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March 10, 2006

Comments

Tracy W

There is no harm in trade when the trade involved is not essential to local survival.

So can NZ buy medicines from overseas or not?

How about iodine supplies? (NZ soil is naturally low in iodine. Pre-European Maori got iodine from seafood. Given that the author has doubts about whether fishing can survive, thus making reliance on seafood doubtful.)

And I must trade with others in order to not starve to death. Why is this okay for me, but bad when you scale up to nations level? Doesn't this have good effects in that it makes me reluctant to start wars on pain of starvation? Isn't part of the EU's determination to avoid another war like the Germans started part of their experience with being hungry during WWII?

It is also possible to make labor itself more enjoyable and fulfilling. The ideal is to produce the goods people need with as little disruption of the natural economy as possible, and also with human labor that is as enjoyable as possible.

The second step would be some shift from energy-intensive mass production to labor-intensive handicrafts and small-scale diversified family farming.

Is this plan compatible with the goal of making labour itself more enjoyable?

And why does this guy focus on markets, and not on all the environmental damage governments have done? He should be putting as much effort into how to constrain governments so they don't hurt the environment too.

And who are the people holding the views of economism? Citations please. Externality theory is taught in Econ 101 at universities, so I am disinclined to believe that there are significant numbers of people out there who simply believe "One can indeed forget all ideology and go about one's own business of gaining as many of the world's goods as possible at the least cost in labor. The market will take care of the rest. " I think John Cobb is attacking a straw man. (There are people who believe that on average the government will do a far worse job if it tries to correct market outcomes, but that's a different position.)

Dave Iverson

Tracy W.

* There is no harm in trade when the trade involved is not essential to local survival. So can NZ buy medicines from overseas or not? How about iodine supplies? (NZ soil is naturally low in iodine. Pre-European Maori got iodine from seafood. Given that the author has doubts about whether fishing can survive, thus making reliance on seafood doubtful.)

Certainly trade is often good, and championed by all economists. Daly and Cobb say in FOR THE COMMON GOOD that 9 times out of ten arguments against trade are invalid. Daly and Cobb propose trade above some commonly-agreed-to base, which may be a bit hard to pin down, but still is a useful idea to talk about and attempt to develop public policy for.

* And I must trade with others in order to not starve to death. Why is this okay for me, but bad when you scale up to nations level? Doesn't this have good effects in that it makes me reluctant to start wars on pain of starvation? Isn't part of the EU's determination to avoid another war like the Germans started part of their experience with being hungry during WWII?

It is OK to scale trade up to the nation-state level, preferably in a sequential, bottoms-up way, as long as the nation is not risking losing it's comparative advantages. And yes, there are advantages to an inter-twined world made possible in part by trade arrangements.

* It is also possible to make labor itself more enjoyable and fulfilling. The ideal is to produce the goods people need with as little disruption of the natural economy as possible, and also with human labor that is as enjoyable as possible.

Yes! And I assume that you meant "natural ecology" not "natural economy" (it proves too easy to hit a wrong key or two in comments and then not see such until it's too late).

* The second step would be some shift from energy-intensive mass production to labor-intensive handicrafts and small-scale diversified family farming. Is this plan compatible with the goal of making labour itself more enjoyable?

Wonderful, if it happens. A friend and I were discussing similar framing at a meeting in Colorado this week. We agreed that bliss would be if, after most all things are made by computer robotics and after many of the so-called service sector jobs disappear due to very powerful communication information systems, craft guilds and local artists were able to make a good living as part of some futuristic production/income distribution system. The other possibility is Kurt Vonnegut Jr's PLAYER PAINO world described in a post on my Econ Dreams – Econ Nightmares blog as "Leontief's Worry: Jobs Destroyed Much Faster than Created" http://forestpolicy.typepad.com/economics/2006/02/leontiefs_worry.html

* And why does this guy focus on markets, and not on all the environmental damage governments have done? He should be putting as much effort into how to constrain governments so they don't hurt the environment too.

Yes, we should be rightfully critical of the damage done to the environment in the name of governments. Power concentrations are always something we should be fearful of.

* And who are the people holding the views of economism? Citations please. Externality theory is taught in Econ 101 at universities, so I am disinclined to believe that there are significant numbers of people out there who simply believe "One can indeed forget all ideology and go about one's own business of gaining as many of the world's goods as possible at the least cost in labor. The market will take care of the rest. " I think John Cobb is attacking a straw man. (There are people who believe that on average the government will do a far worse job if it tries to correct market outcomes, but that's a different position.)

