A Basic Income Research Programme

It is a great vision, particularly popular among the political Left: that the citizen could enjoy the freedom of doing with his life whatever she wants. Work, make arts or devote oneself to family or the community. Of course, basic income would not bring with itself the total freedom, but it would make the unconstrained choice of one’s way of living much easier. So far the assumptions, at least. It would be interesting to know, however, whether and–if yes–how this idea can become reality. For so far the vision of basic income is not much more than that–a vision. A beautiful one, but largely lacking an empirical and scientific basis. Continue reading

The Case for A-Growth, Not De-Growth

It is always a very nice feeling when you find thoughts similar to yours in an influential publication. Once upon a time, some 1 1/2 years ago, I published here a text entitled Stop Debating Growth and Focus on What Is Important (yeah, I admit that titles are not quite a strength of mine). Today I read a paper by Jeroen van den Bergh, published two years ago in the Ecological Economics journal, entitled Environment versus growth — A criticism of “degrowth” and a plea for “a-growth”. To my pleasure, his credo is very similar to what I wanted to emphasize in the Stop Debating text. Continue reading

Progress as Changing Patterns of Dependence

Progress. Hardly any word describes better what is special about the last 200-250 years of human history. Up to then, technological, economic, social progress was scarce, the European Medieval was characterized rather by regress, for instance. But then, then came the Great Transformation, the Industrial Revolution, and changed everything. Today, it is clear to (almost) everyone that the pursuit of progress is what defines humanity, even though it is not the whole definition. Yes, we have difficulties when it comes to agreeing on what progress is. But we mostly identify progress, at least implicitly, with technological progress – all the nice innovations, not necessarily technical in a narrow sense, but also e.g. institutional, that make us less dependent on nature. This is, indeed, what defines social progress in the end – our ability to overcome scarcities and obstacles “created” by nature, be it with regard to natural resources for production, be it our psyche. When it comes to the former, however, it may be argued that we do not really become less dependent – we only change the source of dependence. Continue reading

Historical Dynamics of Growth Critique

Since the beginning of modern economic theory’s history, which set off in the second half of the 18th century, economic growth was one of the most central themes, creating controversies over and over again. The emergence of modern economics, identified oftentimes with the publication of An Inquiry Into the Nature and Causes of the Wealth of Nations by Adam Smith, coincided with the onset of an exceptional process in human history: until the late 18th and early 19th century, economic growth had been a temporary intermezzo at best, not a general pattern of socio-economic development of human societies. Then, around the time when Smith wrote his book, a new pattern gained momentum, economic growth becoming a matter of course. However, the perception of growth and its limits has evolved over time Continue reading

Getting Prices Right vs. Getting Morals Right

One major justification of my work on the economic valuation of ecosystems is that we need to “get the prices right”. Economists think that factoring the value of ecosystem services into the prices of goods and services traded in markets is one important way of creating incentives to use these ecosystems sustainably. Opponents of the economic approach, however, fear the resulting “commodification of Nature”. Instead, the Douglas McCauleys and Mark Sagoffs of this world suggest that, instead of getting the prices right, we should attempt at getting morals right. In their view, this is the right approach to end the ongoing destruction of Nature, rather than the harmful valuation exercises conducted by economists. Continue reading

Is Some Number Assigned to Nature Better Than No Number?

Imagine the following situation: a 6-year old approaches you holding in his hands a picture – he drew a dolphin. Then you see a number above the dolphin, with an €-sign at its end, and the child tells you that the dolphin costs this amount of money. When you ask him, however: Where does the number come from? Who is to pay this to whom? And what is the expected result of the transaction?, he knows no answer.  This situation is not so much dissimilar from what sometimes happens when economists attempt to assign a value to ecosystems. Continue reading

If I Would Be the Nobel Memorial Prize in Economic Sciences Committee…

Tomorrow, the Nobel Memorial Prize in Economic Sciences for the year 2013 is going to be awarded. Despite my general aversion toward this award, I am very curious about who is going to be this year’s laureate. I also think that this may be a good opportunity to present my own “favourites”. I do not claim my choices to be realistic in any meaningful way of this word – indeed, for most of them I am quite sure that those economists are never going to be awarded the Prize. Which does not necessarily make the exercise less interesting. Continue reading

