The Essentials of Economic Sustainability

Economic Sustainability: Ability to meet the economic needs of the present without diminishing economic opportunities for the future

Prepared by John Ikerd for MUM Deep Green Business Symposium, July 5, 2013

Economic Worldview:Sustainability: Internalize Externalities

Nature

Economy

Society

Ecological Worldview:Sustainability: Rethink Economic Reality

Hierarchy of Sustainability

• Purpose and Principles are determined at higher levels:

– Nature and society set bounds and define parameters for economic development.

– All economic value is derived from nature by way of society – there is no other possibility.

• Possibilities determined at lower levels.– Economy determines the extent to which society can

realize the potential of society & nature.

Investments in nature and society essential for economic sustainability have no economic

value.• Economic value is fundamentally different from

social and ethical value.– Economic value: Individual, Instrumental,

Impersonal– Social Value: Interpersonal, Instrumental, Personal– Ethical Value: Communal, Non-instrumental,

Impersonal. • Internalizing economic externalities is necessary but

is not sufficient for sustainability.• The economy places a premium on present value

relative to future value.

Interest: Savers: Reward for delayed gratification or use. Borrowers: Cost of advanced gratification or use.

Compound Interest: Growth in economic value over time.$100 at 7% Compound Interest

Discounted Present Value: Economic value of a future benefit Discount: Consumers: Cost for delaying gratification --

Investors: Cost for delaying return on investment$100 at 7% discount rate

We have created an unsustainable economy.

• All economic value is derived from nature by way of society – there are no other possibilities.

• Nature is finite in its ability to create economic value – productivity ultimately limited by solar energy.

• It is necessary to respond to economic incentives to use nonrenewable resources more efficiently and shift to renewable sources of energy – but not sufficient.

• The economy places too little value on future benefits to ensure the level of investments in nature and society essential for economic sustainability.

• The resulting degradation of nature and society has degraded the productive capacity of the economy.

Ethical/Nature

IndividualEconomy

Social/Society

Economic Sustainability will require “An Expanded Social and Ethical Awareness”

We are inseparable from nature. Our purpose, principles, and priorities are of nature.

• A cultural ethic reflects a societal consensus of the purpose of life and the principles that must guide it.

• A cultural/ethical commitment to sustainability must take priority over societal values and needs of society must take priority over individual preferences.

• Economic and social autonomy is necessary but must be bounded by societal and ethical responsibility.

• A sustainable economy must function within the bounds of an equitable and just society.

The Essentials of Economic Sustainability

This is not some new-age philosophy.This is hard, cold economic reality.

We are economic, social, and ethical beings.It is not a sacrifice to care for others or care for the

earth.We are all part of the same inseparable whole

The “expanded awareness of self” essential for Economic Sustainability is a key to a better way of life and a better world.