Entropy and Economics

7. Social Values and Levels of Consumption
Let us next turn to the problem of reducing the per-capita consumption in the industrialized countries. The whole structure of western society seems designed to push its citizens in the opposite direction, towards ever-increasing levels of consumption. The mass media hold before us continually the ideal of a personal utopia filled with material goods.
Every young man in a modern industrial society feels that he is a failure unless he fights his way to the “top”; and in recent years, women too have been drawn into this competition. Of course, not everyone can reach the top; there would not be room for everyone; but society urges all of us to try, and we feel a sense of failure if we do not reach the goal. Thus, modern life has become a struggle of all against all for power and possessions.
One of the central problems in reducing consumption is that in our present economic and social theory, consumption has no upper bound; there is no definition of what is enough; there is no concept of a state where all of the real needs of a person have been satisfied. In our growth-oriented present-day economics, it is assumed that, no matter how much a person earns, he or she is always driven by a desire for more.
The phrase “conspicuous consumption” was invented by the Norwegian-American economist Thorstein Veblen (1857-1929) in order to describe the way in which our society uses economic waste as a symbol of social status. In The Theory of the Leisure Class, first published in 1899, Veblen pointed out that it is wrong to believe that human economic behavior is rational, or that it can be understood in terms of classical economic theory. To understand it, Veblen maintained, one might better make use of insights gained from anthropology, psychology, sociology, and history.
The sensation caused by the publication of Veblen’s book, and the fact that his phrase, “conspicuous consumption”, has become part of our language, indicate that his theory did not completely miss its mark. In fact, modern advertisers seem to be following Veblen’s advice: Realizing that much of the output of our economy will be used for the purpose of establishing the social status of consumers, advertising agencies hire psychologists to appeal to the consumer’s longing for a higher social position.
When possessions are used for the purpose of social competition, demand has no natural upper limit; it is then limited only by the size of the human ego, which, as we know, is boundless. This would be all to the good if unlimited economic growth were desirable. But today, when further industrial growth implies future collapse, western society urgently needs to find new values to replace our worship of power, our restless chase after excitement, and our admiration of excessive consumption.
The values which we need, both to protect nature from civilization and to protect civilization from itself, are perhaps not new: Perhaps it would be more correct to say that we need to rediscover ethical values which once were part of human culture, but which were lost during the process of industrialization when technology allowed us to break traditional environmental constraints.
Our ancestors were hunter-gatherers, living in close contact with nature, and respecting the laws and limitations of nature. There are many hunter-gatherer cultures existing today, from whose values and outlook we could learn much.* In some parts of Africa, before cutting down a tree, a man will offer a prayer of apology to the spirit of the tree, explaining why necessity has driven him to such an act. The attitude involved in this ritual is something which industrialized society needs to learn, or relearn.
Older cultures have much to teach industrial society because they are already pressing against environmental limits. In a traditional culture, where change is extremely slow, population has an opportunity to expand to the limits which the traditional way of life allows, so that it reaches equilibrium with the environment. For example, in a hunter-gatherer culture, population has expanded to the limits which can be supported without the introduction of agriculture. The density of population is, of course, extremely low, but nevertheless it is pressing against the limits of sustainability. Overhunting or overfishing would endanger the future. Respect for the environment is thus necessary for the survival of such a culture.
Similarly, in a stable, traditional agricultural society which has reached an equilibrium with its environment, population is pressing against the limits of sustainability. In such a culture, one can usually find expressed as a strong ethical principle the rule that the land must not be degraded, but left fertile for the use of future generations.
It would be wise for the industrialized countries to learn from the values of older traditional cultures; but what usually happens is the reverse: The unsustainable, power-worshiping, consumption-oriented values of western society are so strongly propagandized by television, films and advertising that they overpower and sweep aside the wisdom of older societies.
Today, the whole world seems to be adopting values, fashions, and standards of behaviour presented in the mass media of western society. This is unfortunate, since besides showing us unsustainable levels of affluence and economic waste, the western mass media depict values and behavior patterns which are hardly worthy of imitation.

