Earth Economics

There are at least two “Earth Economics” websites.

The first website is an off-shoot of Herman Daly‘s research in ecological economics, see here. Quote: “Earth Economics provides robust, science-based, ecologically sound economic analysis, policy recommendations and tools to positively transform regional, national and international economics, and asset accounting systems.” However, they neglect the work of Dutch economist Roefie Hueting on how to account for the environment in the UN System of National Accounts. The Daly-Cobb Index of Sustainable Economic Welfare (ISEW) allows one to substitute home maintenance for the destruction of the ecology, which is silly. Hueting’s index of environmentally Sustainable National Income (eSNI) is the only index in the world that is properly based both in economic theory and statistical practice. See my paper The Old Man and the SNI.

The second website concerns the new economics textbook Earth Economics by Peter van Bergeijk of the Institute of Social Studies (ISS) in The Hague. The ISS gets its students from all over the world and thus it seems warranted that it pays attention to the world itself. This is a YouTube presentation by Peter explaining that the world is a closed economy and that there is emergent world governance perhaps as we see emergent stability in chaotic systems. Paraphrased: “We see governments all applying the same economic policy (of austerity) and thus the effect is similar to how there would be only one government following that policy.” See also a summary at Edward Elgar’s blog and this longer paper at SSRN.

I tend to enjoy Peter’s work in economics. Peter is open to the importance of the arts, and not only since he paints himself. His Ph.D. thesis (now here) had the important conclusion that economic boycotts are counterproductive. The power elites have the power to insulate themselves and only the weak general population suffers, while it also loses the ability to oppose the power elites. A better policy is to integrate troublesome countries in the world economy such that the internal countervailing powers generate moderation. The only reason that I still dare to advise to a boycott of Holland is that Holland is a wealthy country where a boycott would still achieve the desired outcome, i.e. the end of censorship of science.

It is wonderful that Peter now focusses on world governance. In the past Jan Tinbergen already focussed on this but the subject has been slipping from attention, even though we have the ecological crisis of which climate change is only an aspect. (The two websites are linked, if not by HTML then by content.)

I have some misgivings however.

(1) Peter states that he introduces the global dimension because he wanted to teach about an existing closed economy. This is convoluted. We don’t have a world government thus the world isn’t an existing closed economy in the sense of the Keynesian model. In common definitions we still have countries that trade. In the Edgeworth box the boundary conditions of world resources are given, so there is no need to switch to a closed economy model.

(2) My book DRGTPE also discusses world governance and suggests that this will be improved when countries have their own national Economic Supreme Courts (ESCs). In my analysis economic theory is important as an own separate factor in policy making and thus it requires special protection. That countries nowadays tend to follow the same policy (of austerity) is not a sign of convincing economic science but a consequence of unscientific processes. 

(3) My paper Money as gold versus money as water (RWER July 2013) gives an amendment on the theory of the optimal currency area and suggest that ESCs are the route also for the euro and world money.

(4) My 2005 paper on a World Parliament suggested that people can already start on creating such a parliament as an NGO, by setting up world political parties, holding elections, having parliamentary meetings, and paying voluntary (tax) contributions. Eventually such a parliament might develop some countervailing power to the UN setup. The European Union might be a bad example how countries could co-operate but we could all learn from the experience.

Peter’s book suffers from neglecting DRGTPE. I told him a decade ago about the censorship of science by the directorate of the CPB but he has been neglecting it. Students from all over the world come to The Hague to learn about economic science and “Earth Economics” but aren’t given science and aren’t told about the key results.

Sic transit gloria mundi.

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