“We need a new way of thinking, one that tightly links the human-made world of economics and politics with the natural world of climate and biodiversity and with the designed world of 21st century technology. Consider my own home field of study, economics. Sometime in the 19th century, economics largely dropped its traditional attention to land, water and food, as industry replaced agriculture as the leading economic sector. Economists decided, by and large, that they could ignore nature – take it “as given” – and instead focus on market-based finance, saving, and business investment. Mainstream economists derided the claims of “limits to growth.”
— ‘By separating nature from economics, we have walked blindly into tragedy’, by Jeffrey Sachs, March 10, 2015, The Guardian, U.K.
Commentary: Ron Robins
One main point from the above is how to economically and financially account for natural resources which have been taken “as given.” I read sometime ago of a libertarian economist who advocated that all such natural resources should go back into private hands and then markets would price them appropriately with most owners pricing in the cost of resource depletion, replenishment and so forth. I rather like this concept but it’s probably completely impractical and might well be unfair for most of the population. (Think the Russian “oligarchs!”)
What I would propose, as mentioned in my post of February 28, 2015, is the creation in each country of a sovereign wealth fund that would not only own stocks, bonds, etc., but also all those natural resources that are presently owned by governments. The fund would have a major goal of long-term resource guardianship and management. The fund would then allow bids from private or other public bodies for the use of those resources, and prices would be struck that might approximate a genuine market rate that also allows for the real costing of resource depletion and environmental degradation.
Many governments today already hold or auction off various natural assets or resources — from water to wireless frequencies — but too often without regard to their long-term economic and financial consequences. Also, the proceeds usually only go to help offset the government’s current year cash outlays. From the perspective of fully accounting for the costs of resource depletion and degradation, this is wholly unsatisfactory.
Hence, I add the idea to my prior post that the sovereign wealth fund described there should now also hold the nation’s public resource assets. This would add to the financial ability of the fund to support the future incomes of the poor (as I wrote in my commentary for that post).
Thus, this proposal might solve both the issues of pricing in the full costing of resource depletion and degradation from an environmental/climate change perspective while eventually narrowing the wealth gap between the rich and the poor. Call this enlightened economics.