For his IBCP Sustainability group, Mr. Corbin asked students to write an article for 'The Economist' evaluating the role of GDP/ GNI as a measure of a county's success
and recommending alternative indicators which might be more sustainable.
What do you think?
We encourage Econ/ Geo/ Business/ Sustainability classes to discuss these ideas in their classes and respond to them in the comment section below!
By Greta ADRIAN
Model of Economics
We are currently ruled by the neoclassical/classical model of economics,
where the prosperity of an economy is measured as the economic growth of a
country. Meanwhile an environmental/ecological model of economics
focuses on nature and how it cannot grow infinitely. It acknowledges this and
therefore works by keeping the economy working at a stable economic level.
Our current model is flawed as it believes economic growth can continue
forever. Thanks to research we have been able to see that this is not true and
we are starting to deplete the amount of resources we have come to depend
on to live.
The classical model is a “macroeconomics” concept, founded by Adam
Smith, who is known as the father of modern economics. This concept is
where the economy is viewed as a whole, instead of the behavior of
individuals, firms, or markets. Meanwhile the neoclassical model is
“microeconomics”, focused on individual markets within an economy. Both
these models have one thing is common; they believe prosperity is achieved
through economic growth and believe it can continue forever. Supporters of
the neoclassical model think that when resources run out, incentives for
technological change will save the day. This is related to the Boserup theory,
which believes humans will never run out of resources as we will always find
other means of sustaining ourselves. The neoclassical model additionally aligns with technocentricism. This is a value systems which has complete
faith in technology, firmly believing humans have control over nature.
These models cannot be disregarded as completely useless, as they have
been working for the past few hundred years. Economic growth has helped
increase the prosperity of economies when they needed help. The issue is
that because of economic growth, our need for resources has increased
drastically which has created a deficit in resources.
On the other hand, environmental economics is a subset of the
neoclassical model. This model considers services from nature like flood
prevention, water filtration, pollination, etc. and assigns it a monetary value.
These figures are then incorporated into the market. This helps pose the
question “Can we afford not to conserve and protect the natural world?”.
The ecological model sees macroeconomics as a subsystem within the
biosphere which it depends on, therefore does not treat nature as a type of
waste disposal facility. It is now more relevant in a heavily populated world,
7.3 billion in 2018, since there are no longer limitless discoveries and
resources. This model acknowledges that indefinite growth is impossible and
so aims to keep the economy at a ‘steady state equilibrium’.
The current method of measuring a country’s prosperity, GDP, is also
flawed as it does not take into account wellbeing, only calculates a country’s
economic activity. An example of the problem with GDP is Alaska, who
suffered a massive oil spill in 1989. Yet the GDP increased, due to work effort
needed to fix the disaster. Should our environment really have to suffer to
keep our economy’s prosperity?
It could be replaced by Index of Sustainable Economic Welfare (ISEW) or
the Genuine Progress Indicator (GPI).
These methods incorporate well being of people to calculate how well a country is doing.
To conclude, our economic
model is clearly flawed, and will
not be able to continue to provide for future generations. The
environmental/ecological models clearly are a good alternative, which will
allow economies to continue without having to later suffer the consequences.
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