Economics Of Needs And Limits
By Frank Rotering
13 October, 2010
In the late 1980s I was quietly raising a family and pursuing a computer career in Vancouver, Canada. However, like many others, I was becoming increasingly alarmed by global warming and the clearcut logging that was devastating the forests of British Columbia. In 1989, while attending a rally to save an old-growth forest from the corporate saw, I heard David Suzuki thunderously denounce the world’s economists for their stupidity. He accused them of encouraging economic growth while ignoring ecological limits, thus causing irreversible damage to the environment. I soon put my career on hold, returned to university, and began to study this apparently destructive discipline. My journey to the revolutionary barricades had begun.
What I learned at university amply confirmed Suzuki’s assessment. With few exceptions, the economists I encountered had a deep commitment to growth and virtually no awareness of the natural world. Despite this, I learned some important principles of economic thought, and I had one revelatory experience. This was courtesy of my international trade professor, Steve Easton. Although extremely conservative, he was always willing to chat about concepts and policy. During one such after-class discussion, as I was expounding a progressive position, he cut me off abruptly with the words, “Where’s your model?” In other words: where is the theory underlying your position so that I can check your assumptions and logic?
My immediate reaction was dismissive: I had virtue and passion on my side, so why would I need a theoretical model? This attitude quickly dissipated as I considered the implications of Easton’s challenge. I realized that, without an economic theory of their own, progressive thinkers could not provide reliable guidance to activists, and could not hope to prevail against conservative thinkers like Easton in the court of public opinion. This not only weakened the oppositional role played by progressive forces, it prevented them from eventually gaining political power, thus consigning them to a weak oppositional role in perpetuity.
After graduating in 1992 I returned to my computer career, but in a contractual role so as to leave time to develop the missing model. This development consumed the better part of the next 18 years and resulted in thousands of pages of notes, drawings, and graphs that reflected my unfolding thoughts. A few highlights from this period will depict my tortuous progress.
Through the 1990s I read widely in economic history and theory. Two thinkers in particular impressed me. One was John Ruskin, a 19th century critic of art and society who brought a profound morality to his economic writings. His concepts of intrinsic value (the capacity of outputs to improve life) and effectual value (the life improvement itself) are solid and remain integral to my thought.1 The second was Karl Marx. In university I took an excellent class from the Marxist Michael Lebowitz, but I had not yet studied Marx’s economic thought in depth. I did so during this period by carefully reading Grundrisse, Capital, and Theories of Surplus Value. I ended up rejecting Marx’s interpretations of human nature and historical development, but embracing his analysis of capitalism.
By 2003 I had outlined a sprawling but superficial theory that encompassed Ruskin’s human approach, Marx’s systemic concepts, and market phenomena. I caught a huge break when this work was noticed by Richard Douthwaite, author of The Growth Illusion and co-founder of the Irish sustainability group FEASTA. He kindly put the human concepts on the FEASTA website and asked its member to offer their critical comments. Many of these were insightful and contributed significantly to my project.
Two events in the same year taught me that even heterodox economists, who are the dissidents within their profession, cling tenaciously to mainstream concepts. The first event was an academic conference in Kansas City on “The Future of Heterodox Economics”. The discussions there centered on pluralism - the addition of historical, biological, cultural, and other topics to economics so as to broaden standard thought and soften its mathematical austerity. This approach makes it easier for people to swallow conventional ideas, but it does nothing to replace them with more rational concepts. My own presentation, which addressed this replacement, was met with glassy eyes and shuffling feet. The second event was an encounter with Edward Fullbrook, editor of the Post-Autistic Economics Review.2 In the previous year Fullbrook had printed my article on the potential development of a new economics.3 After returning from Kansas City I offered him a second article, which made this proposal more concrete. He rejected it with the revealing comment that, "... less than 2% of the readership would agree with you that the axioms of economics must be replaced." He was undoubtedly right. I was barking up the wrong tree.
In 2004 it finally dawned on me that my project was far too ambitious: I had to concentrate on the human concepts derived from Ruskin and the environmental concepts required to address the ecological crisis. At this point I also settled on a name for my framework. At the outset, because of my clash with Steve Easton, I called it Progressive Economics. At the time of the FEASTA discussion I referred to it as Human Economics. Now that its scope was restricted and its purpose clear, I called it the Economics of Needs and Limits, or ENL. In 2007 I more or less completed ENL’s development and self-published a book, Needs and Limits, that described the framework in detail. The third edition appeared earlier this year.
