A New Vision: The Market as Subservient to Nature


What is needed is not ever more refined analysis of a faulty vision, but a new vision. This does not mean that everything built on the old vision will necessarily have to be scrapped, but fundamental changes are likely when the preanalytic vision is altered. The necessary change in vision is to picture the macroeconomy as an open subsystem of the finite natural ecosystem (environment), and not as an isolated circular flow of abstract exchange value, unconstrained by mass balance, entropy and finitude. . . . .

The major task of environmental macroeconomics is to design an economic institution analogous to the Plimsoll mark–to keep the weight, the absolute scale, of the economy from sinking our biospheric ark.

The market, of course, functions only within the economic subsystem, where it does only one thing: it solves the allocation problem by providing the necessary information and incentive. It does that one thing very well. What it does not do is solve the problems of optimal scale and of optimal distribution. The market’s inability to solve the problem of just distribution is widely recognized, but its similar inability to solve the problem of optimal or even sustainable scale is not as widely appreciated. . . .

Economists have recognized the independence of the goals of efficient allocation and just distribution and are in general agreement that it is better to let prices serve efficiency, and to serve equity with income redistribution policies. Proper scale is a third, independent policy goal and requires a third policy instrument. . . . . The point is that the market’s criterion for distribution income is to provide an incentive for efficient allocation, not to attain justice. These two values can conflict, and the market does not automatically resolve this conflict. The point to be added is that there are not just two, but three, values in conflict: allocation (efficiency), distribution (justice), and scale (sustainability).

–Herman Daly, Beyond Economics

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Author: manderson

I live in NYC.

3 thoughts on “A New Vision: The Market as Subservient to Nature”

  1. Daly writes: “The necessary change in vision is to picture the macroeconomy as an open subsystem of the finite natural ecosystem (environment), and not as an isolated circular flow of abstract exchange value, unconstrained by mass balance, entropy and finitude. . . . ” This is gobbledygook of the highest order! I have absolutely no idea what it means!

    Then he states the obvious fact about the “market’s inability to solve the problem of just distribution” without any attempt to describe what would be “just.” Until recently, the free market was deemed to provide a degree of justice by allowing each person to “reap as he sows.” But he does observe that redistribution can smooth inequities that may occur. So he approves of the safety nets for the disadvantaged. Nothing new here! Then he points out that the free market is unable “to solve the problem of optimal or even sustainable scale,” the old Malthusian error that has been proven exaggerated by actual results over the past few millennia. Of course, this weakness, to the extent there is one, is patched pretty well by environmental regulations, a process that has been going on in the U. S. for over half a century!.

    Daly does agree with most observors that the free market does one thing very well–it solves the allocation problem by providing the necessary information and incentive. Thus it has led to the recently attained highest standard of living in most free market nations that exceeds the conditions found throughout history in autocratic societies.

    I guess what he is saying is simply that:

    The free market is great, but needs a little tinkering to help the disadvantaged
    and minimize pollution.

    So, I ask you : is Mr. Daly a deep thinker or a BS artist???

    1. Bill,

      As always, I love your constructive criticism. It’s nice to know someone out there is listening, thinking, and challenging.

      Daly is most definitely a lucid thinker and far from a BS artist. However, he is an economist, and his language can definitely be offputting. I’m still struggling with the language, but this particular set of passages struck me as interesting, which is why I posted them.

      A few points on this quote. I took these pieces from the middle of a chapter in the beginning of a book on sustainable economics published in 1997. So if some of it sounds like gobbledygook or slightly outdated, there you go.

      His point above isn’t really about any ideological notions of what “just” distribution might entail — he’s merely establishing that allocation and distribution are separate functions and require distinct policies to address them. In recognition of this, he notes that scale is another consideration, mostly ignored, that also requires distinct policy measures to address.

      I’m curious about what you say here: “the old Malthusian error that has been proven exaggerated by actual results over the past few millennia. Of course, this weakness, to the extent there is one, is patched pretty well by environmental regulations, a process that has been going on in the U. S. for over half a century!”

      I might agree with your notion of a “Malthusian error,” depending on what you mean more specifically by this and what results you are referring to, but I question your assertion that sustainability has been “patched pretty well by environmental regulations.” What is the proof for this? Based on the evidence of climate change, topsoil depletion, wildlife extinction and marine life depletion, and various ecosystem service instabilities, it seems to me like we need to take measures far more drastic and radical than simply minimizing pollution!

      1. I am all for protecting wildlife and marine life, coral reefs, and choice wilderness areas, and am supportive of the numerous private and public organizations that work in that area. But I don’t think Daly’s garbled language helps in any way– talking about pre-analytic thinking, whatever that is, about macroeconomic subsystems, whatever they are, and warnings that we are sinking our biospheric ark. Why can’t we use clear accepted English??

        Further, Daly’s prose adds nothing to the debate. We know the market is efficient, but needs some provision for a social safety net and some controls to minimize destructive side-effects on the environment. These are the three elements Daly is concerned with, they are to a degree in conflict, and American policy has been at work on this for over a century since Teddy Roosevelt set aside parkland so he could hunt.

        I believe that the redistribution programs that have accumulated over the last 50 years are inefficient, redundant, and direct too much aid to the wrong people. The dozens of agencies and programs should be totally reorganized to direct aid to the most needy in a way that reduces the huge frauds regularly perpetrated in our food stamps and disability programs. But these programs have little to do with the free market, sustainability, pollution, or wildlife protection. I do not think Daly’s melding of all these into a 3-way “vision” adds anthing useful to the question. Indeed, it seems to confuse it.

        As for the ongoing wildlife extinction and marine life depletion I have a pessimistic view. I deplore anything that kills birdlife, boaters who scar and kill the manatees, the foreign nations that harvest whales and dolphins, collect rhino horns, etc. and I contribute time and money to rescue programs. But let’s face it, noone wants loose wolves, tigers, and grizzly bears around their homes, farms, and schools. As populations grow, there will be increasing pressure on all wildlife. Is there really any alternative but to keep breeding stocks in zoos? Daly’s gobbledygook avoids such real issues facing us today–and substitutes oracle-like mumbo jumbo instead of addressing the obvious problems we face. That’s why I gave him one star.

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