The markets being planned and in some cases implemented to deal with environmental issues such as pollution, it seems, are no longer being required to meet perfect, free market thinking, where free producers and free consumers determine the price at which to produce and consume.
Economists seem now fine with permanent government intervention setting up environmentally related market prices. And this raises the question, has economic thinking been flipped in the face of the environmental pressures since 2012 UNCSD Rio plus 20? If yes, is that good in the long-term?
If there are externalities, then it is okay and perfectly normal for government to intervene. This is standard regular normal economic theory.
I do not understand why you think this is "flipping" of economics.
Dear friends, thank you for your comments.
Think about, in theory if we correct the traditional market model to reflect environmental concerns then we need to internalize the environmental cost of doing business in the pricing mechanism of the market and when we do that we shift from perfect traditionnal market conditions to perfect green market conditions so now green firms go beyond traditional firms and supply the green market with green products and services at the lowest green market price possible. As you know, under perfect market conditions you do not need government intervention as they are free markets.
As you know, currently countries signature of the paris agreement are implementing different sorts of dwarf green markets such as carbon pricing based markets, where you need permanent government intervention with no incentives for firms to aim at producing at the lowest environmental cost possible as they are not green firms. As the price of carbon is increased, you are forcing behavior that at one point make backfire,
So we have gone from free market thinking and no government intervention to non-free market thinking with permanent government intervention since 2012 UNCSD rio +20 or we have slowly moved from free green markets and free green economies thinking to the world of non-free markets or dwarf green economies.
Is not that flipping?....I remember the time when goverment intervention was on the table economists would scream "that will distort the market"' and it is obvious now that we have been living under distorted markets since Adam Smith assumed environmental externality neutrality.
I am right now about to publish a paper where these ideas are expanded.
Thank you for your comment
Respectfully yours;
Lucio
Lucio Muñoz Once you post your paper on RG, we will be most happy to provide you with constructive and critical comments.
Josepth, keep in mind "environmental externalities" are the consequences of the model and the root cause is distorted market prices, prices that do not account for environmental cost of doing business.
When you correct those price distortions and internalize the environmental cost you shift the market from traditional market conditions to green market conditions, all free market conditions.
The theory-practice consistency principles requires the use of green market theory to address green market issues....when you implement dwarf green markets instead, that is a violation of that principle....but if it is used anyway, that is flipping traditional economic thinking.
Do you disagree?
Ronald, in the traditional markets there are producers and consumers, producers aim at producing/ at supplying the market at the lowest economic cost possible....nice expected profit seeking behavior .....in the green market there are green producers and green consumers, green producers aim at producing/ at supplying the market at the lowest eco-economic cost possible....nice expected green profit seeking behavior
The traditional producer/firm needs to internalize the environmental cost of doing business to become green producer/firm, that is what 2012 UNCSD Rio +20 expected goverments to encourage when they shifted to green markets, green economies and green growth...they did not call for a shift to dwarf green markets....
Keep in mind about goverment intervention....in free markets, the market price is endogenously determined by the interaction of consumers/demand and producers/supply, no government intervention exist....In non-free markets, the market price is exogenously determine(e,g, carbon tax) and demand must cut supply at that price. Permanent government intervention is needed,
Do you agree that we are living in a world of economic thought flipping right now or no?
I have tried to show that yes and indicated why I think so.
You can share your ideas, I am here to freely exchange ideas in a respectful environment....I am not here to convert anyone....
Respectfully yours;
Any policy recommendation must consider the difficulties in implementation. Policy makers ignore the problems of implementation at their own peril. It may not be possible to implement the BEST theoretical solution. We must be pragmatic.
Good day Joseph, I guess then you believe we need to flip economic thinking to be pragmatic. Adam Smith, when assuming social and environmental externality neutrality failed to be realistic....now that we have a problem, instead of fixing it, we have to be pragmatic. ....
If you are right, and those planning and implementing dwarf environmental solutions to green market problems at the UN or in governments are being pragmatic, then the 2012 Rio plus 20 decision to go to green markets and green growth was a decision taken fully knowing that they had not a science based solution to support it/implement it....perhaps becasue of the paradigm shift knowledge gap created when you shift from an economy only model to an economy and environment model.....
Just think about, the climate change plans are science based which need to be implemented through a science based micro and macro economy right? Can you implement science based solutions using non science based tools?....That is what is happening right now....
In summary, this question is whether or no economic thinking has been flipped and if that it is good in the long term. And to keep the focus of the question on this, I see you seem to agree.
Ronald, good day.
