Hammering screws – How economic metrics hamper the transition to a sustainable society

April 18, 2024

Speaker: Patrick Leach (Independent Strategy Consultant)

Abstract:

The goal of sustainability efforts is to strike the right balance between two competing objectives: meeting the needs of the current population, and allowing (or even enhancing) the ability of future populations to meet their needs. Using economic metrics to decide what sustainability initiatives to pursue undermines this objective for several reasons. First, all commonly used economic metrics are maximized by pulling as many benefits as far forward in time as possible, and pushing as many costs as far into the future as possible. They are thus strongly biased toward enjoying ourselves today at the expense of tomorrow.

Second, our entire system of free-market economics is driven by growth – ever-increasing consumption of resources (GDP growth) and an ever-larger human population (witness economists fretting over the drop in fertility rates in wealthy nations). These are clearly unsustainable. We live on a finite planet. Never-ending growth of anything within a finite system will eventually cause the system to break down.

Third and perhaps most fundamentally, the natural world on which our survival depends is not governed by economics, but rather by the laws of physics, chemistry, and biology (and their offshoots, like ecology and climatology). Decisions involving what should and should not be allowed regarding humanity’s interactions with the natural world should therefore be based on analyses in those disciplines, not the inappropriate discipline of economics. Once objectives and thresholds based on natural sciences have been established, economic analysis can be used to determine how to achieve these objectives most efficiently.

Humanity must, of course, consume resources to survive and thrive. But doing so at rates that exceed replenishment is like a corporation selling off its asset base just to meet daily operating expenses. Such a company will not be around for long. It is unfair to future generations to leave them with a severely depleted resource base. We must transition to a sustainable society as rapidly as possible, regardless of how much more money we can make by ignoring the warning flags popping up in the natural sciences and using metrics that are strongly biased in favor of satisfying ourselves in the here and now.