biosphere
climate change
climate science
climatology
ecosphere
ecosystem
emissions
global warming
greenhouse gas
threshold
tipping point
How many of these terms appear in Mankiw's 2,500 entries? None. Nor do any of them appear among the book's 13 section titles, 36 chapter titles and over 700 sub-chapter titles. Why? Because the basic theoretical structure of the economics that is taught to millions of university students every year will not accommodate the bi-directional causal link between the economy and the ecosphere.
The ideas of economists have never been more wrong nor nearly so powerful at doing wrong as those force-fed to the students of today's Economics 101.
When today's mainstream economics was invented in the 19th century, the global economy was too small to have observable effects on the ecosphere, and none were anticipated. Of course even then economies had negative effects on their immediate environment, but they were small enough to make it seem reasonable to ignore them when considering how an economy works. So economists conceptually dumped an economy's negative effects into a broad category they called "externalities" - and today in Economics 101 that is where they remain, under the name "negative externalities"
Chapter 10 of Mankiw's textbook is titled "Externalities". It defines "negative externalities" as all those not so nice things that happen when market "equilibrium fails to maximize the total benefit to society as a whole".[1] Mankiw gives two examples:
- "The exhaust from automobiles... because it creates smog that other people have to breathe";
- "Barking dogs... because neighbors are disturbed by the noise."
Further on, Mankiw explains to students that today's "environmental degradation" is analogous to the problem of overgrazing in the Middle Ages.[2]
Climatologists see the problem of "externalities" as more serious than barking dogs and overgrazing. Here, for example, are quotes from a 2015 paper in the journal Science:
"There is an urgent need for a new paradigm that integrates the continued development of human societies and the maintenance of the Earth system (ES) in a resilient and accommodating state. ... The relatively stable, 11,700-year-long Holocene epoch is the only state of the ES that we know for certain can support contemporary human societies. There is increasing evidence that human activities are affecting ES functioning to a degree that threatens the resilience of the ES - its ability to persist in a Holocene-like state in the face of increasing human pressures and shocks" [emphasis added].
In an interview, the eminent climatologist Will Steffen sums up the economy versus the ecosphere problem informally:
"It's clear the economic system is driving us towards an unsustainable future and people of my daughter's generation will find it increasingly hard to survive... History has shown that civilizations have risen, stuck to their core values and then collapsed because they didn't change. That's where we are today."
It is because humanity has engaged with today's Economics 101 fantasy - that the connection between the ecosphere and the economy is unidirectional - that we are now in this dire threshold situation. As John Maynard Keynes noted, "The ideas of economists... both when they are right and when they are wrong, are more powerful than is commonly understood." And the ideas of economists have never been more wrong nor nearly so powerful at doing wrong as those force-fed to the students of today's Economics 101. We now know, thanks to natural scientists, that the longer this mass indoctrination into this fantasy world continues, the more likely that the ultimate disaster will happen.
It is not only with bombs and gas that crimes against humanity can be committed. Everyone connected with economics, perhaps most of all its students, need to ask themselves what they can do.
NOTES:
[1] Mankiw, G. Principles of Economics (Cengage, 2006), page 204
[2] ibid. pp. 231-234
This piece originally appeared under the title, "Economics 101: Dog barking, overgrazing and ecological collapse", in Real-World Economics Review, issue no. 87, 19 March 2019