Dear Professor X,
For many years now I have been reading your 0p-Eds, articles in periodicals and academic papers. In my mind you are one Nobel Prize economist who speaks the truth to the weaknesses and strengths of past and present economic theory. With all due respect though; let me suggest that the time has come for you and the many other economists following your thoughts to step out of your shoes and take a long hard look at a fatal flaw in the economic theory so long accepted.
You and your associates need to begin with an articulation within your profession of new economic theory that will meet the pressing planetary challenges confronting our species.
The theory that grew out of the industrial revolution, on which capital markets today justify their operation, now finds its “raison d’etre” shaking under its own weight. The cold hard fact is that it has not only seen its day; it is like an insidious disease working against human survival.
All around us there are indications of its failure. The most visible signs at this moment come from our insatiable demand for cheap fossil fuels. In our Biosphere we can observe pollution of our air, acidification of our oceans, rising temperatures. And the failures extend well beyond this. Many earth systems are collapsing. Planet Earth is telling Homo sapiens something.
The key fault is the unfettered operation of capital markets. These markets have grown to a size where they are energizing ecologically destructive forces of a magnitude that has never before been seen in our species’ history. Resource allocation is being misguided and misappropriated on a massive scale. Irreparable damage is being done.
Fingers can be pointed in many directions such as human greed, political dysfunction, just plain stupidity; however, the rules under which capital markets have been operating since they took form at the beginning of the industrial revolution must take primary blame.
The economic profession has not come forward with new ideas to stem the tide. We see an absence of ecological planetary inquiry in the business schools. The need for negative external costs to be built into every investment decision that will damage the earth’s Biosphere is not factored in as part of the decision process. Maximizing return is. There is no interest in saving the planet; becoming more efficient in raping it yes, but not in saving it.
You and those like you need to be thinking and writing and speaking about new economic theory. Physical scientists throughout the world have been describing the ecological problems with great clarity; it is time for economists to offer economic solutions.
Boiled down into a few words; our resource exploitive capital market system needs to be transformed into a constrained yet incentive directed market system emphasizing the equitable and humanistic provision of both the material and psychological needs of all humanity. The long lasting functionality of all the earth’s resources to meet these needs must take on the highest priority. Every element of today’s energy intensive market driven consumerism must be made to meet this planetary survival/functionality test.
How can we mechanistically achieve this? Negative external costs and positive incentives must be built into every investment decision. And these costs and incentives must be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the athletic field to the hospital. Economic outcomes with negative social and/or ecological value must be recognized. Negative externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.
Every investment decision must be internally priced to reflect its socially constructive or destructive outcome. Croplands, grasslands, forests, fisheries, inorganic resources; all of the earth’s natural resources, must be internally priced so as to prevent their exploitation and damage to the planet.
In our present world, none this is happening. We see punitive cigarette and liquor taxes and some others like them, but across the board, any form of build-in of “negative external” cost reflecting negative externalities is almost nil. Disincentives/Incentives in vital areas like energy are being poorly handled. The most simple questions such as; is this or that delivering real worth to society and to the health of the planet are being avoided. As I am certain you are aware; some progress is being made in northern Europe, but I am sure you will agree with me that on a world scale that is insignificant.
Humanity is crying out for an entirely new form of economic/monetary theory. Your economics profession remains notably silent, content on using its advanced theories of algorithms for trading purposes, but not for the above.
How much time do we have to come up with a revised capital market system? Some highly accredited scientists say our present trajectory will present very serious planetary problems within the next fifty years and they even point to the end of our species after three hundred.
Will our great and great-great grandchildren find themselves at the bottom of Dante’s inferno with no escape? There is this possibility. The time has come for humanity to recognize that unless it can change the way it prices what it desires to consume, the Abrahamic biblical prophecy of the end of times may very well prove to be self-fulfilling.
David Anderson brings together a wide range of interests in his writings, namely; theology, history, evolutionary anthropology, philosophy, geopolitics, and economics.
He has written three books. A fourth is near completion.
It is about a necessary geo political, social, religious, economic paradigm shift for human survival.