Planetary limits, social needs and economics for the Anthropocene

Professor, Community Development and Applied Economics, and Fellow, Gund Institute for Ecological Economics, University of Vermont

©Reuters/Stringer

The human economy is a physical system embedded in society, which itself is embedded in a finite global ecosystem. The primary goal of the economy should be to meet basic human and social needs, now and in the future, without degrading the global ecosystem services upon which all life depends. How can this be done?

All economic activity must obey the laws of physics and ecology. It is impossible to create something from nothing: every physical thing an economy produces is the transformation of raw materials provided by our finite planet. All economic production also requires energy, over 80% of which is provided by finite fossil fuels. Burning them generates waste, greenhouse gases and other pollutants. Moreover, all economic products wear out, break down or fall apart.

It is also impossible to create nothing out of something: the economy transforms raw materials and energy into economic products and returns them to the ecosystem as waste. A law of ecology is that everything is connected to everything else, so when we transform raw materials and energy into economic products and waste, we inevitably degrade the ecosystems upon which all life depends. Furthermore, ecosystems are subject to thresholds beyond which a small change in human activity can cause catastrophic and potentially irreversible ecological outcomes. We cannot accurately predict where those thresholds lie, or what lies beyond them. But we do know that to maintain healthy ecosystems while ensuring that people’s basic needs are met, those thresholds must be respected.

The trouble is, current rates of resource extraction and waste emissions are changing ecological functions and geochemical processes so rapidly that many scientists claim we have entered a new geological epoch–the Anthropocene– in which we run growing risk of crossing these ecological thresholds (see for instance, Steffen et al., 2015). Meanwhile, nearly a billion people are still chronically malnourished. We need a new economic system capable of meeting basic needs without exceeding planetary boundaries.

Can the market economy meet this challenge? The strengths of markets are that, under certain conditions, they maximise the monetary value of production and consumption as determined by the subjective preferences and free choices of individuals, and incentivise innovation. Unfortunately, for the challenge of remaining within planetary boundaries, markets are unlikely to achieve these outcomes, while for the challenge of meeting basic needs, their desirability is questionable. These claims require elaboration.

The most obvious problem is that many essential ecological functions, such as climate stability, cannot be owned. Markets therefore ignore their values, treating them as “externalities”, and will produce long past the point where the ecological costs of additional output exceed the market benefits. Individuals cannot choose how much to consume. For this reason, decisions to bolster ecosystem resilience must be collective.

Another serious problem with markets is that they weight preferences by purchasing power, favouring the whims of the rich over the needs of the poor. During the food crises of 2007-08 and 2011-12, the prices of staple grains doubled in response to small decreases in supply. In countries consuming over 3 500 calories per person per day, where the marginal utility of eating more food is zero or negative, our research found that consumption remained stable and people continued to throw away some 30-40% of the food they purchased. In countries where people were already consuming too little to meet basic needs, they cut their consumption even further, exacerbating already high levels of malnutrition and increasing political unrest. If our goal is to maximise monetary value, then it is more efficient to allocate a loaf of bread to a wealthy, possibly overfed Western consumer who throws a third of it away, rather than to a destitute African woman desperate to feed her starving children simply because the former can pay more. Ironically, a small reduction in the supply of essential resources causes their price, and hence the revenue they generate, to skyrocket, thus boosting GDP.

This perverse outcome raises serious alarms about internalising ecological costs into market prices as a solution to planetary boundaries–it would force the greatest sacrifices from those who contributed the least to causing the problems. If we are to use a pricing policy, prices should reflect both ecological and humanitarian costs: an appropriate price signal should make it vastly more expensive to buy fossil fuels for a private jet than for the satisfaction of basic needs such as food, water and shelter.

Markets may also be poorly designed for stimulating appropriate innovations at lowest cost. The profit motive provides little incentive for innovations that meet the needs of the poor, who have negligible purchasing power. In a classic example, drug companies halted production of the drug called eflornithine to cure African sleeping sickness because it made no profit, but continued to market the same compound in wealthy countries to slow the growth of unwanted facial hair.

