Mainstream economics cannot contribute to sustainability research

Written by Henri Wiman

Economics is an easy discipline to criticise. Other social scientists dislike its anti-social theory, citizens are suspicious of its perceived political bias, and students lament its formal dryness and apparent irrelevance to all that makes life meaningful. This essay argues that sustainability researchers have reason to join the chorus of complaints and ought to search for insight into economic affairs elsewhere.

In addition to an academic perspective, the dominant economic paradigm could include the framing of economic discourse and the use of economic ideas in policy and politics . Since focus here is on sustainability research, the dominant paradigm is discussed mainly as the academic theory and methodology of the dominant school economics – neoclassical economics. Today, economics is by default understood to mean neoclassicism , and the words will thus be treated synonymously.

To analyse the sustainability problems of economics, selected aspects of its ontology, epistemology, and methodology are compared against the demands of sustainability research. Ontology is here understood as the pre-supposed objects or concepts that a research community recognised in its theory and research, as well as the pre-supposed nature of those objects . Epistemology refers to the accepted ways of producing knowledge, and methodology is the accepted system for responding to those epistemological demands.

First, the demands on knowledge creation posed by sustainability issues are discussed. This is followed by an overview of economics as is most relevant to sustainability research. It is finally argued that the discrepancies between the two are partially addressed in alternative economic paradigms, and that economic research should be approached pluralistically to be useful for sustainability research.

Novel research for novel problems

Pulling social systems back within the carrying capacity of biophysical life-support systems is a novel and urgent problem, and has thus spawned a novel research approach. Sustainability science is a problem-oriented research field which goes beyond disciplinary boundaries. It recognises non-academic forms of knowledge, discusses complexity and uncertainty, and explicitly tackles the contested normative and political dimensions of sustainable change.

Proponents of sustainability science describe the field as necessarily interdisciplinary or transdisciplinary . Interdisciplinary research can be characterised as the sharing of core concepts, which are then approach from multiple disciplinary directions, whereas transdisciplinary research coordinates the entire research effort across disciplinary experts toward a shared goal . No standardised methodology exists for this (ibid.), however the main insight is that sustainability issues cannot be reduced to the domain of any single discipline. Due to the complexity of social and ecological systems and their interactions, fundamental uncertainties arise regarding causal chains and probabilities. Uncertainty and incomplete data may force sustainability researchers to abandon quantitative modelling approaches , or only use them in relation to qualitative methods.

Practical solutions for sustainability will need to navigate the diversity of values in society . Howitt highlights that environmental resource management cannot be understood as a purely technical exercise since resources are definitionally means for achieving ends and ends in turn are often politically contested. The value-laden nature of sustainable change demands sustainability science to include non-scientist voices in guiding relevant research areas ; , and to perhaps voice objections to scientist-proposed solutions .

Beyond simply surveying stakeholders’ values in relation to problems and solutions, sustainability science can allow non-scientific knowledge as valid input to answering questions . Hadron et al. in fact opt for the term sustainability research instead of science to be explicitly inclusive of non-scientist contributors to research and the humanities subjects. Inclusiveness to different ways of knowing can in part alleviate the uncertainties left by scientific knowledge . Participatory and epistemological inclusiveness implies a significant departure from traditional normal science, where disciplinary experts select research questions independently, have a pre-established idea of the form solutions should take, and approach them under a theoretical framework that has cumulated strictly by self-reference of the discipline .

Post-normal science offers a potentially suitable paradigm for sustainability research. At its heart is the ‘extended peer community’ – non-scientist participants and stakeholders – who contribute knowledge and normative perspectives to the research process . The post-normal paradigm is sensitive to uncertainties and therefore aims to compile evidence rather than discovering truth or probability estimations ; . Healy argues that normal science is poorly designed for sustainability research, since its nature is to offers technical solutions, whereas sustainability crises are fundamentally caused by the ecologically disastrous ways in which human life has become structured. Post-normal science can offer socially transformational solutions that address such root causes ; .

Since neither the post-normal paradigm nor transdisciplinary methods have established theoretical foundations , they seem to necessarily be context-specific in expense of producing generalisable theory. Funtowicz and Ravetz propose that in the lack of theoretical standards, the standard for validating post-normal knowledge could be the egalitarian participatory process.

