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Frank Rotering: An Economics for Humanity
PART 4 - THE ECOLOGICAL FRAMEWORK
INTRODUCTION The objective of human economics is to provide the theoretical basis for the maximization of human well-being, subject to ecological constraints.
The human framework provides concepts and tools to analyze human well-being, but it offers only a limited treatment of ecological constraints. Most importantly, it does not address thresholds, which in many cases should restrict output quantity.
In the ecological framework I further develop this theoretical basis by proposing an analytical approach to thresholds. I also discuss the maximization of human well-being under threshold constraints.
Let me begin with a necessary but contentious topic - the relationship between humanity and nature.
1. HUMANITY AND NATURE
In my view, human beings are a unique part of nature.
Human beings are part of nature in that they are physical entities, have evolved along with the planet's other life forms, and support their existence by converting low-entropy resources into high-entropy wastes.
Human beings are unique in that they possess acute self-awareness, high intelligence, advanced technical capabilities, and the resultant capacity to decisively impact the other life forms and the earth's environment.
Based on this view, I subscribe to the following ethical principles:
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An important reason for choosing physical health as the standard of value and cost in the human framework is its connection with the first ethical principle above.
2. THE ECOLOGICAL ABSTRACTION
To address any complex reality, a theory requires an appropriate abstraction. An abstraction is appropriate when it ignores extraneous details and highlights the features for which the theory assumes analytical responsibility.
Nature is a complex reality. Human economics must therefore find an abstraction of nature that permits it to address ecological constraints in sufficient, but not excessive, detail.
Before presenting my suggested abstraction, let me distinguish between its physical and conceptual representations. The lack of such a distinction appears to be a barrier to productive discussion within the group.
Below is a highly simplified physical representation of the relationship between the economy and nature. The economy is depicted as existing within nature, or as being a subset of nature. The arrow indicates the transfers of resources and wastes between the two domains.
Figure 1: Nature and the economy - physical representation
This accurately depicts the physical situation, which standard economics has persistently ignored. Such a diagram is useful as an initial correction to the standard error.
Once we have recognized this error, however, we can assume the physical reality above and represent the economy and nature separately, as two distinct conceptual spheres. This makes diagrams more convenient to draw and shows the relationships with greater clarity.
In the ecological abstraction I separate nature and the economy for these reasons. This in no way implies that I reject the physical relationship represented above.
Below is my proposed ecological abstraction:
Figure 2: The ecological abstraction
Nature is seen as the source of two types of resource flows - nonrenewables and renewables - and as the recipient of waste flows. The economy is seen as the consumer of resource flows, the producer of intermediate and final outputs, the source of waste flows, and the provider of health benefits to human beings.
The two resource flows are separated because renewables can be exploited beyond the rate of natural regeneration, which means they are subject to thresholds. This is not true for nonrenewables, which are finite stocks of fuels and minerals. Nonrenewables can be excessively exploited in the ethical sense, but not in the ecological sense. Wastes can overload natural sinks and, like renewables, are subject to thresholds.
Intermediate and final outputs are separated because their optimum quantities are determined in different ways. Optimum quantities for final outputs are based on their direct contributions to health. Optimum quantities for intermediate outputs are based on their relationships to final outputs - that is, by their indirect contributions to health.
The resource and waste flows are not further subdivided in order to restrict the scope of the ecological framework. A more detailed abstraction would encroach on the physical sciences and expand the framework beyond its analytical requirements and aims.
The numbers in the diagram indicate the five critical quantities and flows in the nature-economy relationship. Human economics must find methods to determine their optimum values. This will permit us to establish rational limits to growth and to define a sustainable society.
3. ECOLOGICAL EFFICIENCY
Ecological efficiency is a relationship between a resource or waste flow and a final output. It is defined as the intrinsic value of the final output divided by the flow quantity used in its production, use, and disposal. This includes the flow quantity associated with the production, use, and disposal of all intermediate outputs in the final output's production chain.
Because final outputs may incorporate several resource flows and create several waste flows, more than one ecological efficiency may be associated with a final output.
Ecological efficiency is a ratio of mixed dimensions. Total health units are always in the numerator, but the denominator varies with the material nature of the flow. Examples:
Health units/board-feet of lumber (Renewable flow)
Health units/tonne of iron (Nonrenewable flow)
Health units/gigatonnes of greenhouse gases (Waste flow)
Unless ecological efficiencies are associated with the same material flow, they are incommensurable and thus cannot be summed or compared.
An important objective, which follows from the ethical principles above, is that human beings must strive to maximize all ecological efficiencies. This means that for any combination of final output and flow, the intrinsic value - the health gains - of the output should be maximized, and the flow quantity should be minimized.
4. LIFE, DEATH, AND HEALTH
Life and death are ethical issues, hence beyond the scope of economic theory. This is why human economics does not address the question of how many people should live in a society, or how many deaths should be accepted to mine coal, build bridges, or produce steel.
Nevertheless, human economics cannot avoid the following question: how should a human death be treated if it results from production or consumption?
