In 1972, a book called “The
Limits to Growth” was published by using systems dynamic theory and computer
model “World3”. The book presented with various scenarios on environmental
outcome for the world from 1990 to 2100 detailing how humans have exploited
world’s scarce resources and produced waste and pollution faster than the
capacity of the earth to absorb them. Soon after the Limits to Growth, in 1987,
Brundtland report “Our Common Future” stated “Sustainable development is development that meets the needs of the
present without compromising the ability of future generations to meet their
own needs” (World Commission on Environment
and Development: Our Common Future, 1987) and also highlighted two most
important concept of needs of the poor and the ability of environment to meet
our needs of today and tomorrow. Three core pilars of Sustainable development
is environmental, economic and social well-being of present and future
generations. Ecological sustainability
requires fair distribution of resources between current and future generations
and with other species that are living on this planet. Classical
economist; very much broad-minded philosophers and economist “Adam Smith, David
Ricardo and Thomas Malthus” referred economics as “political economics”. Neoclassical
economics provides theory by which marginal costs of goods and services decide
their supply and consumer preference decides their demand. Since 1970s there has
been reference to “mainstream economic approaches” – “seemingly heterogeneous set
of approaches that include new institutional economics, new information
economics, social choice theory, behavioral economics, evolutionary game
theory, experimental economics and many others”
and are debated by many in last few decades; David Colander declared the
“death of neoclassical economics” while
introducing economics of today, Madra who is classifying as late neoclassical
economics and Davis in his journal
refers to as ‘recent economics’ .
Let us now explore some
of the matters that suggest neoclassical economics does agree. Theory of
neoclassical economics has been well received and followed around the world
since last many decades. Mainstream (neoclassical) economics provides us with
conceptual framework and ideas about “efficient allocations of resources”. “The
Invisible hand” when markets are not regulated by power (regulations) provides
seamless functioning markets that helps to distribute resources, wealth and
labor more efficiently compared to markets that are governed by regulators . For
the very same reason economist rely on “the invisible hand” of unrestricted
markets for the efficient utilisation of scarce resources (natural and human).
If market fails to reduce environmental issues, those who excel in
environmental economics pursue an optimal balance between total cost including
environmental and social and economic benefit with the help of ‘market
instrument’ of social cost internalization
Eco-efficient process and productions that are alternative to
conventional productions are considered efficient and helpful in continuous
growth. In neoclassical economics markets is viewed as main vehicle and as
suggested previously “invisible hand” will drive the change with some
adjustments in regards to the externalities or core concepts of sustainability.
Neoclassical economic approach can be applied to environmental and
sustainability issues provided all natural resources and other environmental
and social effects that are priced, once
priced; cost benefit analysis can be deployed. Today in many cases ‘market
failure’ happens from sustainability perspective and it is mainly due to social
and environmental aspect of market is not priced. If sustainability defined its
limit and priced every externality; the framework of mainstream (neoclassical)
economics can be used without any market failure.
Let us now explore some
of the matters that suggest neoclassical economics disagree. Concepts of
sustainability requires fair distribution of natural resources and neoclassical
theory suggests including equity in to the consumer preference model; this
model does not attend fully the concepts of sustainability as actors of those
choice model may consider well-being of themselves or their children but not
necessarily the private or social concerns of others and the fairer
distribution of resources. In market people do not share their views instead
they show the willingness to pay the price and their willingness to pay may not
equate the benefit of environmental and social well-being as (it may) required
by sustainability and therefore there is a possibility that market will fail
and the model may suggest that whatever the market has suggested is sustainable
and acceptable. During financial crisis China and India continued to score the
GDP growth while other countries were repeatedly reporting lower or negative
growth but the growth did not come clean instead it was accompanied by
environmental degradation and increasing pollution in both the countries . Neoclassical
economics with regard to sustainability; when applied generally concentrated on
technological development but excludes institutional structures that plays
critical role in managing resources, policy making and usage of scarce
resources. Economists know the “price of everything and the value of nothing”
and the direct proof of this is the exclusion of non-priced natural resources,
environmental benefits and social values. While achieving optimal outcome
through market interactions if the outcome is inefficient (market failure), it
is considered that the process which drives the price has broken. Neoclassical
economics sees GDP growth as an important indicator of performance of a country
and estimates that with the increased GDP; production increases along with
financial resources, more investment, more jobs and overall economy will flourish
but how reliable it is in relation to the core concepts of sustainability. If
neoclassical economics itself was to exists for completely devoted to economic
growth there would not be any problem in using current structure but the
economy is connected in many ways with multidimensional approach of sustainable
development. Ethics in economics; Ethics basically means doing right thing and
while using mainstream (neoclassical) economics theories and models to tackle
core concepts of sustainability, it is very important to appreciate the
ideology behind the thought of the sustainability.
Conclusion:
Since last few decades
as a result of globalization our global economy has become large and constantly
growing, we cannot expect it to continue at the same speed with the utilisation
of same natural resources assuming that it is abundant and has no other effect
if diminished. Humanity at large must come together and convert to sustainable
economy. Neoclassical economics sees GDP growth as an important indicator of
performance of a country and estimates that with the increased GDP; production
increases along with financial resources, more investment, more jobs and
overall economy will flourish but how reliable it is in relation to the core concepts
of sustainability. If neoclassical economics itself was to exists for
completely devoted to economic growth there would not be any problem in using
current structure but the economy is connected in many ways with
multidimensional approach of sustainable development. Ethics in economics;
Ethics basically means doing right thing and while using mainstream (neoclassical)
economics theories and models to tackle core concepts of sustainability, it is
very important to appreciate the ideology behind the thought of the sustainability.
Does economics agrees with this or not but there is a lot of work needs to be
done. Peter Radford (2011), suggest that economics should abide the rule that
is being followed by Medicine “do no harm”
and calls for a time to “sort the mess out”
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