.

1. OVERVIEW

Due to the dominance of neoclassical economics over the world's markets, the value of resources extracted from, and of pollution emitted into, the planetary environment has been largely disregarded and discounted. This has led to ruthless private exploitation of the global commons, manifesting in unrationed extraction of raw resources and damage to land, rivers, sea and air. Only by integrating economics with ecology can "sustainable development", which meets current needs without compromising the future, occur. That integration cannot be left up to profiteering industry nor indulgent indigenous governments and requires forceful intellectual demand.

To some extent, in the more developed nations, environmental externalities have been curtailed by command and control regulation, but the bulk of the externalities (especially non-point pollution) continue unabated, with severe effects upon human health and viability, other species, global climate and intergenerational equity.

It is possible to minimize central planning and state control, yet to retain the free market as the facilitator and regulator of production and exchange, provided that the environmental legal system adopts appropriate economic instruments which address and redress these externalities. In this way a true & viable economic efficiency can be eventuated. Given resource constraints, and if equity is to be achieved between the developed and developing worlds, the new stasis will inevitably involve decentralized, co-operative, self-managing, low-impact, low-demand communities, but there need be no diminution of the quality of life.

The appropriate economic instruments must be operated against, or rather as part of, a Site Revenue economy, where annual rental value of sites privately occupied is collected as public revenue (in lieu of all forms of taxation). In this regard, such instruments address not only the locational values of sites but also resources extracted out of them and wastes expended into the global commons.

The Site Revenue system must be adopted globally. All rentals within the Site Revenue system should reflect market pressures on the basis that the bequest value of existing species and habitats is inestimable, that a safe minimum must be retained of all biological stocks, and that known raw resources must be rationed, at any given time, on a 1000-year plan. Whilst general rentals from locational value of sites may be paid into general revenue, rentals in respect of environmental externalities must be earmarked for expenditure specifically related to those impacts.

2. NEOCLASSICAL ECONOMICS AND THE ENVIRONMENT

(a) Neoclassical Economics

(i) Overview

The standard neoclassical model of an economy is an abstract, blackboard theory, which bears little relationship to the real world economy. It envisages a self-perpetuating, "closed circuit" where boundless, free resources are endlessly converted by labour into goods and services and finally become resources again. Consumer prices are seen as having a natural stability reflecting resource availability & extraction costs, production costs and demand.

As a result of viewing the environment as a boundless, common-property resource with zero price, goods in neoclassical economies were produced with high pollution externalities and sold unrealistically cheaply, thereby stimulating over-demand and exacerbating degradation. Neoclassical markets fail to audit or account for a plethora of external impacts & incommensurate goods, whether public, private or non-human, thereby systematically undermining ethical responsibility. In their encouragement of material acquisition (pace the clamouring protestations of subjectivist & 'liberal' devotees), industry and the values-free "ideal" market shape & serve hedonistic and "want-regarding" motivation whereby fortuitous, shallow preferences, which indulgently disregard ideals, are easily driven by the perverted blandishments of advertising.

In fact, raw resources are neither endless nor produced, but rather are in limited supply and extracted. Moreover, extraction and transformation of them (e.g., using fossil fuels to supply energy) and expulsion of their final wastes both exploits and depends upon a world outside of such closed circuit. The real economy is in fact linear (in its prior & subsequent dependency) and dissipative in the way it uses potent materials and, having converted a fraction into human capital, expels the vast bulk as useless, low-grade heat or toxins by the remorseless process of entropy.

Indeed, it has been cogently argued that incompetent or corrupted professors from the neoclassical and Keynesian school of economics deliberately and/or negligently attempted to pervert & debase their discipline and serve vested interests. The method used was to disguise the value of land (or sites generally) as a unique factor in production by subsuming same within the broad aggregate of 'capital' generally, and by this obfuscation of basic economic concepts to forge mind control over economic thinking so as to distort perspective upon, or blinker from view, the potency of locational and environmental factors. Thus did economic theorizing bifurcate from the real world and, adding to its fundamental estrangement preoccupation with the ôintellectual toyö of mathematical modelling, lead to its current confusion, inutility and intellectual dead-end. The mystery of persistent economic failure is thus explained.

This extraction and consumption of raw resources, and this expulsion of wastes, may benefit industrial shareholders & consumers, but beyond that is conducted at the expense of the global commons. The raw resources involved are (recycling aside) no longer available for use by others or by future generations. The pollutants expelled not only damage species and threaten intergenerational inheritance, but impinge in various ways upon the amenity, health and materials of others.