The Rationale for Being a Sceptical Economist

Recently I have renamed my blog to “The Sceptical Economist”. Partly, it is an ironic allusion to the self-called Skeptical* Environmentalist Bjørn Lomborg. Another reason for choosing this name is my dedication to rationality, pragmatism and scepticism – the foundation I try to base my worldview on. The last reason rationalizing my choice is my deep scepticism toward the dominant orthodoxy in the discipline I’m trained in – economics. This last reason I would like to explain more comprehensively today. Continue reading

Economic Possibilities for Keynes’s Grandchildren

83 years ago John Maynard Keynes, the great economist of the first half of the 20th century, wrote a short essay entitled Economic Possibilities of Our Grandchildren. Even though the word and the very discipline of futurology had not been invented yet at that time, this is exactly what Keynes engaged in. He wrote down in the essay what he thought the world would look like around 100 years later. Although there are still some 15 years left, I guess it is fair enough to assume that no great, revolutionary changes in societal or economic affairs will take place until 2030. Let us therefore take a look at Keynes’s vision, for we can learn a lot from it about our own time.

Continue reading

The Economics of Endangered Species Rescues

Anthropocene. The era of human dominance. Many commentators agree that anthropocene is a proper name for the current geological era (formally we still live in the Holocene). Human activities are the all-dominant factor influencing natural systems all over the Earth. Climate change, mass extinction of species, biodiversity loss, peak everything, widespread soil degradation and, as a result, erosion and desertification… There are many phenomena caused, at least partly, by human activities, especially over the last 2 centuries, that are critical for the state of the Earth ecosystem. A phenomenon of particular “media potential” is the continued loss of species across the world. Just think of the media buzz around Lonesome George. Extinction of whole species mobilizes many people to action. The question, however, is whether the actions finally undertaken are always sensible. One may call this the economics (and ethics) of endangered species rescue. Continue reading

Entitlements: Why Income-Based Measures of Poverty Are Not Enough

In this blog, I repeatedly criticized the use of income-based indicators of well-being in rich countries. Probably the most important reason why their use is inappropriate is the so-called Easterlin paradox, viz. the fact that people seem not to become happier as they become richer in absolute terms (above a certain threshold level). In measuring the well-being of poor people or societies, income seems to be of much more merit. However, here also there are reasons to be sceptical. One of the main problems has been identified by Amartya Sen, who stressed that income (or, more generally, command over commodities) alone does not generate well-being if the individual in question lacks entitlements. Continue reading

Peak Everything, Backstop Technology and Economic Growth

And interesting, though also frightening characteristic of today’s world is that it seems to be peaking all the time. Peak Oil, Peak Metals, Peak Soil, Peak Uranium, Peak Rare Earths. Peak Everything, to put it bluntly. Some of these slogans may be exaggerated, at least if taken literally. On the other hand, given high and rising demand for oil, coal, uranium, rare earths, metals, agricultural land and other essential resources – demand that is going to be increasing for decades to come, as China, India and especially Africa will become both richer and more populous -, there is a strong case for taking seriously concerns regarding the diminishing resource base, even if there is still much left. Continue reading

Consequences of the Rogoff/Reinhart Controversy

Most people interested in economics (or in scandals) have heard of this – the famous conclusions of Kenneth Rogoff’s and Carmen Reinhart’s analysis of data about the relationship between public debt and GDP growth have been found wrong. They were based on flaws in handling the data base and in the application of statistic methods. There is a lot to be learned from this “scandal”, but I personally found Barry Eichengreen’s commentary particularly insightful. He calls for open-access to the data and algorithms used by researchers, as well as more reservation regarding causality interpretations.

Statistics are helpful. But in economics, as in other lines of social inquiry, they are no substitute for proper historical analysis.

In impugning the authors’ motives and criticizing the uses to which others have put their research, critics of Reinhart and Rogoff have taken their eye off the ball. The real problem is scholarly procedures and priorities, not motives. If the problem of procedures and priorities is addressed, the fact that politicians are tempted to misuse scholarly analysis for their own ends will take care of itself.

