Economics and sustainability

January 31, 1996
Issue 

Sustainability and Policy: Limits to Economics
By Michael Common
Cambridge University Press,1995. 348pp.,$29.95 (pb)
Reviewed by Dot Tumney
This is a mathematical and academic treatment of issues of sustainability. Current economics is rigidly exclusive. It is not designed to cope with the multiple facets of an operating society, let alone a biosphere with all its complexities and variations. Many things are too complicated for markets to achieve required outcomes — despite the economic rationalists, who will have you believe that the result of market function is by definition desirable. That overworked and singularly ill-defined expression "sustainable development" is replaced here by sustainability. The arguments presented relate to the appropriate tools for assessing and maintaining sustainability. Discussion of particular examples helps to concretise the notion of sustainability a bit. A meaningful discussion of "sustainable development" first requires determining who you are discussing with. In the report where the expression was coined, it was important to make the concept broad enough to encompass a very diverse range of self-interests. It is therefore not a lot of use as a basis for specific technical considerations. This specifically technical focus is less intimidating than I first thought and provides a framework for explaining the methods and assumptions of standard economics well enough for one unfamiliar with the jargon to follow the arguments. The description of the mechanisms of prevailing economic theories and practices is followed by an explanation of the history of sustainability concepts to provide a basis for discussing developments in environmental economics. Environmental economics, in Common's view, requires economists who can encompass the notion of the planet as capital and the solar radiation that energises it as the only input, so that for all practical purposes it is a closed system. Working in a closed system has the merit of requiring discussion of usage limits and the possibilities or non-possibilities for resource substitution. But if economists are really incapable of discussing sustainability without regarding the earth as "capital", one suspects they will not contribute much to the solution of the problem. Of course it's not really the theoretical technicalities that are the major difficulty. A huge chunk of the problem lies in how to overcome the inertia of the comfortable and the hostility of vested interests. A pronounced characteristic of the vested interest is the demand for absolute proof and a determination to ensure that the wrong kind of evidence never sees the light of day (i.e. standard tobacco company tactics). Proceeding from the present Australian situation, Common presents two angles to the subject for the developed country. It involves a carbon tax replacing all other taxes since carbon is a factor in everything, not just greenhouse, and a basic income for all adults since poverty is not compatible with long-term planning, as well as lots of other things. The carbon tax is presented as basically a mechanism to allow economics to calculate for long-term use of non-replaceable resources. In this context electricity generation may be looked at. It is loopy in terms of energy efficiency to use electricity to heat things. It's nuts to burn oil to generate electricity. Common argues for greater use of price mechanisms by claiming that "the economics of instrument choice is separable from the economics of target setting". Here, it seems that the mechanics of achieving targets are allowed to obscure the more important question of who sets the targets. A further consideration is that business is conducted planet-wide. Capitalists have had a world view since empires were a sunrise industry. Sustainability concepts and social equity are still largely hamstrung by national boundaries. Polluters have great freedom to border hop. Toxic wastes are presently exported, imported, classified, reclassified and generally show up on national accounts as activity. It would be theoretically possible to tax/price such behaviour into unviability — but if governments really had the determination to do that, it would be easier and simpler just to ban such trade.

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