To some extent Cobb has set up a strawman—don't we all too much of the time—but the problem of externalities being forgotten in both practical political situations and in much of the written text of economics is well-documented. I don't have my economics books at home or I'd rattle off a few citations. Perchance I'll find a spare moment to do so tomorrow, if others don't answer this question before I get to it.


Dave Iverson

Externalities problem:

Wikipedia has this to say about "externatilites": http://en.wikipedia.org/wiki/Externality

"An externality occurs in economics when a decision, such as for example, to do something which pollutes the atmosphere, causes costs or benefits to stakeholders other than the person making the decision, often from the use of common goods, though not necessarily so. In other words, the decision-maker does not bear all of the costs or reap all of the gains from his action. As a result, in a competitive market too much or too little of the good will be consumed from the point of view of society. If the world around the person making the decision benefits more than he does, such as in areas of education, or safety, then the good will be underconsumed by individual decision makers; if the costs to the world exceed the costs to the individual making the choice in areas such as pollution or crime then the good will be overconsumed from society's point of view.

"…Economists see voluntary exchange as mutually beneficial to both parties in an exchange. On the other hand, either the consumption of a product … or its production may have external effects…. Those who suffer from external costs do so involuntarily, while those who enjoy external benefits do so free….

"From the perspective of a social planner or welfare economics, this will result in an outcome that is not socially optimal. From the perspective of anybody affected by the externality, it is either a negative factor in their lives, as with obnoxious smell or pollution or a boon, as with the other's pretty clothes. In the first case, the person who is affected by the negative externality in the case of air pollution will likely see it as violating his freedom to breathe freely. It might even be seen as trespassing on their lungs, violating their property rights. Thus, an external cost can easily pose an ethical or political problem. Alternatively, it might be seen as a case of poorly-defined property rights.

"An external benefit, on the other hand, may increase the availability of choices for — and thus the amount of freedom of — the beneficiaries with no cost to them. In effect, it can be called a "free lunch" for them. They may thus resist the ending of such beneficial externalities along with any associated inefficiencies.

"The value of the effects of the externality are likely not something that can be easily calculated in a technocratic way by economists or social planners, since they reflect the ethical views and preferences of the entire population. Instead, for countries believing in popular sovereignty, some sort of democratic method is needed to attach values to the external costs and benefits.

"Sometimes, laissez-faire economists such as Friedrich von Hayek and Milton Friedman refer to externalities as "neighborhood effects" or "spillovers". But it should not be thought that all externalities are small, spilling over only in the "neighborhood." For example, the burning of fossil fuels affects the entire "neighborhood" of the Earth, and according to many, causes global warming.

"Going outside the broadly-defined liberal political tradition, Marxists see externalities of all sorts, including pecuniary ones, as ubiquitous, being the rule rather than the exception. Production is socialized or totally interdependent...."


THEORETICAL WELFARE ECONOMICS, by J. de V. Graaff, (Cambridge University Press, Cambridge, 1975 (first published 1957)) has this to say:

"... Much of the appeal of what we might call laissez-faire welfare theory, which is largely concerned with demonstrating the optimal properties of free competition and the unfettered price system, is undoubtedly due to its elegance and simplicity. Admit the existence of external effects [the so-called externalities] and both disappear. Even under ideal circumstances, price no longer measures the marginal contribution a good makes to social welfare--it measures the contribution it makes to private welfare, which may be something quite different. ...

"... In my view the job of the economist is not to try to reach welfare conclusions for others, but rather to make available the positive knowledge -- the information and understanding -- on the basis of which laymen (and economists themselves, out of office hours) can pass judgment.

"It is for this reason that I choose to regard aggregate index numbers of output or consumption as mere providers of information which may or may not be useful in themselves, but which are certainly devoid of normative significance. ...

"No doubt many professional economists are reluctant to abdicate what they may like to regard as their traditional prescriptive role, and are uneasy at the prospect of becoming mere purveyors of information. If they are, it is up to them to show how welfare economics can be set upon a basis which is even reasonably satisfactory--or can be made to yield conclusions with which a significant number of men are likely to concur." (pp. 170-1)

{Note: The THEORETICAL WELFARE ECONOMICS Cite is drawn from my "Criitques of Cost-Benefit Analyisis," http://www.fs.fed.us/eco/eco-watch/econcritiques.html }

Tracy W

John Cobb's claim was that certain people believe, amongst other things, something like "For the first time in history, it is now established that the best way to serve one's neighbor is to act in perfect selfishness! One can indeed forget all ideology and go about one's own business of gaining as many of the world's goods as possible at the least cost in labor. The market will take care of the rest. "

A series of citations of people attacking this idea are not proof that anyone holds it. Nor is uncited claims about Hayek or Friedman. Furthermore, I've had my meaning completely misinterpreted by quoting out of context, so I'll see the quotes first before I'll believe that anyone like Hayek or Friedman would have completely forgotten Econ 101 (E.g. once I said in letter drafted for someone more important that "Private banks cannot create credit like a central bank can." [Going on to explain the differences]. This got quoted as "banks cannot create credit ...".)

