas tax

Basic to his calculation is the I=PAT equation, where I=Impact, P=population, A=affluence and T=technolgy.  These are the variables that are manipulated to create the various scenarios.

Some factors required for low growth are: shorter work week, tax on greenhouse gas emittors and energy, and population stability.  Without going into further details of each scenario, he does show with this model that it is possible to have a sustainable economy that deals fairly with the environment.  But he is honest enough to say, in his Conclusions, that it is unreal to expect any one of the favourable scenarios to be actually  implemented.  It is unreal because of the need for the political personae to promote economic growth, not any form of Alow growth@ scenario. 

Even if it were possible to conform to any of the preferred scenarios, Canada, he says, could not implement such a program alone; it must be a global exercise. It is these frank conclusions that makes Peter Victor=s work meaningful and does provide a well researched background for thinking about the global future.  I would recommend it as a good read.

Fred G. Thompson

www.fredgthompson.com

fgthom@sympatico.ca

April 17, 2010

The Earth Must Achieve Prosperity Without Growth

– but does Tim Jackson point the way?

Robert Hoffman sends CACORzine our first-ever book review.  He gives a concise overview of Tim Jackson’s new tome, Prosperity without Growth: Economics for a Finite Planet, followed by an insightful and piercing analysis of today’s economic theory.  Join the penetrating discussion.  Please read Mr. Hoffman’s analysis and give us your ideas.  Ed. CACORzine

Photo: Robert Hoffman

Timely and Provocative … but

A book review by Robert Hoffman

Robert Hoffman, a long time member and past chair of CACOR, is an economist by training and systems modeller by vocation.  He has been involved in integrated socio-economic and biophysical systems modelling for four decades, first as an analyst and research program director at Statistics Canada, then as Research Associate Professor at the University of Waterloo.  He is currently co-founder and President of whatIf? Technologies.

Tim Jackson’s just published Prosperity Without Growth: Economics for a Finite Planet is already being heralded by an editorial reviewer as a book that might well become as important for sustainable development as the Brundtland Report. [Jackson 2009] It addresses the dilemma of our age. The relentless pursuit of economic growth endangers the ecosystems upon which humankind depends for its survival. Yet, not to pursue economic growth and to accept less than full employment is to risk social and economic instability and to commit political suicide. Jackson challenges the reader to question the conventional wisdom of the current economic order. For this reason alone, his book is essential reading.

For the past half-century or more, the dominant economic model was a macro-model specified in terms of a small number of aggregate variables: gross domestic product, consumption, savings, government expenditures, investment, income, and international trade. Within this economic paradigm, the pursuit of economic growth as indicated by gross domestic product is the primary objective of economic policy. It is presumed that economic growth would assure full employment, provide growing prosperity for all, including those at the bottom of the income scale, and ensure economic stability,

Jackson makes a convincing argument that the relentless pursuit of growth among the developed countries has not only failed over the past two decades to deliver increasing prosperity in any meaningful sense of the word, but it has also failed to deliver economic stability, a robust infrastructure, and equitable access to income. Furthermore, there is widespread agreement that economic growth is not environmentally sustainable. Indeed the natural resources and ecosystems upon which we depend for our long-term survival are endangered by continued growth.

Rather, Jackson develops the idea of an economy whose task is to provide capabilities for flourishing within ecological limits. Prosperity cannot be equated with consumerism. It has to do with health, education, access to shared public spaces and social infrastructure, as well as consumer goods.

 What is needed, Jackson argues, is a new ecological macro-economic model capable of representing the relationship between the economy and sustainability. The starting point for such a model, according to Jackson, is the old macro-economics: essentially the national accounting identities augmented by a somewhat more elaborate production function. In this, Jackson follows the lead established by Herman Daly [Daly 1996; Daly 2008] and more recently Peter Victor [Victor 2008a; Victor 2008b]. This suggestion disappoints.

 Ashby’s law of requisite variety implies that “the regulation that the regulator can achieve is only as good as the model of the reality that it contains”. [Beer 1981] Over-simplification will miss crucial elements of the system; over-sophistication results in bulky models that defy transparent analysis. Accordingly, it is worth exploring the mapping between the main features of the reality that Jackson has described and those of the neoclassical macro-economic model to help us judge whether the neoclassical macro-economic model is an appropriate starting point for a model to support navigation in the new reality.

 The new model must include a rich enough set of variables to address five issues identified by Jackson.