If you agree that in 2012 Rio plus 20 we formally moved towards green markets and green growth, that means traditional micro and macro enconomic model no loger work, they are left behind....now you need green micro economic/the theory of the green firm and green consumer; and you need green macro economic/the theory of the environmentally friendly economy......so the standard thinking that you mentioned there no longer work, the cost structure of traditional markets is below the cost structure of green markets....
Again the questions is has economic thinking flipping taken place, and your comment tells me yes, whether it is pragmatic thinking or not, it is beyond the point.
Dear friends, just as food for thoughts related to the question I am sharing this article here:
From Traditional Markets to Green Markets: A Look at Markets Under Perfect Green Market Competition https://www.researchgate.net/publication/330701187_From_Traditional_Markets_to_Green_Markets_A_Look_at_Markets_Under_Perfect_Green_Market_Competition
Ronald, the 2012 UNCSD rIo +20 shift mean, now economists and governments and society needed to figure out how to best transition from the traditional economy to the green economy to make the first step away from business as usual as the brundtland commissions asked us in 1987....This was supposed to be the beginning of transforming consumers and producers slowly into green agents throught environmental education and through fixing education programs including economics to internalize the environmental concern....a tranformational social change....
It was not just formal talk in 2012, but in 2016 almost all countries in the workd, all developed countries, signed the paris agreement making the move to green economies binding, a binding agreement....
However, slowly the move towards green markets started to be diverted towards dwarf green markets....
Thanks for your comments
Ronald, you are moving away from the question at hand, the flipping of economic thinking in the face of the environmental crisis.....and as far as I can see you agree that it has happened....
I said "....making the move to green economies binding, a binding agreement...." and as far as I know AS OF TODAY only the USA has asked out from the group of originally signing countries......
Let's leave it here unless you would like to provide your views related to the question at hand....
Lucio Muñoz Maybe what you propose is theoretically and conceptually correct. However, you must think of the implementation of the ideas. There is no use in having a brilliant idea if it does not work in practice. Maybe in theory, the idea of complete internalization of social costs is great. But people resist, and so we have to compromise. To live in society, we must compromise and slowly move forward.
Joseph, we are, at least I consider myself a scientist, if a theory does(eg the traditional market) not work and the evidence shows it does not work(increasing pollution and poverty levels), then we need to improve it if possible by fixing it and shift it to a more responsible theory(eg green markets). Then we need to close the paradigm shift knowledge gap created by developing the new theory or fixing the old one to properly deal with the new paradigm issues(eg environmental issues). Once you have done that you can develop a transition plan to transition from the old paradigm to the new one in a step by step way.....
In my view 2012 UNCSD Rio +20 made the shift under a green market paradigm shift knowledge gap which preclude them to see or develop a long tern transition plan aim as step by step, industry by industry to shift to green market pricing....
That i think is what Karl Popper would have expected from scientists after theory refutation and that is what Thomas Kuhn would have expected too after paradigm shift was agreed upon....
Let's leave it here Joseph, and thank you for your comments
Being pragmatic using dwarf green markets under paradigm shift knowledge gap may backfire and make it more difficult later on and perhaps more costly to finally transition to green markets, especially if our attention is on the consequences and not on the root cause, but i think a global or country dwarf green market collapse, partially or total may do the trick and the governments will be blamed this time, not firms or consumers as markets would be under permanent government intervention.
Let's leave it here Joseph, and thank you for your comments
Lucio Muñoz Dear Mr. Munoz, with your permission, I would like to respond to your previous comment which has many interesting ideas.
Lucio Muñoz I would like to suggest that perhaps economics is not a proper science because the predictions of economics are very weak. On this point, we may have to agree to disagree. I am not sure what exactly we disagree on. In my experience, implementation is one of the weakest links. For example, in the U.S. citizens do not like cap and trade, even though most economists would support it. Most economists find that reducing class size is not cost-effective but this policy is extremely popular among educators. Think about the disagreement on minimum wage. I could give more examples. These are "wicked" social programs that a scientific approach may not be able to solve. Climate change is such a program. See attached file about the complexity of wicked programs.
Gracias maestro. Con mucho gusto.
Economists need to change their record of progress. GDP is no longer an adequate record of economic progress as it does not take account of the depletion of resources or the market failure, such as pollution. Ideally, we need to reduce our consumerism and live lightly and thoughtfully as this will improve the sustainability of our planet for all. And yes, we do live in a technological era, so we do need to apply these technologies, such as to irrigation processes for the growing of food, so that existing resources, with a strong emphasis on water and energy, can be used more effectively. Are we moving in this direction? One does hope so and ultimately as people with drivers to survive and be successful, we should move in a direction that enhances our own well-being.