Market incentives for innovation also require patents, which raise the cost of using existing information and slow the rate of scientific advance, as several researchers have shown. This is hardly the way to address pressing climate change. Furthermore, once a green technology has been developed, its social value is maximised when it is made freely available to all. If society developed clean, dependable and inexpensive solar energy, it would be counterproductive to limit use to those who could pay monopoly prices, while leaving others to burn coal. It is true that patents last only 20 years and then become part of the public domain, but can we afford to delay the widespread adoption of green technologies for that long?

Competitive markets worked well for a fossil fuel economy far from planetary boundaries. Now however, the physical boundaries of the planet compel us to make a transition to a zero-carbon, solar energy future. Countries need not compete for solar energy, since one country’s use leaves no less for others and technological innovations for capturing solar energy improve through sharing. The maximisation of monetary value largely excludes the poor, and unbridled economic growth exacerbates climate change. This is why governments must act together, which is what the UN climate change summit in Paris is about.

New approaches are needed. One would be for the richest countries to fund a global research effort into green technologies–especially alternative energy–with results made freely available to all, on the condition that any improvements are also open access. Open source software and the Internet have used this approach to unleash innovations. This “sharing economy” approach could stimulate the conditions of trust and reciprocity required to develop co-operative solutions to other global problems. Another would be to ensure that basic needs are met before selling essential resources to the highest bidder. We cannot simply assume that markets are always best.

An economics for the Anthropocene must be grounded in science but guided by moral values. Together, we must first decide on the socially, morally and psychologically desirable ends of economic activity–perhaps using the UN’s Sustainable Development Goals as a start–and then assess how to achieve them. Only then can we determine what economic institutions will meet our goals.

References 

AAH (2009), Feeding Hunger and Insecurity: The Global Food Price Crisis. A summary of Action Against Hunger research in Ethiopia, Sierra Leone, Central African Republic and Liberia, Briefing Paper, January

Benkler, Yoshai (2004), “Commons-Based Strategies and the Problems of Patents”, Science, Volume 305.

Berazneva, Julia, and David R. Lee (2013), “Explaining the African food riots of 2007-2008: An empirical analysis”, Food Policy, Volume 39

Commoner, Barry (1971), The Closing Circle: Nature, Man, and Technology, Knopf, New York.

FAO (2013), Statistical Yearbook 2013: World food and agriculture, FAO, Rome.

FAO (2009), The State of Food Insecurity in the World, FAO, Rome.

Farley, Joshua, Abdon Schmitt Filho, Matthew Burke, and Marigo Farr (2014), “Extending market allocation to ecosystem services: Moral and practical implications on a full and unequal planet”, Ecological Economics, Volume 117.

Farley, Joshua, and Skyler Perkins (2013), “Economics of Information in a Green Economy”, Building a Green Economy, Michigan State University Press, East Lansing, Michigan.

Foley, Jonathan A., Navin Ramankutty, Kate A. Brauman, Emily S. Cassidy, James S. Gerber, Matt Johnston, Nathaniel D. Mueller, Christine O’Connell, Deepak K. Ray, Paul C. West, Christian Balzer, Elena M. Bennett, Stephen R. Carpenter, Jason Hill, Chad Monfreda, Stephen Polasky, Johan Rockstrom, John Sheehan, Stefan Siebert, David Tilman, and David P. M. Zaks (2011), “Solutions for a cultivated planet”, Nature, Volume 478.

Godfray, H. Charles J., John R. Beddington, Ian R. Crute, Lawrence Haddad, David Lawrence, James F. Muir, Jules Pretty, Sherman Robinson, Sandy M. Thomas, and Camilla Toulmin (2010, “Food security: The Challenge of Feeding 9 Billion People”, Science, Volume 327.

Gustavsson, Jenny, Christel Cederberg, Ulf Sonesson, Robert van Otterdijk, and Alexandre Meybeck (2011), Global Food Losses and Food Waste: Extent, Causes and Prevention, FAO, Rome

Heller, Michael, and Rebecca Eisenberg (1998), “Can Patents Deter Innovation? The Anticommons in Biomedical Research”, Science, Volume 280.

Heller, Michael (1998), “The Tragedy of the Anticommons: Property in the Transition from Marx to Markets”, Harvard Law Review, Volume 111.

IEA (2014), 2014 Key World Energy Statistics, OECD Publishing.

