Summary and Conclusions

Course Goal Explore the three basic questions that arise from the definition of economics, particularly as they apply to essential resources with no substitutes: –What are the desirable ends towards which society should allocate its scarce resources? –What are these scarce resources, and what are their characteristics relevant to allocation? –Based on the nature of the scarce resources and human nature and institutions, what allocative mechanisms are best for achieving these desired ends?

Course Objectives Apply the theories of ecological economics and market failure to some of the most pressing problems society currently faces. Take home messages: – Most of the serious crises we face were caused by catastrophic failure of the current economic system – We can't solve problems by using the same kind of thinking we used when we created them Albert Einstein – Most pressing issues concern non-rival and/or non- excludable resources: Cooperation essential to solve them – Scale should be price determining, not price determined

Course Objectives Review empirical studies of human behavior/psychology to build our economic theory on a solid foundation Take home messages: – People are not inherently insatiable – Little evidence that more economic growth makes us better off – People are altruistic as well as selfish – People are cooperative as well as competitive

Course Objectives Critique conventional theories of macroeconomics from empirical validity of underlying assumptions to desirability of theoretical outcomes. Take home messages: – Conventional theories on macroeconomics reasonably good, but lack any notion of ecological constraints – Goals and indicators of conventional macroeconomists inappropriate – Growth does not end poverty – Monetary policy is a blunt instrument – Fiscal policy far more effective at achieving goals of ecological economics – Government currently converting fiscal policy to monetary policy, opposite approach is required.

Course Objectives Critique conventional theories of international economics from empirical validity of underlying assumptions to desirability of theoretical outcomes. Take home messages: – Theory of comparative advantage is irrelevant in world of global financial flows; absolute advantage pertains – Goal of globalization is ever increasing growth – Globalization tries to create one global economy, eliminating local control. Better approach is internationalization – Free global financial flows inherently destabilizing, primarily speculative, not productive.

Course Objectives Evaluate and Design policy tools based on ecological economic principles Take home messages: – Policy tools exist to address serious problems of scale, distribution and allocation – Six policy principles In ever-changing system with irreducible uncertainty, all policies must use adaptive management Need institutions on the scale of the problem – Political will to implement them is lacking – If goals are wrong, can never solve problems

Course Objectives Apply what you learn to a real life problem, use the problem to better understand course material – Reflect on the relationship between your project and the course, your other UVM courses, your life goals and experiences.

How Can we Change Complex Systems Leverage points –Where can we have the most impact? See Meadows, Donella “Places to Intervene in a System,” Whole Earth, winter issue.

10 Leverage Points 10. Numbers (subsidies, taxes, standards). –Standard economists stuff –Can still be powerful 9. Buffering capacity –E.g. acid rain and calcium carbonate 8. Material stocks and flows. –E.g. replacing transportation system,

10 Leverage Points 7. Regulating negative feedback loops –Feedback has to be proportional to problem –Markets and feedback loops 6. Driving positive feedback loops. –Slow them down, let negative feedbacks do their thing –E.g. Financial crisis 5. Information flows. –E.g. publicizing pollution, labeling, etc.

10 Leverage Points 4. The rules of the system –Democratic control over the commons, the media, and the problem of macroallocation –Cooperative provision/management of non- rival resources, including information –Return the right to seigniorage to government –Just distribution of resources provided by nature and society 3. The power of self-organization. –Maintain diversity

10 Leverage Points 2. The goals of the system. –What is socially and psychologically desirable? –Shared vision of a sustainable and desirable future. –Continuous economic growth is undesirable –Doom and gloom doesn’t win converts

Would Addressing Current Crises Require Sacrifice? Over 80% reduction in fossil fuel use required Per capita income (adjusted for inflation) in 1969 was 1/2 of today’s GDP, and poverty was lower We could live at 1969 standard with ½ of current CO2 emissions –With proper incentives and technologies, we could do much better

How Miserable was Life in 1969?: The Genuine Progress Indicator

10 Leverage Points 1. The mindset or paradigm out of which the goals, rules, feedback structure arise. –What is biophysically possible? –Economy is sustained and contained by the global ecosystem –Continuous economic growth is impossible –Macroallocation is central problem –Humans are social animals, not homogenous globules of desire, etc.

10 Leverage Points 0. The ability to transcend paradigms