Good day Joseph, First, I am trying to keep comments within the scope of this question, traditional economic thinking flipping or not in responding to environmental crisis, and it seems yes.
With respect to your last comment, if a model is distorted would you expect the predictions to be trusted?....Since Adam Smith assumed social and environmental externality neutrality you can not use it to deal with socio-economic issues or eco-economic issues, as only the economy matters. If you do not properly correct the adam smith model to close social and/or environmental sustainability gaps(eg green markets) and use for example dwarf green markets, do you think the predictions can be trusted?.
You mentioned climate change program, it is a science based program being inplemented through dwarf green markets, not green markets....
If you have anything to add to the question of economic thinking flipping feel free to write otherwise let's leave it here.
Gracias por sus comentarios!
I think you can find some good food for thoughts related to your last comment in the following articles:
Complex and Man-made Markets: Are We Currently Approaching Sustainability in a Backward and More Chaotic Way in Terms of Economic Thinking? https://www.researchgate.net/publication/281277199_Complex_and_Man-made_Markets_Are_We_Currently_Approaching_Sustainability_in_a_Backward_and_More_Chaotic_Way_in_Terms_of_Economic_Thinking
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Did Adam Smith Miss the Chance to State the Goal and Structure of Sustainability Markets in His Time? If Yes, Which Could Be Some of the Possible Reasons Behind That? https://www.researchgate.net/publication/286625136_Did_Adam_Smith_Miss_the_Chance_to_State_the_Goal_and_Structure_of_Sustainability_Markets_in_His_Time_If_Yes_Which_Could_Be_Some_of_the_Possible_Reasons_Behind_That
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Beyond Traditional Market Thinking: What is the Structure of the Perfect Green market? https://www.researchgate.net/publication/302025169_Beyond_Traditional_Market_Thinking_What_is_the_Structure_of_the_Perfect_Green_market
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The Unintended Consequences of Paradigm Death and Shift: Was the Arrow Impossibility Theorem Left Behind? https://www.researchgate.net/publication/299879934_The_Unintended_Consequences_of_Paradigm_Death_and_Shift_Was_the_Arrow_Impossibility_Theorem_Left_Behind
Annabel, thank you for your comments. Since it is outside the scope of economic thinking flipping question, I will leave it here.
Ronald, please read all the comments i have made here carefully, let's go step by step, what is the question at hand Ronald you are not moving away from?
Ronald, 2012 Rio plus 20 was the end of traditional market thinking or business as usual, a global move to the world of green markets, green economies and green growth....A tsunami compared to the environment related events that came before it...in my humble view
Do you think that permanent government intervention to push environmental goals is consistent with traditional free market thinking? I think No, but permanent government intervention is needed in dwarf green markets.
If you Ronald actually think that free market thinking is consistent with permanent government intervention I would like to know why you think so.
Good day Ronald, it would be been easier to exchange ideas if you would have answer the question directly and provide your rationale, but instead you started by agreeing with Joseph, but Josepth did not directly answered the question.
If not much has happened since 2012 rio plus 20 to now in terms of setting up green markets and the slow migration to dwarf green markets, including Canada as you know, in my view can be explained by the green market paradigm shift knowledge gap created when you shift from a perfect market(eg the traditional market) to another perfect market(eg the green market)....without a clear green market knowledge base IT IS NOT SURPRISE no much progress, but the cummulative impact of increasing govermnent intervention needed to sustain the working of dwarf green markets may lead to market failure. We may see this in our life time.
Let.s agree to disagree then Ronald
Respectfully yours;
Lucio
"Sustaining and enhancing human well-being
requires a balance of all of our assets—individual people, society,
the built economy, and ecosystems. This reframing of the way we
look at ‘‘nature’’ is essential to solving the problem of how to build
a sustainable and desirable future for humanity.” - quoting from
Changes in the global value of ecosystem services
Global Environmental Change 26 (2014) 152–158
Robert Costanza et al. So the way of valuing the economy is not outside of the flipping of economic thinking. It is not until we change the way we measure the economy that we will change our thinking and create further markets to deal with pollution.
Good day Annable, the key is "[This reframing of the way we look at ‘‘nature...’’]"
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The reframing is the move from economy only thinking(eg. traditional market, where only the economy matters) to eco-economy based thiking(eg. green markets), where both the economy and nature/environment matter,..... since perfect markets shift to perfect markets, then you do not need economic thinking flipping, just more responsible economic system shifting to move from independent choice(economic choice) to codependent choice(eco-economic choice)....When paradigm shift takes place, the price structure, the choice structure, the model structure and the cost structure shift at the same time...leaving old structures behind.....