Can economics produce knowledge for sustainability?

A discussion of the nature of economics is best begun from a widely-agreed self-description. Lionel Robbins’ definition from 1932 has retained its popularity to this day: Economics is

“the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” 

Robbins’ aim was to make a departure from classical economic traditions of the 19th century which were founded on utilitarianism and the achievement of a good society . In Robbins’ view, discussion of ends was fundamentally moral and therefore beyond rational argument, whereas questions of means are subject to rational inquiry (ibid.). Economics thus developed to proudly have no normative purpose – at least that it recognises . The closest economics comes to stating an objective is the pursuit of allocative efficiency, though it is framed as a value-neutral one . This claim to value-neutrality rests on the highly normative notion that wellbeing cannot be compared across individuals , but here it suffices to say that economics is fundamentally reluctant to discussing values and politics.

Methodology and epistemology

Along the trajectory set in the 1930s, economics has come to define itself by a methodology – quantitative modelling . Though quantitative methods in economics are in practice subject to ambiguities, incompleteness, and uncertainties in data, they remain vastly preferred by policymaking bodies and academia . Quantitative methods additionally require making highly limiting assumptions about human and firm behaviour. Assumptions themselves are left beyond the scope of verification ; and may include e.g. profit or utility maximising, consistent preferences, or rational calculative expectations. Such mechanisms are far simpler to express mathematically than their alternatives . Modelling can be a valid tool for understanding human-environment interactions , but the specific shortcoming of economics is its lack of alternative methods for making its findings more robust in the face of modelling uncertainties.

Theoretical unrealism which underlies modelling is traditionally justified by an instrumentalist rationale: unrealistic foundations can be ignored if they produce useful predictions . Instrumentalism is however a problematic excuse for theoretical unrealism, since it undermines potential to learn about the objects of study . If the foundations of an apparently useful theory are not true, theory effectively becomes a black box: nobody knows why it generates useful predictions. And when the mechanisms generating predictive power are left unknown, it should be no surprise that unpredicted events emerge. For instance, Keen argues that economists’ inability to foresee the financial crisis of 2007/8 rested largely on unrealistic assumptions regarding how the financial sector functions, not any inherent randomness or unknowability of the event itself. Against this reflection, it is rather astounding that instrumentalism can pass as a valid defence of theory in an academic discipline.

Ontology

Beyond its questionable methodology and epistemology, economics is a peculiar social science for mainly discussing markets but no other basic social phenomena such as power, norms, and community – although the ‘new institutional’ branch seeks to quantify behaviour arising from such aspects . Economics also tends to handle time without adequately considering intergenerational equity . Though these aspects are relevant to sustainability, ontological critique will here only focus on how economics understands the environment and its interaction with humans specifically.

The environmental economics branch of neoclassicism includes the environment in its ontology by defining nature and ecosystem services as natural capital, thereby bringing them within the scope of economic analysis. Nature and environmental policy can thus be monetarily valued: for instance, the Stern review estimates the price of delaying climate mitigation action , and the TEEB report calculates the total economic value of specific ecosystem services .

Most fundamentally, the single-metric valuation of the environment cannot capture the variety of value the environment has to people. At best it is a category error , whereby emotional, spiritual, and ethical values are falsely measured in relation to commodities. But beyond these critiques, defining the ‘true economic value’ of any aspect of the environment becomes extremely intensive and uncertain when one considers the complex interconnectedness of the environment . Additionally, since different capitals are not distinguished by quality, only price and yield, natural capital excludes any notion of critical ecosystem services while treating the environment as intrinsically substitutable by built capital. When a natural resource is given a price, it is rendered a commodity like any other that will be depleted once a monetarily valuable enough alternative for its existence is found . One may argue that the ‘true price’ includes information of environmental limits and thus functions to prevent unsustainable use. Even assuming this price could be found, it does not imply an automatic pull away from using a resource as its maximum sustainable yield is approached, only that prices would need to be infinity at the (entirely theoretical) ‘marginal point of unsustainability’ .

