Ecological Economics, Power, and the Hayekian Problem
With some Implications for Liberalism in the Age of Ecological Crisis
I was last week at a conference on economic philosophy in Lille. One of the keynote speakers was Clive Spash, one of the main contributors to the “ecological economics” research program. It was not the first time that I was seeing a talk of Spash nor my first encounter with ecological economics. I was therefore not really surprised by the talk. Still, it made a strong impression on me – not necessarily a positive one, especially because it is revealing of the difficulty of going beyond a purely “deconstructivist” discourse about both capitalism and mainstream economics.
I will not go into the details of the tenets of ecological economics here. Moreover, Spash is not necessarily representative of the whole research program. Nonetheless, his talk built on a few features which, I think, are constitutive of what ecological economics is all about. Among those, the idea that the economy cannot be studied in isolation from the broader environment in which it is embedded is the most prominent. It is fairly simple: before allocating resources as means to pursue competing ends, the economic system is foremost a set of interrelated institutions aimed at satisfying people’s needs. This leads to a “substantive” definition of economics interested in the way the society is organized to satisfy those needs but also in how those needs are created. Ecological economists then insist that you cannot study the economic system while ignoring the natural environment in which these needs and their satisfaction take place, if only because the environment sets limits on what can be satisfied. As it happens, because the natural environment is made of a strictly finite set of resources, and because those resources are needed for the production of goods aiming at the satisfaction of needs, society cannot be organized to satisfy an ever-growing set of desires and needs. Infinite economic growth is impossible in a finite world of resources.
From this fundamental thesis comes a second one which is that the value of resources and other things is in general incommensurable. For instance, ecological economists reject the idea (fairly standard in mainstream economics) that natural capital and other forms of capital are substitutes. More generally, it is no sense thinking in terms of tradeoffs as economists are used to do, at least when natured is concerned, as much as it is to pretend to set a price on everything. It follows that ecological economists firmly reject the use of cost-benefit analysis and its derivatives (e.g., contingent valuation) as tools for the justification and evaluation of public policies.
A third tenet (which, I must admit, remains obscure to me) is the rejection of individualism (ontological? Methodological? Normative?) and the endorsement of a (ontological? Normative?) view that emphasis the importance of communities. The idea seems to be that the solution to the ecological crisis will necessarily rely on “communitarian” solutions à la Ostrom where community members design local institutional scaffolding, instead of top-down solutions designed and implemented by state authorities or market-based solutions relying on individual decision-making. A fourth tenet, which is really a corollary of the third one, is the combined endorsement of a “politics of recognition” and an “identify epistemology”. The former indicates that groups identified for instance by ethnic criteria should be recognized special rights in virtue in particular of past (environmental) injustices. The latter states that the form of knowledge that is specific to those groups, though not necessarily based on scientific methods, should be appropriately recognized and taken into consideration for collective decision-making.
The fifth and last main tenet of ecological economics that I’ve identified is the rejection of the fact/value and positive/normative distinction on which mainstream economics is still largely relying. For ecological economists – and it was pretty much clear in Spash’s talk – the distance between academic and activist practices is small, if not nonexistent. The research program is obviously directed toward the pursuit and achievement of political goals, that is to transform the society according to a broad conception of the good society, most often related to the degrowth or “post-growth” ideologies.
I disagree with almost all these constitutive features of ecological economics, except for the first tenet (with qualifications). It is hard to reject the idea that the economic system of a society is embedded into a natural environment that, for a given technological state of the arts, sets limits on what we can do. Note however the italics. Ecological economists typically are dismissive of those “solutionists” who imagine that technological progress will solve all our issues, including those related to climate change. The thing is that nobody can anticipate what will be the technological state of the arts in a decade, even less in a century. Even if planet Earth has a strictly finite set of resources, we have no idea where the limits of growth are. That doesn’t mean that we should be blindly optimistic. It may indeed happen that we are close to reaching a state where technologies will not sufficiently improve to continue to grow as we have been for the last couple of centuries. No one knows, and so our view of the good society should acknowledge this uncertainty.
