Janet Batista asks:
Most economists seem to be fixated on "growth." Is it possible to have an environmentally sustainable economy, stable population, market prices that incorporate environmental costs and still satisfy economists need to see growth?
Great question. I'll give an answer a try...
This is a bit of a rant, but it's my blog and I'll rant if I want to:
Let me start by saying that I know very few economists who are fixated on growth. Economic growth is an easy indicator that the popular press uses to convey information on economic efficiency--more on this in a minute. In my view, the perceived fixation on growth comes from a combination of the constant reporting of economic growth numbers and business economists' fixation on profits (not a bad thing, just the typical economist you see on the news is not always representative of the broader view of economics).
So what then is economic growth? Economic growth is a byproduct of economic efficiency. I would venture to say that a vast majority--although definitely not all--of economists are fixated on economic efficiency: The allocation of resources in such a way that all cost and benefits of production and consumption are accounted for. If resources are allocated efficiently then most of the time, we will see economic growth (growth in GDP).
Unfortunately, focusing on economic growth alone may mask economic inefficiency. Put another way, economic efficiency will most likely lead to economic growth, but economic growth is not a definitive indicator of economic efficiency.
Now when I talk about accounting for all costs and benefits of production and consumption, I do mean ALL costs and benefits: traditional expenditures, environmental costs and benefits, social costs and benefits, etc. As we've seen before, traditional measures of economic growth--like GDP growth--don't capture all of these costs and benefits. A true measure of economic efficiency would.
Back to the question. "Is it possible to have an environmentally sustainable economy, stable population, market prices that incorporate environmental costs and still satisfy economists need to see growth?" I think I addressed the third part first--yes market prices can--and perhaps must--incorporate environmental costs to measure true economic growth (through economic efficiency).
The reasons that many economists--OK,the reasons that I am focused on economic efficiency rather than sustainability are twofold: 1) I believe that economic efficiency and sustainability are compatible, and 2) I have no idea what sustainability is. Sure everyone has their own ideas of how to define sustainability, but I have yet to see a consensus reached. Does sustainability mean no economic growth? No net environmental loss? No environmental loss? Stable population? Constant economic growth? I have seen all of these put forth in various definitions of sustainability. Unfortunately, the myriad definitions of sustainability often conflict leaving us wondering, how do we achieve sustainability if we can't define it?
As you can tell, I believe economic efficiency is the answer. As properly applied economic efficiency provides a workable, practical definition of sustainability. Economic efficiency, with full accounting of all costs and benefits, does not mandate positive economic growth. If the non-market costs of production and exceed the market benefits, it is entirely possible that economic efficiency requires negative growth. Let's see Katie Couric report that.