8. The Responsibility of Governments
Like a speeding bus headed for a brick wall, the earth’s rapidly-growing population of humans and its rapidly growing economic activity are headed for a collision with a very solid barrier – the carrying capacity of the global environment. As in the case of the bus and the wall, the correct response to the situation is to apply the brakes in good time, but fear prevents us from doing this. What will happen if we slow down very suddenly? Will not many of the passengers be injured? Undoubtedly. But what will happen if we hit the wall at full speed? Perhaps it would be wise, after all, to apply the brakes!
The memory of the great depression of 1929 makes us fear the consequences of an economic slowdown, especially since unemployment is already a serious problem. Although the history of the 1929 depression is frightening, it may nevertheless be useful to look at the measures which were used then to bring the global economy back to its feet. A similar level of governmental responsibility may help us during the next few decades to avoid some of the more painful consequences of the necessary transition from the economics of growth to the economics of equilibrium.
Economists, industrialists and business leaders have a duty to the peoples of the world and to the global environment in much the same way that physicians have a sacred duty to the welfare of their patients. Therefore, the education of economists and industrialists ought to emphasize ethical and ecological principles. Like doctors, economists and industrialists carry matters of life and death in their hands: Think of the 10 million children who die each year from poverty-related causes; think of the wholesale extinction of species; think of global warming; think of the risk of a catastrophic future famine caused by population growth, by energy shortages, by climate change and by ecological degradation. We urgently need to introduce biology, ecology and ethics into the education of economists. The economics of growth must be replaced by equilibrium economics, where considerations of ecology, carrying capacity, and sustainability are given proper weight, and where the quality of life of future generations has as much importance as present profits.
Not only economists, but students of business administration should also be made conscious of the negative, as well as positive effects of globalization, and should consider the measures that will be needed to correct the negative effects. Students of business administration should be helped to develop an attitude of responsibility towards the less developed countries of the world, so that if they later become administrators in multinational corporations, they will choose generous and enlightened policies rather than exploitative ones.
The economic impact of war and preparation for war should be included in the training of economists. Both the direct and indirect costs of war should be studied, for example, the effect of unimaginably enormous military budgets in reducing the money available to solve pressing problems posed by the resurgence of infectious disease (e.g. AIDS, and drug-resistant forms of malaria and tuberculosis); the problem of population stabilization; food problems; loss of arable land; future energy problems; the problem of finding substitutes for vanishing non-renewable resources, and so on. Many of these problems were discussed at a recent conference of economists in Copenhagen, but the fact that all such global emergencies could be adequately addressed with a fraction of the money wasted on military budgets was not discussed.
Finally, economics curricula should include the problems of converting war-related industries to peaceful ones – the problem of beating swords into plowshares. It is often said that our economies are dependent on arms industries. If this is so, it is an unhealthy dependence, analogous to drug addiction, since arms industries do not contribute to future-oriented infrastructure. The problem of conversion is an important one. It is the economic analog of the problem of ending a narcotics addiction, and it ought to be given proper weight in the education of economists.
The Worldwatch Institute, Washington D.C., lists the following steps as necessary for the transition to sustainability: 1) Stabilizing population; 2) Shifting to renewable energy; 3) Increasing energy efficiency; 4) Recycling resources; 5) Reforestation and 6) Soil Conservation. All of these steps are labor-intensive; and thus, wholehearted governmental commitment to the transition to sustainability can help to solve the problem of unemployment.
In much the same way that Keynes urged Roosevelt to use governmental control of interest rates to achieve social goals, we can now urge our governments to use their control of taxation to promote sustainability. For example, a slight increase in the taxes on fossil fuels could make a number of renewable energy technologies economically competitive; and higher taxes on motor fuels would be especially useful in promoting the necessary transition from private automobiles to bicycles and public transport.
The economic recession that began with the US subprime mortgage crisis of 2007 and 2008 can be seen as an opportunity. It is thought to be temporary, but it is a valuable warning of irreversible long-term changes that will come later in the 21st century when the absolute limits of industrial growth are reached. Already we are faced with the problems of preventing unemployment and simultaneously building the infrastructure of an ecologically sustainable society.
Today’s economists believe that growth is required for economic health; but at some point during this century, industrial growth will no longer be possible. If no changes have been made in our economic system when this happens, we will be faced with massive unemployment. Three changes are needed to prevent this:
♦ Labor must be moved to tasks related to ecological sustainability. The tasks include development of renewable energy, reforestation, soil and water conservation, replacement of private transportation by public transport. Health and family planning services must also be made available to all.
♦ Opportunities for employment must be shared among those in need of work, even if this means reducing the number of hours that each person works each week and simultaneously reducing the use of luxury goods, unnecessary travel, conspicuous consumption and so on. It will be necessary for governments to introduce laws reducing the length of the working week, thus ensuring that opportunities for employment are shared equally.
♦ The world’s fractional reserve banking system needs to be reformed. We have the chance, already today, to make these changes in our economic system. The completely unregulated free market alone has proved to be inadequate in a situation where economic growth has slowed or halted, as is very apparent in the context of the present financial crisis. But, halfway through the 21st century, economic growth will be halted permanently by ecological constraints and vanishing resources. We must construct a steady-state economic system – one that can function without industrial growth. Our new economic system needs to have a social and ecological conscience, it needs to be responsible, and it needs to have a farsighted global ethic. We have the opportunity to anticipate and prevent future shocks by working today to build a new economic system.
The introduction of Pigovian taxes by one country may make it less able to compete with other countries that do not include externalities in their pricing. Until such reforms become universal, free trade may give unfair advantages to countries which give the least attention to social and environmental ethics. Thus free trade and globalization will become fair and beneficial only when ethical economic practices become universal.
Governments already recognize their responsibility for education. In the future, they must also recognize their responsibility for helping young people to make a smooth transition from education to secure jobs. If jobs are scarce, work must be shared with a spirit of solidarity among those seeking employment; hours of work (and if necessary, living standards) must be reduced to ensure that all who wish it may have jobs. Market forces alone cannot achieve this. The powers of government are needed.
Governments must recognize their responsibility for thinking not only of the immediate future but also of the distant future, and their responsibility for guiding us from the insecure and socially unjust world of today to a safer and happier future world. In the world as it is today, a trillion dollars are wasted on armaments each year; and while this is going on, children in the developing countries sift through garbage dumps searching for scraps of food. In today’s world, the competition for jobs and for material possessions makes part of the population of the industrial countries work so hard that they damage their health and neglect their families; and while this is going on, another part of the population suffers from unemployment, becoming vulnerable to depression, mental illness, alcoholism, drug abuse and crime. In the world of the future, which we now must build, the institution of war will be abolished, and the enormous resources now wasted on war will be used constructively. In the future world, as it can be if we work to make it so, a stable population of moderate size will live without waste or luxury, but in comfort and security, free from the fear of hunger or unemployment. The world which we want will be a world of changed values, where human qualities will be valued more than material possessions. Let us try to combine wisdom and ethics from humanity’s past with today’s technology to build a sustainable, livable and equitable future world.

* Unfortunately, instead of learning from them, we often move in with our bulldozers and make it impossible for their way of life to continue. During the
past several decades, for example, approximately one tribe of South American forest Indians has died out every year. Of the 6000 human languages now
spoken, it is estimated that half will vanish during the next 50 years.

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