Lei, Zhen, Rakhi Juneja, and Brian D. Wright (2009), “Patents versus patenting: implications of intellectual property protection for biological research”, Nature Biotechnology, Volume 27

Murray, Fiona, and Scott Stern (2006), "When Ideas Are Not Free: The Impact of Patents on Scientific Research”, Innovation Policy and the Economy.

Ramanathan, Belinda Reyers, and Sverker Sörlin( 2015), “Planetary boundaries: Guiding human development on a changing planet.”, Science, Volume 347

Sampat, Bhaven N. (2006), "Patenting and US academic research in the 20th century: The world before and after Bayh-Dole", Research Policy, Volume 35.      

Steffen, Will, Jacques Grinevald, Paul Crutzen, and John McNeill (2011), “The Anthropocene: Conceptual and historical perspectives”, Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences, Volume 369.

Steffen, Will, Katherine Richardson, Johan Rockström, Sarah E. Cornell, Ingo Fetzer, Elena M. Bennett, Reinette Biggs, Stephen R. Carpenter, Wim de Vries, Cynthia A. de Wit, Carl Folke, Dieter Gerten, Jens Heinke, Georgina M. Mace, Linn M. Persson, Veerabhadran Ramanathan, Belinda Reyers, and Sverker Sörlin ( 2015), “Planetary boundaries: Guiding human development on a changing planet”, Science, Volume 347.

©OECD Observer No 304, November 2015




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly


Online edition
Previous editions

Don't miss

  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • “Nizip” refugee camp visit
    July 2016: OECD Secretary-General Angel Gurría visits the “Nizip” refugee camp, situated between Gaziantep and the Turkish-Syrian border, accompanied by Turkey’s Deputy Prime Minister Mehmet Şimşek. The camp accommodates a small number of the 2.75 million Syrians currently registered in Turkey, mostly outside the camps. In his tour of the camp, Mr Gurría visits a school, speaks with refugees and gives a short interview.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • Queen Maxima of the Netherlands gives a speech next to Mexico's President Enrique Pena Nieto (not pictured) during the International Forum of Financial Inclusion at the National Palace in Mexico City, Mexico June 21, 2016.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • OECD Environment Director Simon Upton presented a talk at Imperial College London on 21 April 2016. With the world awash in surplus oil and prices languishing around US$40 per barrel, how can governments step up efforts to transform the world’s energy systems in line with the Paris Agreement?
  • Happy 10th birthday to Twitter. This 2008 OECD Observer interview with Henry Copeland said you’d do well.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Once migrants reach Europe, countries face integration challenge: OECD's Thomas Liebig speaks to NPR's Audie Cornish.

  • Message from the International Space Station to COP21

  • COP21 Will Get Agreement With Teeth: OECD Secretary-General Angel Gurría on Bloomberg

  • The carbon clock is ticking: OECD’s Gurría on CNBC

  • If we want to reach zero net emissions by the end of the century, we must align our policies for a low-carbon economy, put a price on carbon everywhere, spend less subsidising fossil fuels and invest more in clean energy. OECD at #COP21 – OECD statement for #COP21
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org
  • Pole to Paris Project
  • In order to face global warming, Asia needs at least $40 billion per year, derived from both the public and private sector. Read how to bridge the climate financing gap on the Asian Bank of Development's website.
  • How can cities fight climate change?
    Discover projects in Denmark, Canada, Australia, Japan and Mexico.
  • Climate: What's changed, what hasn't, what we can do about it.
    Lecture by OECD Secretary-General Angel Gurría, hosted by the London School of Economics and Aviva Investors in association with ClimateWise, London, UK, 3 July 2015.

  • Climate change: “We should not disagree when scientists tell us we have a window of opportunity–10-15 years–to turn this thing around” argues Senator Bernie Sanders.

  • In the long-run, the EU benefits from migration, says OECD Head of International Migration Division Jean-Christophe Dumont.
  • Is technological progress slowing down? Is it speeding up? At the OECD, we believe the research from our Future of ‪Productivity‬ project helps to resolve this paradox.
  • Is inequality bad for growth? That redistribution boosts economies is not established by the evidence says FT economics editor Chris Giles. Read more on www.ft.com.
  • Catherine Mann, OECD Chief Economist, explains on Bloomberg why "too much bank lending can slow economic growth".
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .

Most Popular Articles

Poll

What issue are you most concerned about in 2016?

Unemployment
Euro crisis
International conflict
Global warming
Other

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2016