In other words, what is true of the economy is equally true of economic analysis. A crisis is a terrible thing to waste. [more]

The Myth of Decoupling

It is something probably every junkie dreams of – to be able to keep taking drugs and feeling free, careless or just high, but without all the unpleasant side-effects like health issues, financial ruin, destroyed social networks etc. This, however, is illusion and no reasonable person would deny that it is. It is therefore astonishing how many otherwise reasonable persons fall prey to this illusion with regard to the great societal addiction – economic growth. They invoke the idea of decoupling GDP growth from resource use, environmental pollution and the like. But decoupling growth has nothing to do with reality, it is a myth. Continue reading

Nature’s Disservices

There is much talk in ecological and environmental economics about ecosystem services – all the things Nature contributes to human well-being, such as pollination, climate regulation, aesthetic values or food. Indeed, my own master’s thesis dealt with the ecosystem services approach to valuation of Nature. Even though I wrote about the problems generated by this approach (and there are many), I still am rather a proponent of it. Recently, however, I realized that there exists an important flaw in the way ecosystem services are valued. I owe this insight partly to Bjørn Lomborg and Douglas McCauley. Particularly the latter mentions explicitly the fact that not all Nature “does” is good for human beings. Indeed, along with ecosystem services, Nature provides us with many disservices, too. Continue reading

Yasuní in Master’s Thesis

I already once mentioned that I was going to write a master’s thesis about economic valuation of ecosystems and the Yasuní rainforest of Ecuador. I submitted the thesis some months ago and wanted to make it available to anyone interested in the subject. It can be downloaded here: http://ubuntuone.com/6lkeCkyV4R9LLW9wx8VQLZ I make it available under under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License, so you are free to use it with the restriction of no changes and no commercial use.

[UPDATE: As UbuntuOne, where I had uploaded my thesis, has gone offline, the thesis is no longer available. In case you are interested in getting it, write a comment.]

[UPDATE2: The thesis can be downloaded from ResearchGate here.]

Limits to Growth and Extrapolation of Trends

I already once wrote about what may be regarded the conventional economist’s obsession – virtually every time they wants to refute allegations that there may exist limits to economic growth, economists use the 1972 report to the Club of Rome, The Limits to Growth, as a virtual “opponent”. As if Donella Meadows and her co-authors were the only ones concerned about the infinite growth assumption in conventional economics, and as if their argument were the only one (or even: the most convincing one) speaking for the limits to growth hypothesis. But even when we focus on The Limits to Growth, there is a serious fallacy in the economists’ criticism. Continue reading

Where Does Technological Progress Lead – Ancient Greece or “Beggars in Spain”?

Ancient Greek polis are often thought to be the ideal form of participative democracy and vital cultural life of a society. Political discussions, philosophy, science and arts – male Greeks enjoyed a real “highlife” that many in the educated “elites” of today dream of. However, to engage in politics, arts, philosophy and science, one needs a significant amount of free time. Indeed, Greek vivid public life rested on a peculiar foundation: slaves. Greek citizens were free of doing most of the less pleasant (but necessary) work like washing, cleaning, production of simple everyday-use goods etc. Therefore they had lots of time to visit the Agora or the Amphitheatre. Continue reading

Who Should Pay for Waste Management?

Waste is one of the largest environmental problems of modern economically advanced societies (and, since a part is dumped in the developing world, also there). On the one hand, recycling rates are relatively high in many countries (some 80% for most kinds of waste in Germany). On the other, this effect is overwhelmed by the sheer amount of trash society produces: both consumer waste (aluminium cans, plastic wrappers, printed advertisement, electronics with a lifetime of hardly more than a few months etc.) and production wastes. The latter is being better controlled and therefore, better managed in most cases. Furthermore, its amount depends directly on the amount of consumer products. So, the question emerges: how can we lower the production of the latter? And, at the same time, how can we lower the waste generation across the whole life-cycle? Continue reading

Limitations of GDP as Welfare Indicator

GDP (and its derivatives) is a measure of economic activity, actually. Narrowly understood economic activity, one should add. However, this does not prevent economists and policy makers from making welfare comparisons across countries and across time on its basis. The argument goes as follows: GDP is a good proxy of the consumption possibilities people have, and consumption is a good proxy of well-being/welfare. Therefore, we allegedly can use GDP per capita for comparing welfare between countries and GDP growth as an indicator of social progress within a society. This may sound compelling to many and, indeed, we are used to this rhetoric from authorities and the media. But it is wrong to assume that GDP or any of its common derivatives provides a measure of social welfare, for a number of reasons. Continue reading