onsdag 10 april 2013

My problem with "economic sustainability"

Last week I wrote about a seminar I attended two months ago about social sustainability. Well, I also attended another seminar about economic sustainability one month ago. I appreciate the fact that these seminars were organized at/by KTH, but unfortunately none of them helped advance my understanding about these two important concepts.

I wrote a blog post about my problems with the concept "social sustainability" last week, but my problems with the concept "economic sustainability" are more severe. Just as in the previous blog post, I will concentrate on only of the two talks at the seminar in question. While the second talk was interesting, it didn't really treat the concept of "economic sustainability" but rather discussed how a course module about topic X ("sustainable business development") could practically be integrated into different university courses.

So what is economic sustainability? As apart from when I wrote the previous blog post, I don't have access to the lecturer's slides so this text will build exclusively on my notes (i.e. I might have misunderstood something). The guest speaker in question works as an environmental economist at Enveco - an environmental economics consultancy. Do note that Enveco is not an economic sustainability consultancy and the difference bears some significance. I wanted ideas and theories about economic sustainability but got an explanation about how environmental accountancy is practiced today.

The speaker differed between "strong" and "weak" sustainability. Strong sustainability assumes that ecological sustainability (or certain ecological values) are non-negotiable and can not be compensated through strong positive consequences for social and economic sustainability. Weak sustainability thus assumes that it can sometimes be worth it to sacrifice (some) ecological values if that act has (strong) positive consequences in terms of social and economic sustainability. It is Enveco's job to do the counting and determine the outcome of the trade-off between different values i.e. to determine what is and what isn't "economic desirable development" in particular situations.

The question Enveco answers is thus "what is 'economically desirable'?". Enveco consultants are basically beam-counters who take into account not just costs (money), but also people's environmental preferences as expressed in (or transformed into) the (monetary) value they place on certain "intangibles". They then transform preferences and costs into a "net-present value" (using a complicated formula) and if that value is positive, then project X should go ahead and if the value is negative, then it should stay on the drawing board (or it's back to the drawing board). That's all. I posed a questions specifically about the meaning of "economic sustainability" and got a nonsense answer (i.e. "something is economically sustainable if the net-present value of the proposed project is positive"). I asked about all the assumptions and variable that goes into such calculations and it was agreed-upon that the assumptions and the pricing of "intangibles" is very important (what is "beautiful nature" worth and how does it stack up compared to the economic values of building a dam and a coal power plant?). The practice of this particular strain of bean-counting did to me seem totally devoid of principles and values. Values had been replaced by math and a "positive net-present value" was basically taken to be equivalent to "economic sustainability". The talk awoke many (very critical) thoughts. Here are a few:

- Oscar Wilde on "what is a cynic?": "A man who knows the price of everything and the value of nothing".

- How do you practically go about to price what is priceless in dollars and cents; human wellbeing, justice, equality, fairness, beauty, habitat for endangered species? How certain can you be that your end result (positive or negative net-present value) really makes sense?

- If you value the factors above (human wellbeing, justice etc.) by asking consumers how much they are willing to pay for it, how do you (for example) take into account rapidly shifting preferences? Perhaps people on Iceland, in Greece and on Cyprus today have different preferences than only a few years ago and today wish for other decisions and other tradeoffs retroactively? And how to you put a value on (for example) the absence of child labor in a product, on social stability or even on the presence or the absence of civilization? What if we "like" and "value" X highly, but X (for example our current lifestyles in affluent parts of the world) leads to the ruin of the planet? How do you count on that? Do you leave values and long-term consequences "at the door" and settle for what people say. That can obviously lead to absurd consequences although I have to admit that I here hint at a paternalistic perspective (i.e. people don't always know what's best for them (or for their grand-children)).

- Comic strip: "What you environmentalists don't understand is that a ruined planet is the price we have to pay for a healthy economy".

- Another comic strip: in the cave and around the campfire a guy dressed in the remnants of a three-piece suit says: "Sure, we blew it, but for a time we did create some great shareholder values".

- I perceived a conflict between two different perspectives at the seminar. The lecturer preached that "we must pay respect to people's values" in terms of how much they are willing to pay for X of for the absence of Y (but what about the dirt poor who don't have any economic leverage - do or don't their preferences count?). This perspective can be contrasted with the patently true strong-sustainability slogan "Mother Nature doesn't do bailouts". How do you, based on these contrasting perspectives, figure out "what to do" in different practical situations?

- In the end I have a hard time understanding the difference between what environmental economics consultants do and what market researchers do. Both ask people "what they want". Or at least what they are willing to pay. Depending on the answer to that question they then go about applying the logic of capitalism and the market to make it come true (or not - if the price is "too high").

I for sure hope there is deeper theorization about the meaning of the concept "economic sustainability" elsewhere... I for example still don't really have any analytical tools whatsoever to discuss the relationship between economic sustainability on the one hand and ecological and social sustainability on the other hand.

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