ECON 101 Disconnect
Posted January 15th, 2008 by RobDietz 6 comments
I studied economics as an undergraduate. I even followed the “honors” curriculum and wrote a thesis. I have to admit that I was mainly interested in environmental science (my other major), and majored in economics to be more employable upon graduation. Nonetheless, I got a solid schooling in the prevailing theories of economics from a highly regarded department at a highly regarded university.
At the time I was taking all those courses, from Econ 101 to advanced econometrics, I felt like something was out of place. I liked the analytical methods used. Economists are adept at drawing simple line graphs to represent complex ideas and analyze various behaviors exhibited by individuals and societies. I also liked the clean logic of some of the underlying principles, like the law of diminishing returns. But there was something about my economics training that left me with a sense of uncertainty.
While I was in school, I was never able to put my finger on the source of that uncertainty. Like many students, I felt like the field of economics was overly concerned with mathematics and statistics. It seemed like a fruitless attempt to demonstrate scientific rigor where it wasn’t warranted. But that wasn’t enough to explain my disenchantment with my studies. It was only years later, when I read Ecological Economics by Herman Daly and Joshua Farley that I figured it out.
The most basic difference between today’s standard university economics (neoclassical economics) and ecological economics is the world view. The neoclassical economists believe that the ecosystems of the planet are a subsystem of the economy – the economy is the containing whole. Ecological economists believe the opposite. Namely, the economy is a subsystem of the Earth’s ecosystems – the Earth is the containing whole. I don’t recall any explicit utterance of the neoclassical world view in my studies, but the assumptions used by my professors, text books, and readings align with that world view. This was the source of my discontent.
I believe that the economy is something we have built on our finite planet. The logic seems pretty straightforward to me. The ideas about economic growth and efficiency that derive from this starting point are quite different from those pushed in economics lecture halls today. If I were a student of economics today, I would be sure to ask my professor about this underlying world view. What is the system and what is the subsystem? What is the logic behind the neoclassical view? It’s time for the models in economics to bear a resemblance to the reality they purport to describe.
6 Responses to 'ECON 101 Disconnect'
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Hey, nice to see the blog off the ground here!
Good post, Rob. That simple, key point you describe concerning the relationship between the economy and the biosphere seems to me to have the potential to generate broad debate and, I hope, more exposure in the media.
Keep it up!
John Feeney
17 Jan 08 at 11:07 am
Thanks for the kind words, John. I’ve been following the discussions and Growth is Madness (www.growthmadness.org) with much interest. Let’s keep working on these ideas and come up with some approaches to do what you say — generate debate and exposure in the media.
Thanks again,
Rob
RobDietz
17 Jan 08 at 11:19 am
Funny. I followed a similar course and now am back at University doing a Masters in Sustainability Sciences. One of my courses was resource economics.
This debate – whether economics contains the biosphere or the other way round is as old as economics itself and goes back to the time of Descartes and Bacon. The debate was initially about who/what prevailed: God, Man or nature. God was discarded early on and man ultimately “won”. This is the source of the classical and neoclassical economic principle thatt resources are infinite. The earliest teachings (Francis Bacon) say that nature is there purely to serve man and that man must take as he wants from natures bounty.
This was all very well when global population was less than 1bn; and in those terms it was true. Now with 7bn in sight, it is no longer true. Sadly, many neoclassical economists, especially those of the Austrian school, still believe there are no limits. Has anybody else found economists of the Austrian school especially blinkered, arrogant, rude and unpleasant?
Saildog
29 Mar 08 at 3:14 am
Hello, I have a money-question, please help me on this.
Can a Steady-State Economy even work if it uses Money?
It seems to me that any economy that uses money
would always have some Inflation, which can only be compensated by some form of Growth in the money supply and energy input.
When money is used and circulated, its embodied energy seems to leak away somehow, since any useful work done with that money must consume some Resources and Energy.
Resources and Energy must be bougt with money.
So, any set ammount of money circulating in a system would soon fade away because of inflation, which can only be compensated by inputting energy and resources, but these must be paid for with that same money.
So the money would consume itself, devoured by
entropic decay, needing replacement.
The resources and energy consumed in replacing the money are lost, without ever producing anything directly, wich seems like a entropic leak at some level.
The Use of Money causes Inflation, when all goes well.
Inflation Neccesitates Growth, in some form.
Inflation is partially a form of entropic decay in the Money Supply.
Is there any truth in these statements, and if so,
Does this hold with Fiat Money, or all forms of it?
Can a Steady-State only exist if there is no Money, or if all Resources and Energy are not paid for with money?
Does Money in general emit a form of Gravitational Field,
that attracts other Money? would this be a Problem?
Is Money also a form of Memetic Virus, like Organized Religion?
Is any of this valid? Anyone? please help!
Profiteer
29 Mar 08 at 11:49 am
Try “A thermodynamic theory of economics” by John Bryant
Also “Thermodynamic and the Economic Process – an application to world energy resources and climate change” by the same author.
Can be downloaded from economics page of http://www.vocat.co.uk
entropybuster
29 Dec 08 at 1:39 am
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TopDog
28 May 09 at 12:34 pm