US economists Robert Solow and John Hartwick then embarked on the question
of the intergenerational allocation of natural resources and their basic idea became
that of ‘capital substitutability.’ In line with closed system exchange value conversion assumptions, capital substitutability holds that while each generation should
have the same amount of capital available, the composition of its overall stock can
vary. For example, natural capital can be degraded as long as man-made capital is
increased to the same value (Solow 1986: 141–149).
When the Rio Summit put intergenerational distribution of the means for need
satisfaction center stage, this concept was included in the measures recommended
for tracking if development had become sustainable. But instead of making calculations according to the biophysical laws of nature, policymakers used the laws of
exchange value for natural assets. Capital substitutability offered a way to integrate
the environment with economic calculations that need not upset the human
self-image: economic growth could happily continue. It might also have helped that
Robert Solow won the Nobel Prize for Economics in 1987, the same year that the
Brundtland Report came out.
Natural scientists and ecological economists were and are critical of this move
and demand that there should be limits to the use of market pricing in a good
governance regime. Let us explore their criticisms and alternative concepts in more
detail.
3.2.2 Market Prices and the Allocation or Protection
of Scarce Resources
The term that mainstream economics uses when its models’ predictions go awry is
‘market failure.’ There is no question as to whether markets are always the best
solution; the problem is always that some policymaker was silly enough to intervene in the equilibrating checks and balances of exchange value. Of course there
are many, many cases where market prices are distorted, often because private
actors also seek to manipulate them. The aim of making them tell the ‘truth’ about
the environmental and social costs involved in producing a product or service is a
necessary one. But it is not sufficient to govern human–nature relations in a sustainable manner.
Here are some examples in which prices did not secure good allocation or
prevent overexploitation of nature’s riches. First, when the natural resources
affected are needed for subsistence. The direct survival means of many of the
poorest people in the world today need to be protected against price hikes fuelled by
speculative interests that aggravate supply crises. Individual economic gain aspirations need to yield to survival needs. Yet, if there is a detectable pattern, it seems
to be that instead of prioritizing the needs of the poor, exchange value orientation
means prioritizing the rich with purchasing power. Second, and as a consequence of
unequal wealth generation, market prices do not necessarily deter rich people from
84
3 Why the Mainstream Economic Paradigm Cannot Inform …
of the intergenerational allocation of natural resources and their basic idea became
that of ‘capital substitutability.’ In line with closed system exchange value conversion assumptions, capital substitutability holds that while each generation should
have the same amount of capital available, the composition of its overall stock can
vary. For example, natural capital can be degraded as long as man-made capital is
increased to the same value (Solow 1986: 141–149).
When the Rio Summit put intergenerational distribution of the means for need
satisfaction center stage, this concept was included in the measures recommended
for tracking if development had become sustainable. But instead of making calculations according to the biophysical laws of nature, policymakers used the laws of
exchange value for natural assets. Capital substitutability offered a way to integrate
the environment with economic calculations that need not upset the human
self-image: economic growth could happily continue. It might also have helped that
Robert Solow won the Nobel Prize for Economics in 1987, the same year that the
Brundtland Report came out.
Natural scientists and ecological economists were and are critical of this move
and demand that there should be limits to the use of market pricing in a good
governance regime. Let us explore their criticisms and alternative concepts in more
detail.
3.2.2 Market Prices and the Allocation or Protection
of Scarce Resources
The term that mainstream economics uses when its models’ predictions go awry is
‘market failure.’ There is no question as to whether markets are always the best
solution; the problem is always that some policymaker was silly enough to intervene in the equilibrating checks and balances of exchange value. Of course there
are many, many cases where market prices are distorted, often because private
actors also seek to manipulate them. The aim of making them tell the ‘truth’ about
the environmental and social costs involved in producing a product or service is a
necessary one. But it is not sufficient to govern human–nature relations in a sustainable manner.
Here are some examples in which prices did not secure good allocation or
prevent overexploitation of nature’s riches. First, when the natural resources
affected are needed for subsistence. The direct survival means of many of the
poorest people in the world today need to be protected against price hikes fuelled by
speculative interests that aggravate supply crises. Individual economic gain aspirations need to yield to survival needs. Yet, if there is a detectable pattern, it seems
to be that instead of prioritizing the needs of the poor, exchange value orientation
means prioritizing the rich with purchasing power. Second, and as a consequence of
unequal wealth generation, market prices do not necessarily deter rich people from
84
3 Why the Mainstream Economic Paradigm Cannot Inform …