Toward a Sustainable World Economy

Mar 29, 2012

Today’s guest post in our series honoring the 40th anniversary of the landmark Limits to Growth study is by William Rees. Rees, along with Mathis Wackernagel, originated ecological footprint analysis. My interview with Dr. Rees for GrowthBusters was one of the last conducted before completion of the film. I left that interview thinking I could have saved myself a lot of time and trouble – rather than devoting six years to funding and producing the film, I could have simply recorded this interview and released it. In 40 minutes Bill Rees covered, knowledgeably and eloquently, nearly every topic in the film!

William ReesThis is part of a paper William Rees presented at the Institute for New Economic Thinking Annual Conference in Bretton Woods one year ago. INET is doing some great work exploring what a sustainable economy looks like and how to get there. The institute’s next annual conference is a few weeks away.


Toward a Sustainable World Economy

By William Rees

Economic Paradigms – Social Constructs All

What the scientist’s and the lunatic’s theories have in common is that both belong to conjectural knowledge. But some conjectures are much better than others… (Popper 1972).

You may say, if you wish, that all ‘reality’ is a social construction, but you cannot deny that some constructions are ‘truer’ than others. They are not ‘truer’ because they are privileged, they [become] privileged because they are ‘truer.’ (Postman 1999, 76)

All cultural narratives, worldviews, religious doctrines, political ideologies, and academic paradigms are ‘social constructs.’ They are products of the human mind massaged or polished by social discourse and elevated to the status of received wisdom by agreement among members of the social group who are creating the construct (see Berger and Luckmann 1966).

In some contexts, people more or less automatically and passively acquire their allegiance to important social constructs. For example, we gradually adopt the fundamental beliefs, values, assumptions, and behavioral norms of our ‘tribe’ or society simply by growing up in a particular cultural milieu. In other situations—in church or in school, for example—we are essentially the captives of social institutions that exist explicitly to indoctrinate their ‘clients’ with the accepted way of seeing the world. In any event, by the time most people have reached mature adulthood they will have accepted their culture’s overall ‘narrative’ and will subscribe, consciously or not, to any number of subsidiary religious, political, social and disciplinary paradigms.

It is important to underscore that, although it masquerades as ‘reality’ in our consciousness, all formal ‘knowledge’ is, in fact, socially constructed. Some constructs are entirely made up—there is no corresponding structure in the natural world for ‘civil rights’ or ‘communism’, for example. These well-known concepts were birthed and given legs entirely through words and social discourse. Other socially-constructed frameworks have been erected specifically to describe corresponding real-world phenomena. For example, everyone here will agree that ‘the economy’ is that set of activities central to the production, distribution and consumption of goods and services in a specified region or country. Nevertheless, such activities exist in all societies whether or not the people have any formal concept of ‘the economy’

Will the real economy please stand up

As implied above, there are many different ways of conceiving the ‘appropriate’ structure and function of the economy. Each alternative reflects its followers’ unique set of socially-constructed beliefs, values and assumptions about the structure of the economy, how it relates to other systems and how economic activities should be conducted and regulated to serve particular specified ends. Alternative economic paradigms may differ radically—entities or activities that are given prominence in one paradigm may be marginalized or omitted altogether from another. Things can get complicated—an economic paradigm is a socially-constructed model that may contain other models that are themselves socially constructed!

Despite being mere constructs, ideologies and paradigms are extremely powerful. They are perceptual filters through which we interpret all new data and information; while essentially subjective, they constitute our perceived ‘reality’ and determine how people ‘act out’ in the real world. It is therefore important to emphasize that: a) no economic paradigm can ever be more than a partial representation of external reality, and; b) while all paradigms belong in the domain of conjectural knowledge, not all conjectures are created equal. Some conjectures are demonstrably better than others, particularly in terms of how well they represent the real world. “Conjectures are our trial balloons, and we test them by criticizing them and by trying to replace them, by trying to show that there can be better or worse conjectures, and that they can be improved upon”… “So long as a theory stands up to the severest tests we can design, it is accepted; if it does not, it is rejected” (Popper 1972).

Table 1 (attached) contrasts two competing economic visions, the neo-liberal expansionist paradigm (a corrupted version of which prevails in the world today) and the ecological economics vision which is struggling to emerge from the on-going sustainability discourse. The table shows that from their epistemological roots to their policy prescriptions, these two ‘pre-analytic visions’ of the economy reflect vastly different perceptions of economic and biophysical reality, particularly in terms of how the economy functions in relation to the rest of the ecosphere. As Coase (1997) has opined, “Existing economics is a theoretical [meaning mathematical] system which floats in the air and which bears little relation to what happens in the real world”. Ecological economics was therefore born out of necessity, a concerted effort by liberated economists, ecologists and political scientists to bring the economy back to solid ground.

The purpose of this paper is to make the case that the neo-liberal vision, always crude in its representation of both Homo economicus and the economic system itself, is not only failing on its own terms but has actually become an ecological hazard to the future of civilization. A sustainable alternative is needed. Canadian environmental journalist and author, Andrew Nikiforuk describes our dilemma this way:

Let’s face it: Homo economicus is one hell of an over-achiever. He has invaded more than three-quarters of the globe’s surface and monopolized nearly half of all plant life to help make dinner. He has netted most of the ocean’s fish and will soon eat his way through the world’s last great apes. For good measure, he has fouled most of the world’s rivers. And his gluttonous appetites have started a wave of extinctions that could trigger the demise of 25 percent of the world’s creatures within 50 years. The more godlike he becomes the less godly Homo economicus behaves (Nikiforuk 2006).

A major problem with neoliberal economics that its foundational models are based on ideas borrowed from Newtonian analytic mechanics (an excellent paradigm for the design of automobile engines), have a naively constricted view of actual human economic and social behaviour, carry reductionist logic to extremes by all but excluding reference to the rest of biophysical reality and reflect arrogant certainty in their prescriptions. By contrast, while by no means perfect, ecological economics is explicitly grounded in complex systems theory and far-from-equilibrium thermodynamics (necessary to describe real-world economic-, social- and eco-systems behavior), adopts a much more generous view of human nature, perceives the economy as a integral component of the ecosphere and accepts the need to adapt the economy to irreducible systemic uncertainty (Table 1). Keep in mind that every economic system is, in effect, an experiment that necessarily tests its fundamental propositions against the reality within which it is embedded. When a model fails the ‘severest tests we can design’ it should be modified or rejected and replaced outright. Given the current scale of economic activity, a faulty economic paradigm has the potential not only to undermine the world economy but also to wreck the biophysical basis of its own existence. The question is, based on the evidence, should we be considering rejecting the neo-liberal ‘conjecture’ and replacing it with (at least for starters) something resembling the ecological economics framework?


William Rees has a doctorate in population ecology. He recently retired from the faculty of the School of Community and Regional Planning at the University of British Columbia. You can read the entire paper here.

If you find this information at all compelling, if you’re concerned about the prospects for a civilization hell-bent to grow forever on a finite planet, please take the Think Small Pledge and encourage your friends, family and colleagues to do so. Thank you.

Dave Gardner



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