As for 'natural economy' vs 'natural ecology', I actually quoted that from the text in the post. I meant to put it in italics, but they didn't show up.

I have my doubts that small-scale farming and intensive handcrafts will lead to enjoyable labour. When you read accounts by 19th century NZ settlers that was much of their lives, and quite often they disliked it.

Dave Iverson

Tracy W.

Sorry about misinterpreting your intent, and not appropriately separating what you were quoting from the nature of your inquiry and challenge.

As to "who are the people holding the views of economism?" I reply: All those who don't adequately account for externalities, which in my book is a large number, particularly when dealing in matters of political economy. The very act of labeling something "external" gives license to ignore it, or leave it as a problem for others to solve. I believe this happens far too often, and is, in my opinion, a major reason that the cross-disciplinary conversation Ecological Economics came to be.

Tracy W

My mistake on the quotes - I sometimes get confused between different commenting interfaces on the web.

"Do not adequately account for externalities", with Dave Iverson presumably defining what is meant by 'adequate', is a different thing from believing that "... it is now established that the best way to serve one's neighbor is to act in perfect selfishness! One can indeed forget all ideology and go about one's own business of gaining as many of the world's goods as possible at the least cost in labor. The market will take care of the rest." I now have a Bayesian-probability based belief that there is no one who holds the view John Cobb describes. (Bayesian-based because I'm prepared to alter it if someone actually does come up with good evidence that someone does hold this belief.)

Reasonable people can disagree on whether externalities have been accounted for adequately. See for example these cross-submissions on how the HVDC link in NZ should be priced, at http://www.electricitycommission.govt.nz/submissions/substransmission/hvdcjan06. (You will have to take my word for it as a NZer that these people are reasonably reasonable, however).

'The very act of labeling something "external" gives license to ignore it, or leave it as a problem for others to solve. ' - who gives this license? I wish my thesis supervisor at uni had adopted this approach, it would have made my thesis much easier. :)

Dave Iverson

* 'The very act of labeling something "external" gives license to ignore it, or leave it as a problem for others to solve. ' - who gives this license?

License is too-easily taken, not given, by politicians, business moguls, wildcatters, and others who operate in the sphere described well by author Kurt Vonnegut, Jr. when he said (in God Bless You, Mr. Rosewater):

"The therapist, after a deeply upsetting investigation on normality at this time and place, was bound to conclude that a normal person, functioning well on the upper level of a prosperous, industrialized society, can hardly hear his conscience at all."

Tracy W

Dave, in my experience, politicans don't need the word "externalities" to take license. What drives them is the need to get re-elected, and they will ignore their own common sense, let alone any economic or ecological arguments, if they think it is the best way to get votes. See what happened with the cod fisheries in Canada.

Which is why I worry about the eventual effect of those environmentalists like John Cobb who implicitly blame only markets for environmental damage, and never mention the damage done by governments. They risk setting up an institutional structure by which more enviromental damage is done because the risk of damage by government was not considered at the outset.

thebizofknowledge

These ideas really remind me of the whole concept of corporate social responsibility, yet they also take into account the role played by the individual in the economy. Very thought provoking stuff here!

Dave Iverson

Follow up on "corporate social responsibility, yet they also take into account the role played by the individual in the economy."

I've been reading Ian Mitroff and Harold Linstone's THE UNBOUNDED MIND. In a chapter titled "Unbounded Sytems Thinking: A Fifth Way of Knowing" they suggest looking at problems (framing things) into three realms: technical (science-technology), organizational (social entity, small to large, informal to formal), and individual.

Mitroff and Lindstone advocate a reasoned approach that allows one (or communiites larger than one)to vet problems and work up resolutions by looking at things differently depending on the different lenses through which one looks. In this the two authors join a large and growing number of people who advocate taking a "multiple perspective" approach to complex and wicked problems.

Wouldn't it be nice to see the press, the politicos, etc. using multiple frame approaches instead of "faith based" or "I'm right therefore you are wrong!" approaches.

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