It has now become apparent that unrestrained "cowboy" extraction of resources and waste disposal by dilution and dumping are no longer viable due to a burgeoning planetary population, the moral imperative to maintain intergenerational equity, the impact of extraction upon the biosphere and the massive quantity and potency of wastes, which, even if diluted and dissipated, resurface in ultimate overloaded sinks. Yet the neoclassical market still basically prevails such that dominant political and industrial attitudes continue to endorse both an indefinitely growing economy and private enrichment at public & environmental expense.

"Sensible, economical conservation ... is too prosaic, and besides it violates the .... credo of preferring the most resource-using solution. Real men don't conserve resources; real men have vision and acquisitive genes, they sally forth like their warrior progenitors and grab more. Conservation is for sissies..."

Only forthright collective action can constrain these impacts, which will be ignored by individualistic free enterprise. Such collective action must, moreover, be international in scope, since merely national constraints (e.g., using resource extraction charges or pollution fees) can be subverted by relocating industry offshore to regions with "comparative advantage"-- a process much assisted, the days, by the high mobility of both capital & cosmopolitan management.

(ii) Market Failure

Neoclassical economics praises efficiency, that is, production of the most (so as to satisfy all demands) at least cost. It is a concomitant of this attitude that efficiencies (i.e. aggregate benefits) may be improved but at the expense of equities (ie by causing a minority to lose). So far as human loss is concerned, it can be argued that (provided the costs of doing so are not too high), this sacrifice may be redressed by redistributing income (e.g. by giving the dole to farmers dispossessed by mining), and is not integrally a concern of law. An important concept in considering ôefficiencyö of this type is Pareto efficiency, which exists when a situation cannot be changed to make someone better off without at the same time making another worse off.

The neoclassical ideal, efficient market fails to exist in reality, because it discounts the inarticulate and unborn, monopolies subsume competition, transaction costs intervene and informational asymmetry prevents all parties knowing all relevant factors, thereby rendering competition imperfect. Also ôfreeloadersö benefit from 'public goods' to which they have not contributed (e.g., lighthouses, defence): an unattractive proposition to private enterprise.

More particularly, for our purposes, a vast range of unpriced adverse impacts upon third-parties and the environment are ignored. Only the efficient anthropocentric allocation of an economy's output is weighed, whilst ignoring the environmental impact which the scale of the throughput has upon the communal environment. Modern markets, virtually ubiquitously, fail to reflect (and so "externalize") environmental impacts, whether occasioned by consumption of non-renewable resources or by unconstrained pollution. Conventional economics endorses maximization of instant throughput (ie of production, sales, turnover and profit) and has little regard to increasing efficiency whilst maintaining substance in the long-term.

This failure to integrate economy and ecology renders impossible the Pareto-efficient allocation of resources: it makes some people (eg shareholders and consumers) better off but only by making others (e.g. natives, downstream communities, future generations -- not to mention species) worse off. In considering any calculation of market efficiency it is essential that account be taken of the true value of raw resources extracted, natural capital harvested and pollution externalized. Any such adjustment is complicated: neat dollar values cannot be defined.

Measuring and constraining impacts is crippled by the lack of common units and methods for assessing or pricing environmental degradation, or any accepted resource accounting system. This lack leads to an underpricing of resources and of impacts with consequent burgeoning consumption and pollution. Depletion of human capital (e.g., by living off savings or by running down machinery with no sinking fund for its replacement) is not treated as income, but consumption of natural capital is. Rather than treating resources exported and pollution engendered as being costless givens having no downside on GNP, National Resource Accounting should be adopted to analyze and trace physical resources and so identify impacts & demands, thereby facilitating planning and reflection of externalities in national accounts.

This failure to value the environmental commons as a public good is, in reality, not so much an inherent or necessary free market failure as the construction and imposition, by treacherous academics and financiers, of a deceptive and fraudulent market.

(iii) State Failure

State failure generally (including the failure to master environmental externalities) is occasioned by inherent corruptions in democracy, pathologies in bureaucracy and perversions in the market-state interface, and by the confusions, self-interests and buck-passing which bedevil this complex politico-bureaucratic organization.

