8.1. An Apostasy from Free-Market Fetishism
Non-economists as well as economists are seeing glaring problems and inconsistencies with the contemporary theory and practice of mainstream economics. Social scientists are recognizing the urgent need to confront the planetary environmental crisis [94
]. Green criminologists are debating how capitalism and nature can both survive over the long run and if, in criminological terms, capitalism is a crime against nature [95
The academic discipline of economics encompasses profound disagreement and controversy over fundamental ideas such as Keynesianism, monetary policy, feminist economics, and the efficiency and accuracy of the free market for setting asset prices [97
]. Ongoing debates over these ideas prove that the discipline of economics is alive, flexible, and potentially responsive. Nobel Prize winning economist Paul Krugman has provided an excellent summary of these disagreements, stating that “the economics profession went astray because economists … clung to a vision of capitalism as a perfect or nearly perfect system, (and) this romanticized and sanitized vision of the economy led (them) to ignore all the things that can go wrong.” He thus argues that “(Economists) will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets” [97
This captures some but not all of the problems with the theoretical foundations of the discipline of economics. For example, it does not capture the failure of mainstream economics in valuing natural capital as the very foundation upon which all market economic activity takes place [98
]. It is an accessible characterization of the level of disagreement within the discipline.
It is interesting that while the discipline of economics encompasses fundamental disagreement within the academy, mainstream economics is still the most revered approach to economics for advising policy makers. This is in contrast to an academic discipline such as climatology, which enjoys almost unanimous agreement on fundamental theory within its discipline, yet its practitioners are ignored and disparaged even though they have a much better track record in matters of predictions and fundamental theoretical explanations. It is time for policy makers to give more attention to economic schools and approaches that embrace the messy world of data, empirical reality, uncertainty, and irrational human behavior [1
]. It is interesting to note that many recent Nobel Prizes in economics have been awarded to people who have recognized the implications of many of the failed assumptions of mainstream economics. We argue that a fundamental set of premises from ecological economics [21
] can serve as guidelines for redirecting economic policy advising with the aim of transitioning towards sustainable wellbeing economic systems.
8.2. A Modest Proposal to Reform the Logic of Economics
The paradoxes and delusions described in this paper are well known. The Jevons paradox, the LtG, and the non-generality of the EKC remind us that the effects of technological improvement and development at the global scale can be different from those effects at local scales. The Easterlin paradox reminds us that income is only one of many contributors to human wellbeing. The Lucas paradox and the delusion of the invisible hand show how free global trade can contribute to maintain global imbalances. Taken together in one overall picture, these paradoxes and delusions alert us to the negative outcomes of economic “growth at all costs”, with local and global consequences. They show us that economic growth is not synonymous with increasing wellbeing and prosperity and that the logic of economics needs fundamental transformation, shifting away from a narrow focus on producing and consuming marketed goods and services to one more broadly focused on sustainable wellbeing as the goal of development [105
A wellbeing economy has the fundamental goal of delivering good human mental and physical health, greater equality and fairness, good social relationships, and a flourishing natural environment. A wellbeing economy will attribute value to economic activities driven by collaboration and sharing, recycling, and upcycling. It will redefine the role of producers and consumers, blurring the boundaries between them. It will entail regenerated ecosystems and an extended global commons. It will mitigate the need for vast expenditure on treating, healing, and fixing through supporting safe and healthy communities and distributing wealth more fairly from the outset (predistribution) rather than relying on complex and politically fragile (in times of inequality) redistribution. It will switch to renewables and purpose-driven businesses with social and environmental aims. It will focus on measures of progress that reflect real value creation [106
Existing examples of what a wellbeing economy might look like are already happening around the world through innovative business models based on restorative and regenerative design, service offerings, collaborative consumption, and re-use and re-cycling. A transition to renewable energy is already happening, with countries such as Costa Rica, Finland, and Sweden aiming at being carbon neutral by 2021, 2035, and 2045, respectively, and national trusts, institutions, and companies divesting from fossil fuels.
Local and national governments are implementing measures of prosperity to inform budgetary decisions beyond their effect on economic growth. In 2019, New Zealand adopted such a Wellbeing Budget [107
]. Similarly, Scotland assesses national progress through a framework measuring outcomes in improving child wellbeing, sense of community, culture and education, environmental quality, quality of working conditions, health, human rights, and reducing poverty. The framework includes economic growth as one of the many deliverables of a national economy, assessing it, however, against carbon footprint and natural capital depletion [108
A wellbeing economy has a commitment to put wellbeing at the heart of policymaking. Overall, to implement a wellbeing economy, we need a major transformation to:
Live within planetary boundaries and achieve environmental sustainability;
Achieve and maintain an equitable distribution of wealth and opportunity, both within and between generations;
Efficiently allocate resources to provide high levels of human wellbeing.