ENL responds to a glaring omission in the history of economic thought. Over the past five centuries economics has almost exclusively meant the study of production and consumption under capitalism. This is true across the political spectrum. On the right it was used to justify capital’s rule and to facilitate business. On the left it probed the system’s internal structure in order to pave the way for socialism. Except for a few gleams of light, the discipline has never sought a method for determining rational economic objectives, based on a stated goal. That is: What outputs should an economy produce, and at what quantities? What should be the target rates of resource utilization, waste flows, and habitat destruction? What should be the target population level? ENL adopts the goal of sustainable well-being and helps analysts formulate answers to these and other questions.
Of course, developing an economic framework is one thing; applying it is quite another. This is why, over the past few years, I have devoted part of my time to producing a strategy that puts ENL to work.4 The key idea behind this strategy is that a society, instead of acceding to the results of capitalist markets, should use ENL to determine economic objectives, and should then strive to achieve them. Capitalist institutions would be eliminated, modified, or retained based on their usefulness in this process. The intended result is a profound economic transformation that reverses overshoot and achieves sustainable well-being.
How does revolution enter the picture? Capitalism is based on a specific economic logic: the interaction of corporate profits and manipulated consumer wants in the market. If this logic is replaced, capitalism is no longer tenable and will be historically superseded. The capitalist class and their supporters will fiercely resist such changes to protect their power and privileges. A revolutionary struggle is therefore inevitable.
This reasoning is straightforward and appears to me irrefutable. A revolutionary stance is not an extreme or irrational reaction to the biosphere’s destruction, but an inescapable conclusion. It may also be the leading edge of an expanding realization. Guardian columnist George Monbiot recently said the following about the faltering climate change struggle: “... we indulged a fantasy of benign paternalistic power ... we must stop dreaming about an institutional response that will never materialise and start facing a political reality we've sought to avoid.5 .
I don’t know precisely what Monbiot meant by this, but he’s clearly turned a corner, and his adoption of a revolutionary stance may not be far off. I’m eagerly awaiting similar indications of disgust and enlightenment from Bill McKibben, Rob Hopkins, Richard Heinberg, and many others.
One last observation will bring me full circle. Late last year I did a presentation for the Suzuki Foundation here in Vancouver. I recounted some of the above history, talked about ENL, and distinguished between aims that standard environmentalism can and can’t accomplish. In the latter category I mentioned several aims that are incompatible with capitalist logic, such as a steady-state economy and production for needs instead of inflated wants. These comments were eagerly received by the Foundation’s staff, but they caused visible consternation in its senior executive. This may well be typical of progressive organizations today: a rank and file that’s ready to move to the next stage of history, but a leadership that remains mired in the expansionary and ecocidal past.
1. Ruskin’s best-known book on economics is Unto this Last (1860). However, these value concepts were introduced in Munera Pulveris (1862).
2. This publication has since changed its name to Real-World Economics Review.
4. The full strategy document is at http://needsandlimits.org (“Strategy” tab).
ENL's Core Principles
1. Value is the objective effect of consumption on human beings, and is measured by physical health.
2. Cost is the objective effect of production on human beings. Because cost is the converse of value, it is also measured by physical health.
3. The optimum quantity for an output is reached when the marginal cost of its production equals the marginal value from its consumption.
4. An economy’s environmental budgets are set by the maximum rates of habitat destruction, waste generation, and renewables utilization that do not result in environmental degradation.
5. An output’s share of an environmental budget, called its budget share, is established by its relative contribution to health.
6. An output’s ecological limit is reached when the output has exhausted its lowest budget share.
7. An output’s target quantity is the lower of its optimum quantity and ecological limit.
8. An output may be produced beyond its target quantity in order to satisfy socially-sanctioned wants if its ecological limit is not violated.
9. The target rate for a natural flow is the minimum rate required by target output quantities at maximum ecological efficiencies.
10. A population’s optimum level is reached when average health is maximized due to scale effects.
11. A population’s target level is the lower of its optimum level and the area's carrying capacity.
Frank Rotering is an independent economic thinker who lives near Vancouver, Canada. He studied economics at Simon Fraser University, has produced several YouTube videos about economic thought and related topics, and maintains the website needsandlimits.org. His book "Needs and Limits" describes an economic logic that helps establish rational economic objectives. His core message: because humankind has overshot the planet’s ecological limits, we must revolutionize the economic principles by which we live. He invites communication via his email frank_rotering AT yahoo DOT com
For articles, YouTube videos, and more of Frank Rotering's work, see his website, Needs and Limits.