 · impending ecological limits

· sustainability over the long term

· a concept of prosperity more appropriate than consumption

· the instabilities associated with financial bubbles

· the growing inequity in the distribution of income

 In order to handle ecological limits and sustainability, the new model must incorporate a full representation of the stocks and flows of materials and energy and the processes that transform resources, land, and energy sources into the goods and services required for human uses. This accounting must be done using energy and mass units and with sufficient compositional detail to recognize that materials and energy differ in their physical and dynamical properties. The neoclassical economics focuses exclusively on variables measured in value units; production is concerned with combinations of labour and capital that generate value, not on the processes that transform materials and energy. Further, it consists of relationships among flows – income, production, consumption, savings, investment are all flows or rate variables – to the almost total exclusion of stocks. Many ecological constraints are concerned with stocks – stocks of resources and reserves of minerals and fossil energy, stocks of arable land, stocks of fish, forest inventories – as well as flows. In fact, natural resource management is fundamentally concerned with the management of stocks – the depletion of non-renewable stocks and the maintenance of renewable stocks.

 In order to be capable of addressing sustainability, the new model must operate over a much longer time horizon than is the practice for macro-economic models. Typically, a macro-economic model is considered to be long term if its time horizon is five years; the new model must operate over a time horizon of fifty years or more. Ideally its span would cover two roll-overs of most stocks. To be relevant over such a long time horizon, the physical components of the model must be coherent with the first and second laws of thermo-dynamics.

 A more nuanced concept of prosperity requires stock as well as flow variables. According to Kenneth Boulding, “Another taxonomic and conceptual problem that has plagued economics from the time of Adam Smith is the confusion between stocks and flows . . . Furthermore, the idea that production is consumption is only partly true. What we get satisfaction from for the most part is use, not consumption . . . This has led to an extraordinary neglect of information collection about the capital structure . . . and the absurd view that it is income which is the only measure of riches.” [Boulding 1978] Adequate stocks of public social infrastructure from which services can be provided, such as schools, roads, hospitals, are as important a component of prosperity as private stocks such as houses, cars, appliances, and home computers.

 The sine qua non for exploring the phenomenon of financial bubbles is the concept of debt. What is needed are the variables contained in balance sheets that indicate the assets, both financial and real, against which debt is issued. Of course, one actor’s assets are another’s liabilities. The standard macro-economic model does not represent a fully articulated set of income and balance sheet accounts subject to the usual accounting identities.

 Models based on neoclassical theory have seldom been concerned with the distribution of income as the workings of the invisible hand were deemed to be sufficient to ensure the most efficient distribution of income. In my view, not only must the distribution of income be an integral part of the new economic model, but the distribution of wealth must be included as well.

 From the discussion above, it is clear that the neoclassical macro-economic model cannot be adapted to meet the needs identified by Jackson. The new model must be built on different foundations.

 Such a foundation has been suggested by John Schellnhuber in a paper entitled ‘Earth System Analysis and the Second Copernican Revolution’. [Schellnhuber 1999] At the highest level of abstraction, it is useful to identify two sets of processes, those that are naturally occurring and those that involve a human factor. The human factor may be subdivided into a physical component that encompasses the physical manifestation of human activities and a mind-space component that is a self-conscious control force that guides human activities. Not only does the macro-economic model ignore naturally occurring processes, but it confounds the distinction between the physical and meta-physical dimensions of human activities.

 An approach for modelling the biophysical processes in both the naturally-occurring and human domains may be found in the concept of activity analysis [ Koopmans 1951, Georgescu-Roegan 1971], its application in input-output modelling [Leontief 1986] and in materials and energy- process-product modelling [ Ayres 1972,1978], the design approach to socio-economic resource modeling [Gault 1987], and the stocks and flows models of CSIRO [Foran 2005, Turner]. Indeed, the need for a new biophysical paradigm in economics has been articulated by Hall and Klitgaard. [Hall 2001, 2006]

 The mind-space is inhabited by institutions that interact with one another and exert control over the biophysical space through the institutions of ownership and governance. A large body of literature in what is called institutional economics documents the complexities of the behaviours of institutions. [Burns 1985, Galbraith 1958, 1967, 1994, Hirsch 1976, Keirens 1983, Arthur 1994, North 2005, Saul 1995, Stiglitz 2007, 2010] This literature easily refutes the maximizing behavioural axioms upon which the neoclassical theory of value is based. In the absence of a value based weighting scheme for aggregation, it is unlikely that the new economics will be a macro-economics at all. Rather, the new economic model will have to be pragmatic in the decomposition of institutional space and in its links to the underlying biophysical space.

 Prosperity Without Growth is a timely and provocative addition to the economics literature. It challenges the reader to rethink the very foundations of the mainstream economics that has provided the conventional wisdom upon which public policy has been based for the past half century.

 References

 Arthur, W. Brian. Increasing Returns and Path Dependence in the Economy. University of Michigan Press, Ann Arbor, Michigan, 1994.

 Ayres, Robert U. and A. V. Kneese. “Production, Consumption and Externalities”. American Economic Review, June 1969.