‘Economics’ by other means

Sustainability-oriented critiques of economics tend to agree that an alternative paradigm should be founded on an explicit normative sustainability mission and the recognition of diverse human values relating to nature . Describing a vision and identifying ends is however not sufficient. A new sustainable economics paradigm needs to possess some notion if how the economy and the environment interact, so it can fruitfully approach sustainability issues. Many mainstreamed environmentalist ‘critiques’ such as sustainable development (which is now the new normal rather than a critique) leave this aside . It is also essential that the new paradigm recognises a diversity of social phenomena.

Ecological economics offers a distinct ontology regarding the human-environment interaction. It considers the economy a subsystem of the Earth’s biophysical system, where energy and materials are extracted and processed, and waste is produced as a result. Where environmental economics sees the environment as generating services which can be valued, ecological economics sees environmental inputs as a core part of economic value , while recognising other ways of valuing nature.

Ecological economics could potentially lend itself well to a post-normal research paradigm , since its pre-analytic vision is concerned with justice, diverse values, and complex and uncertain human-environment interactions. Faber offers an alternative vision, suggesting that uncertainty in ecological economics can be addressed by professional judgement. This arises from transdisciplinary dialogue, a normative consideration of intergenerational effects, and attentiveness to sensing the world without theoretical filters. Faber’s vision of attentiveness is attractive, but leaves much room for interpreting substance:

[W]e need the ability to experience unfiltered what we see, feel, smell, hear and taste in nature… For only if we are attentive to the dimensions of real life can we make sure that our choice of scientific lens for observing the world does not altogether obscure our true problem of caring for nature and justice.”

Faber’s vision for ecological economics is consistent with post-normal science in that it validates transdisciplinary and non-academic knowledge. The major difference is that Faber would retain control of knowledge creation with the researcher. Sustainability researchers would perhaps do best to explore the continuum between researcher- and stakeholder-controlled inclusive processes depending on the research question.

Ecological economics alone cannot however be the new economic paradigm. While ecological economics takes essential ontological positions, it does not possess a comprehensive alternative theory for how the economy works . Many other heterodox (non-neoclassical) schools face a similar challenge, where they are largely defined in opposition to neoclassical theory without having sufficient internal agreement and breadth to replace it completely . Thus, the necessary new economic paradigm is not so much a paradigm, but tolerance for a plurality of economic analysis.

Not all heterodox schools have a research focus on sustainability. However, since they are each methodologically diverse , they are all inherently more valuable to sustainability research than neoclassical economics. Admittedly, pluralism yet again raises the issue of how different types of knowledge should be compared and contextualised when they are generated within distinct paradigms. This should perhaps not be seen as a reason to abandon pluralism, but as an intrinsic feature of social research. What transdisciplinary and post-normal research have gotten right, which monistic economics has overlooked for decades, is that a pluralism of perspectives is a necessary feature of studying human interaction comprehensively.

Conclusion

It is regrettable that economics is poorly equipped to producing knowledge for sustainability, since sustainability crises are economic crises – the economy is not only a human-human interaction, but a human-environment interaction (and also increasingly a human-algorithm, or algorithm-algorithm interaction). The sustainability problems of economics stem from its early 20th century self-definition as a quantitative discipline of means, and an ontology that excludes basic sustainability concepts such as critical ecosystem services, uncertainty, power, and diverse values and political ambitions. Along Ha-Joon Chang’s thinking, a better economics would be framed in relation to its subject matter – the economy – while understanding the economy in a fuller sense and tolerating multiple methodologies for its study. Until then, the economic research that is most relevant to sustainability is done within other paradigms such as ecological economics, ‘old institutional’ economics, and other social sciences.

An even more fundamental problem with the dominant paradigm is that it is dominant. Sustainability research and practice demands pluralism and the non-domination of specific world-views. Ecological economics stands out as making an essential environmentalist contribution to economic analysis by recognising fuller interconnection between the economic and environmental domains, but only a tolerance for multiple economics paradigms will be truly consistent with social-environmental research. Nurturing a diversity of perspectives within a single domain of research challenges orthodox academic principles. Sustainability research is however a case where novel problems require novel principles.

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