Where ecological economists are wrong is in their inference that this observation makes all talk about resource allocation and tradeoffs irrelevant. This is so wrong that it is hard to believe that such a claim can be made. Whatever you think about the limits of economic growth due to environmental pressure, it is a fact that we (both as individuals and as a society) have to make choices about which ends to pursue and how to pursue them. These choices are even more necessary if growth is limited because then the tradeoffs are likely to be more severe. Ecological economists counter this claim with their magic expression “value incommensurability”. This betrays however a very bad understanding of the nature of value incommensurability. For sure, it is very hard to compare a great professional career costing you your marriage and a life-fulfilling marriage that goes with an eventless professional career. But many of us have, at some point in our life, have to choose between similar (and arguably less caricatural) pair of options. The same is true for society as a whole. We can agree (and I surely do, as an admirer of Isaiah Berlin) that value incommensurability is a fact of life. But that doesn’t make choice impossible and even – contra some interpretations of Berlin – rational choice impossible. This is indeed one of the great institutional innovations of our societies, to have designed “tools of commensuration” that make it possible for us to make decisions despite the incommensurability of options and evaluative standards.[1]
Property rights and the price system figure among the main tools of commensuration that we use in modern societies. Property rights define “private spheres of sovereignty” within which one is free to do as it pleases her. The price system gives information about the tradeoffs that individuals are willing to make and therefore helps to transfer property rights depending on what agents (individuals, firms) want to and can do. Cost-benefit analysis and the likes are devices that justify and evaluate policies based on the same considerations. Now, it is absolutely true that these tools of commensuration are not “neutral”, in the sense that grounding the allocation of resources on agents’ willingness to pay makes it biased toward some outcomes. Different tools of commensuration would lead to different outcomes. What is not possible however is to dispense with tools of commensuration. It seems that ecological economists are uncomfortable with that – as it happens, many ecological economists continue to stick to cost-benefit analysis and, during his keynote, Spash avoided answering a question about which alternative tools should be used. Sometimes, the idea of lexicographic priority is hinted at – i.e., we should prioritize nature over anything else in all circumstances. But it is not very helpful. First, because lexicographic ordering is a tool of commensuration that does reveal a tradeoff (we are ready to sacrifice everything for something else), and second because it is practice unhelpful to make many decisions.
The point is that whatever their view of the good society, ecological economists cannot avoid what I would call the Hayekian problem. The problem is epistemological in nature. Society is a complex system that no one can organize by himself. The information required to form true expectations about the way the system would react following any given individual or collective decision is dispersed and inaccessible to a single mind. Value incommensurability is part of what makes the complexity of the system. Tools of commensuration are therefore among the resources that help us to navigate in the water of complexities. The point is to limit conflicts and to make sure that a stable (and environmentally sustainable) order can emerge and be preserved. Absent any credible alternative, the price system and more generally the market-based economy remain the best way to achieve this end.
All this is also relevant to the issue of the philosophical and political relevance of liberalism today. Ecological economists are prone to answer the above objection that the problem with the market-based economy is that it gives too much power to a small group of persons who, because of that, have the ability to steer society in a direction that is ecologically unsustainable. I think it cannot be disputed that market relations also are power relations, at least in the generic sense of the concept, i.e., the ability of A to make B do what A wants B to do. There are obviously other sources of power in society, starting with political power. It is clear that we cannot imagine a society without power relations. A legitimate question is therefore how power should be allocated in society to make it ecologically sustainable. Liberalism has essentially evolved as a philosophy of the limitation of political power. Separating political functions and giving people economic power through property rights is basically the liberal answer to this issue. In the 20th century, liberalism’s nemesis was the various forms of totalitarianism that concentrated power into a few hands. The conception of the good society that many ecological economists are pushing forward figures among those new conceptions that tend to suggest that power should be reallocated into the hand of “citizens” or “communities”, without being clear about what this implies in practice. The strength of this conception is that it builds on a hardly disputable fact, the ecological crisis. What is at stake therefore is the ability of liberalism to oppose these conceptions of the good society, in the context of the ecological crisis.
[1] On this, I recommend Fred D’Agostino, Incommensurability and Commensuration: The Common Denominator (Routledge, 2018).