A fair, responsive, just, and accountable governance system aimed at promoting wellbeing recognizes the interconnectedness of the environment, society, and the economy and is coherent with global initiatives for sustainability, such as the Sustainable Development Goals [92
]. The paradoxes and delusions discussed here evidence how mainstream economics theory does not reflect anymore the current real-world phenomena. Failing to live within planetary boundaries makes it impossible to achieve an equitable distribution to future generations. The findings of Piketty and Wilkinson and Pickett suggest that this will in turn undermine the end goals of human and ecological wellbeing. Krugman’s prescription for a re-evaluation of the discipline of economics does not go far enough in dealing with planetary boundaries and natural capital within the global economy. Efficient allocation is essentially what mainstream economics has attempted to do historically within its flawed terms of reference (e.g., failing to value natural capital and waiving concerns about distribution of wealth). Imposing Pareto optimality and ceteris paribus rules suggest that equitable distribution will also represent a formidable challenge for any serious attempt to re-evaluate and/or reform the discipline of economics. Just like environmental economics that developed in its present form in the 1960s from acknowledging market failures, now it is time to transform the economic discipline into a more integrative and branched theoretical apparatus not only focused on the maximization of profits and equalization of marginal costs and revenues (that only reflect marketable items). In the spirit of using empirical and adaptive approaches to achieving these goals, we suggest some possible solutions and a new vision of global leadership.
8.3. Reforming Global Economy’s Leadership
The G7 is a group of GDP-rich countries meeting yearly to define common policies “on global issues like economic growth and crisis management, global security, energy, and terrorism” [109
]. Despite the fact that no formal membership criteria exist, all the participant countries were initially selected on the basis of their GDP, a parameter which is also used to identify members of the G20 [2
]. One question to ask is: Are the goals and objectives of the G7 appropriately framed in light of climate change, economic inequality, security, and resource depletion? If the answer is “no” and we reframe the purpose of the G7 towards sustainability, equity, and efficiency then we might ask: Are the current countries that comprise the G7 the best examples of political economies that actually function to increasing the common good in a sustainable way? Or, in other words, do we have a good set of exemplars steering the global economy?
None of the G7 countries are amongst the seven best-performing countries for sustainable development (according to the Ecological Footprint, the Happy Planet Index, and the Human Development Index), nor in terms of wellbeing (according to Foundations of Wellbeing and the Social Progress Index), nor in terms of environmental performance (with the exception of Germany, according to the Yale Environmental Performance Index), nor prosperity (with the exception of Canada, according to the Legatum Prosperity Index) [110
]. The list of best-performing countries according to these alternative-to-GDP indicators includes countries whose sustainability vision and inclusive policies have been praised by eminent economists [111
National governments that are prioritizing environmental, social, and economic policies for increasing wellbeing should step forward as global leaders. This is already happening through the Wellbeing Economy Governments partnership (WEGo), a joint initiative that was officially launched in November 2018 led by Scotland with New Zealand and Iceland, with further governments to join in the coming months and years. The formation of WEGo was discussed in October 2017 in Glasgow by representatives of governments, including ministers and high-ranking officials and with the advice of world-leading academics and the OECD. This instigation of WEGo [112
] recognizes the importance of economies that contribute to the wellbeing of people and planet and that through collaboration and sharing of good practice, countries can better deliver this goal. Participating governments and economies have demonstrated capacity to marry a low-impact economy with high living standards or are sincerely committed to it in future policy decisions. This implies going beyond GDP as the key parameter to identify international leadership and implicitly recognizes mainstream economics paradoxes and delusions that constrain the development of a wellbeing economy. Forming an international alliance provides a significant opportunity for this initial group of countries to act as the drivers of change by championing wellbeing principles and collaborating together. They show that the shift to a new economic and social paradigm that puts people and the planet at its core is a development goal more suited for the 21st century than clinging on to the economics of paradoxes and delusions. This is also consilient with the vision of UNEP’s recently published Global Environmental Outlook (GEO-6) with its vision of “Healthy People, Healthy Planet” [113
Alongside WEGo is a cross-sectoral collaboration of networks, businesses, academics, citizens, and civil society—this is the Wellbeing Economy Alliance [114
]. Its members are united by the willingness to work together to build an economy that serves people and planet first and foremost.