State failure is exacerbated in democracies due to its inherent structure. Politicians are elected by popular vote and tend to function from base motives, in their own short-term interest (of remaining in office, getting rich etc.), without regard to the global commons or to future generations. Politicians rarely have technological expertise and are exposed to capture by bureaucrats & industrial lobbies. Industry possesses detailed information but has a strong interest in constraining remedial action and in influencing or ameliorating the design of anything which must be done. Indeed, the power of such lobbies is insidious and can render conflict stillborn, thwarting its very entry into the political agenda (as remains the case with the Site Revenue debate).

Politicians are thus prone, in their decision-making, to many improper (selfish or short-sighted) influences and lobbies. Such sectional pressure cripples altruistic and informed political motivation, especially where desirable reform would impact upon welfare dependents. This is especially so as regards housing, food and fuel prices, which are invariably substantially distorted since markets in such products are shaped by decades of public intervention reflecting significant political resistance against green revenues which reflect 'true' environmental costs. The market-state interface has become very blurred, given state participation in the market and widespread use of private contractors (who often gain powerful leverage to define strategies).

State failure is evidenced by inappropriate laws, easy permits, lax regulation, failure to curb externalities or prosecute, secret profiteering and even active bribery and corruption: a multiplicity of costly regulations ineffectively combating symptoms rather than causes. The most viable policies are not so much regulatory/removal as either structural (reducing demand, eg the need for private transportation and fuel) or preventive (e.g., by "clean technology" reducing raw material input and waste), but there is little will for their adoption and implementation.

Whilst vulnerability exists at State & Federal levels, the greatest dangers occur where extensive environmental responsibilities are delegated to politically-sensitive local authorities which strive for a consensus with industry. Where industry and development forces are able to (in effect) bribe politicians or councillors by "campaign donations" etc., the unfavourable interaction between the market and the state is at its most incestuous and the rout of public decency is complete.

The bureaucrats comprising government instrumentalities, like free-enterprise individuals and their political masters, also rationally pursue their own self-interest at the expense of ideals . Thus, a hydro-electric or a municipal waste authority will tend to inflate its empire by building dams or sewerage works as if these were ends in themselves, rather than mere means. Failure to impose effective, integrated pollution control at the source (opting instead for lax licensing, dilution and end-of-pipe solutions) spawns a burgeoning and wasteful bureaucracy and extensive but largely idle treatment empires which can ultimately encourage rather than constrain production of polluting material lest costly works lie idle and appear superfluous and officials become unemployed.

This leads to distortion, bias and ineffectiveness in regulations since the authorities create the necessary empire (of employees, power & budget) merely on paper potentials (not in actual or effective investigations and prosecutions). Bureaucrats prefer central control and routine solutions, neither of which are sufficiently flexible to deal with the complexity of environmental externalities. Case-specific solutions (which might entail bothersome thought and initiative) are ignored and expensive solutions (which build well-paid but vapid regulatory empires) displace prevention.

Both regulatory bureaucrats and regulated industries exist symbiotically in a sphere of specialist technicality (for which wealthy industry, ever effective in lobbying, holds the relevant data) which politicians and laymen cannot enter. They talk the same jargon and each hopes to be head-hunted for plum jobs with the other: this leads to "regulatory-capture" (which is usually tacit, informal and subliminal) of bureaucrats by eco-industrial complexes. Once they are in cahoots (usually endorsing central control and routine mass solutions) specific abuses are impersonalized into anonymous, general categories. Responsibility is distanced into remote and sluggish bureaucracies and the wool is quickly pulled over public eyes.

In this way, the bureaucrat-industry cartel milks taxpayers' funds and perpetuates its own indulgences. The more industry is allowed to impact the environment unhampered, the more revenue can be squeezed -- for a few decades -- out of the artificially expanding economy, the more empires there are for bureaucrats with pretend clean-up campaigns, and the more profits for the few. The devil laughs all the way to the bank. Only disasters (such as cholera outbreaks or the hole in the ozone layer) tend to break this cartel's grip nexus (which is more the incremental result of the bureaucratic and regulatory process than a deliberate conspiracy) and refashion meaningful policies.

As a result of this state failure, for two decades industry has been allowed to mass-produce in usual or enhanced volumes, subject perhaps to dilution and end-of-pipe regulations and subsidies which have been a boon to bureaucratic empires, done nothing to constrain the mounting quantum of externalities, and (by displacement) has created new problems. These problems are essentially iatrogenic (doctor-induced) and multiply the problem, not least because repairing activity is more expensive (for the state) than prevention and increases dependence on taxation of growth industry.

NEXT [] BACK