 Ayres, Robert U. “A Materials-Process-Product Model”. In Kneese, A V and Blair Bower eds. Environmental Quality Analysis: Theory and Method in the Social Sciences. The Johns Hopkins Press, Baltimore 1972.

 Ayres, Robert U. Resources, Environment and Economics: Applications of the Materials/Energy Balance Principle. John Wiley and Sons, New York, 1978.

 Beer, Stafford. I Said, You are Gods. The Third Annual Teilhard Lecture. The Teilhard Centre for the Future of Man, London, 1981.

 Boulding, Kenneth, Ecodynamics, Sage Publications, London, 1978.

 Burns, Tom R., Thomas Baumgartner, and Philippe DeVille. Man, Decisions, Society: The Theory of Actor-System Dynamics for Social Scientists. Gordon and Breach Science Publishers, New York, 1985.

 Daly, Herman E. Beyond Growth: the Economics of Sustainability. Beacon Press, Boston, 1996.

 Daly, Herman. “A Steady State Economy”. Think piece for the SDC workshop ‘Confronting Structure’ April 2008. London: Sustainable Development ommission. Online at www.sdcommission.org.uk/pages/redefining-prosperity.html.

 Foran, Barney and Franzi Poldy. “Modeling Physical Realities at the Whole Economy Scale.” In van den Bergh, Jeroen C.J.M. and Marco Janssen (eds). Economics of Industrial Ecology:  Materials, Structural Change, and Spatial Scales. The MIT Press, Cambridge, Massachusetts, 2005.

 Galbraith, John Kenneth. The Affluent Society. Houghton Mifflin Company. Boston, 1958.

 Galbraith, John Kenneth. The New Industrial State. Houghton Mifflin Company. Boston, 1967.

 Galbraith, John Kenneth. The Culture of Contentment. Houghton Mifflin Company. Boston, 1992.

 Gault, F.D., K.E. Hamilton, R.B. Hoffman, and B.C. McInnis, “The Design Approach to Socio- Economic Modelling”, Futures, February, 1987.

 Georgescu-Roegan, Nicholas. The Entropy Law and the Economic Process. Harvard University Press, Cambridge Mass., 1971.

 Hall, Charles, Dietmar Lindenberger, Reiner Kumel, Timm Kroeger, and Wolfgang Eichner. “The Need to Reintegrate the Natural sciences with Economics.” Bioscience Vol. 51, No. 8, August 2001.

 Hall, Charles and Kent Klitgaard. “The Need For a New, Biophysical-Based Paradigm in Economics for the Second Half of the Age of Oil.” International Journal of Transdisciplinary Research Vol. 1, No. 1, 2006.

 Hardin, Garret. “The Tragedy of the Commons, Science” Vol. 162, No. 3859 (December 13, 1968), pp. 1243-1248.

 Hirsh, Fred, Social Limits to Growth, Harvard University Press, Cambridge, Mass., 1976.

 Jackson, Tim. Prosperity without Growth: Economics for a Finite Planet. Earthscan Publishing. London, 2009.

 Keirans, Eric. Globalism and the Nation State. CBC Massey Lectures. In the Lost Massey Lectures. Anansi Press, 1983.

 Koopmans, T.C. (ed) Activity Analysis of Production and Allocation. John Wiley and Sons Inc., New York, 1951.

 Leontief, Wassily. Input-Output Economics. Oxford University Press, New York 1966, expanded edition 1985.

 North, Douglass C. Understanding the Process of Economic Change. Princeton University Press, 2005.

 Perrings, Charles. “Conservation of Mass and Instability in a Dynamic Environment-Economy System”, Journal of Environmental Economics and Management 13 199-211 (1986).

 Saul, John Ralston. The Unconscious Civilization. Massey Lectures, 1995. Anansi Press, Toronto, 1995.

 Schellnhuber, H.J. John. ‘Earth System’ Analysis and the Second Copernican Revolution. Nature,  Vol 402, December 1999.

 Stiglitz, Joseph E. Making Globalization Work. W.W. Norton and company. New York, 2007.

 Stiglitz, Joseph E. Freefall: America, Free Markets, and the Sinking of the World Economy. W.W. Norton and company. New York, 2010.

 Turner, G.M. and F. Poldy. Let’s Get Physical: Creating a Stocks and Flows View of the Australian Economy. Resource Futures Group, CSIRO Sustainable Ecosystems.

Victor, Peter. Managing without Growth: Slower by design not disaster. Cheltenham: Edward

Elgar, 2008.

Victor, Peter. “Managing without Growth”. Think piece for the SDC workshop ‘Confronting

Structure’ April 2008. London: Sustainable Development Commission. Online at www.sdcommission.

org.uk/pages/redefining-prosperity.html.

Over the years, CACOR members have undertaken a number of projects.