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If Constanza et al are thinking about the reframing from the green market point of view and perfect market shift thinking, then there is no flipping just a capturing or inclusion of environmental responsibility....to bring traditional economic thinking to a higher responsibility level....
If you go from traditional economic thinking(free market thinking) to dwarf green market thinking(non-free market thinking) YOU NEED traditional economic thought flipping. .... If Constanza et al reframing is to be done within dwarf green markets then you NEED ECONOMIC THINKING FLIPPING.
Thank you for your comment Annabel
Respectfully yours;
Lucio
I have been at Rio+20 and I can confirm that economic questions were very lively discussed there and many representatives of the (private) economy contributed, at times with very interesting ideas around 'green economy'.
Still I would like to highlight that this was a minority, a huge minority, and I cannot see any paradigmatic change, not even in the so-called developed world where awareness has surely reached many in companies; where ever being 'green' can be made a comparative advantage, it is taken up, but that does not mean that suddenly the exploitation of resources, the degradation of the environment is now no more happening. I also would argue that in the big developing countries catch-up industrialization leads to environmental challenges that are bigger than the reduction of negative environmental impacts elsewhere.
Still there is no doubt that economic thinking and economic measures to reduce pollution, emission, degradation and resource utilization will be required to strengthen global environmental improvements. To achieve this in existing economic systems might be very difficult.
Dear Eberhard, thanks for your comments.
As you may remember, just before 2012 Rio plus 20 the OECD, different offices of the UN, the World Bank and so on wrote about win-win solutions when moving to green markets, green economies and green growth, the UN even wrote a guide to the green economy....all consistent with the 1987 brundtland commission call to move away from development as business as usual by reflecting environmental concerns and social concerns in our economic and development models,,,
We were suppose to fully correct the old traditional market model to properly address the environmental issue, and which leads to green markets...
Governments were supposed or expected to move after that with that guidance to set up green markets by internalizing the environmental cost of doing business in the pricing mechanims of the old market to shift it to green markets and provide the supportive incentives and regulation to slowly transition from the traditional economy to the green economy while created a culture and educational system of green consumers and green producers...
That has not happened yet....
Such a shift from a free traditional market to a free green market does not required economic thinking flipping just economic thinking updating....
The current dwarf green markets like carbon pricing need economic thinking flipping as they are not free markets.....
In otherwords, if you invert the assumptions of how free perfect market thinking works you get the assumptions that explain the working of dwarf green market thinking...
Since the theory proctice consistency principle requires a match of theory and practice....you can not use non-green market theory and tools to deal with green market practice and issues...sooner or later the persisntence of the environmental sustainability gap will lead to market collapse
We can not expect to solve the environmental issues with the use of traditional economic thinking or with the use of dwarf green market thinking; a view consistent with your comment "To achieve this in existing economic systems might be very difficult."
Have a nice day
Dear Eberhard, good day, what you call "developing country catch-up" I called the copy cat syndrome.
You may find ideas related to this in the following papers shared as food for thoughts:
Weak Landscape-Strong Emission Impact Based Development: Is this the Most Likely Response in All Countries to Global Warming Issues?
https://www.researchgate.net/publication/307561802_Weak_Landscape-Strong_Emission_Impact_Based_Development_Is_this_the_Most_Likely_Response_in_All_Countries_to_Global_Warming_Issues
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Substituting The More is Better Paradigm for The Less is Better Paradigm: Identifying Key Transitional Problems
https://www.researchgate.net/publication/281276526_Substituting_The_More_is_Better_Paradigm_for_The_Less_is_Better_Paradigm_Identifying_Key_Transitional_Problems
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Understanding the Road Towards the Current Dominant Non-Renewable Energy Use Based Economy: Using An Inversegram to Point Out a Step by Step Strategy Towards an Efficient Dominant Renewable Energy Use Based Economy
https://www.researchgate.net/publication/281230333_Understanding_the_Road_Towards_the_Current_Dominant_Non-Renewable_Energy_Use_Based_Economy_Using_An_Inversegram_to_Point_Out_a_Step_by_Step_Strategy_Towards_an_Efficient_Dominant_Renewable_Energy_Use_
Dear friends, I sharing here an unpublished article as it is in line with this question here; and you may find some good food for thoughts in it, you can take a look at it when you have time:
Article The Flipping of Traditional Economic Thinking: Contrasting T...
Wishing you a good day
https://www.researchgate.net/publication/308955102_Stimulus_of_developmental_projects_to_landscape_dynamics_in_Uttara_Kannada_Central_Western_Ghats
https://www.researchgate.net/publication/313486918_Modelling_the_forest_transition_in_Central_Western_Ghats_India
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