In the Canadian province of British Columbia, where I live, the government publishes statistics on the "potential years of life lost'' from a number of causes - accident types, diseases, etc. This is a useful approach in that it gives added weight to causes of death that afflict the young more than the old.
For example, the potential years of life lost in car accident deaths is far higher than for prostate cancer deaths, because teenagers tend to die in cars, while older men tend to die of prostate cancer. In this sense, then, the average fatal car accident is "worse" than the average prostate cancer death.
This approach can be adopted by human economics. If a 30-year-old steelworker dies while constructing a building, and if this worker was expected to live to 75, then he or she loses the health that would have been gained from ages 30 to 75. This is referred to as "potential health units lost." This loss is a labour cost, and must be added to the input cost of constructing the building.
Similarly, if 10,000 people in a society have shortened lives because of air pollution caused by economic production, then the potential health units lost due to their early deaths must be added to the input cost of the associated outputs.
The principle applies to consumption as well. Some of the negative intrinsic and effectual value of cigarettes is based on the severe health degradation caused by smoking. For the most part, however, it is due to the stunning mortality associated with this addiction.
Note that there is a clear distinction between death and the forgone health associated with death. Death itself is an ethical issue; forgone health is an economic issue. A society might decide that a single death in production renders that production unacceptable. This is an ethical judgment that no economic quantification can override.
5. THRESHOLDS
a. Summary of the Issue
A threshold is an ecological discontinuity - the point where the flow of a renewable resource into the economy, or of a waste back to nature, triggers a sudden ecosystem collapse. In most cases, the physical sciences can determine only approximately when such a collapse will occur. Thresholds confront human economics with two distinct questions:
- What, if any, is the ethical justification for risking a threshold collapse?
- If such justification exists, how should the risk of collapse, and the consequences of the collapse itself, be analyzed?
The graph below summarizes the issue:
Figure 3: Marginal and threshold ranges
The graph indicates that total health increases linearly with the quantity of a final output. As quantity and health increase, so does the flow of a renewable resource or waste. For simplicity, assume that only one flow is involved, and that it is uniquely associated with this output. The flow itself is not shown - it is expressed in terms of the output that incorporates it.
Assume that the flow's ecological efficiency has been maximized, and that no alternative output can achieve the same health effect. We therefore have an unavoidable trade-off between health and threshold risk.
From the physical sciences we learn that the flow rate initially poses no risk of ecological collapse. This is called the marginal range, shown in green above. Within this range, the marginal analysis employed thus far is valid.
Science further informs us that a threshold range exists for this output and its associated flow. This is the red zone above, where the probability of ecological collapse increases from 0% to 100%. Marginal analysis, which assumes continuous change, cannot be used here.
As quantity increases within the threshold range, the probability of ecological collapse tends to rise more and more rapidly. That is, the probability increase from 0% to 100% will be exponential, not linear. This is not shown in the diagram, but is assumed below.
Based on the diagram, the problem can be restated as follows: should the quantity of this output enter the threshold range, and if so, how far should it go?
b. Ethical Considerations
Before addressing the questions above, let me pose another: can the risk and consequences of threshold collapse be expressed entirely in terms of human health, or is something more involved?
I believe that for most people, something more is involved. Nature is widely seen as having inherent worth, beyond its roles as humanity's source of raw materials and sink for wastes. If this is accepted, an ecosystem collapse destroys not only human lives and health, but also an inherently valuable realm of being.
There is a strong parallel here with another thorny ethical issue: abortion. Few people would argue that a human fetus is an object without inherent worth, to be aborted in the same way that tonsils or kidney stones are removed. The real question is: given the inherent worth of both the woman and the fetus, does the woman have the right to abort, and if so, under what circumstances?
Applying this analogy to thresholds, the question becomes: given the inherent worth of both human beings and nature, do human beings have the right to risk ecological collapse to gain health, and if so, under what circumstances?
A related question must also be considered: do human beings have the right to prevent others from entering a threshold range?
The answers to these questions may appear obvious: human beings have no right to risk ecological collapse, and they have every right to prevent others from doing so. This stance, however, has extreme consequences: it would prevent a society from incurring even the slightest probability of collapse for the most localized of threshold effects, forcing it to sacrifice the greatest of potential health gains.
Imagine, for example, that farming over a large area will incur a 1% probability of driving an indigenous flower to extinction, but that the farm products will significantly improve the health of millions of poor peasants. (Again, the assumption is that these health benefits are not obtainable in any other way.)
Does a well-founded ethical principle exist that justifies the sacrifice of such a large health benefit to humanity for such a small risk to nature? I have been unable to find one, but I look forward to the group's comments on this critical issue.
My answers to the questions that have been posed are based on the following three ethical principles. By "society" I mean any group or collectivity. Health loss means an actual or potential health loss, and includes loss of life.
Fundamental principle:
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Secondary principles, based on the above:
3. PREVENTING ENTRY: A society may avoid entering a threshold range, but it may not prevent other societies from doing so.
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