Chapter 3.3.

Chapter 3: The Relationship between the Environment and the Economy

3.3. Limitations of Classical Environmental Economics 　

In recent years, ignoring the environmental forecasting perspective in classical economics could be seen as going against the times. If classical economics is to be progressive to any degree, it must go to an economic theory that incorporates environmental forecasting, namely classical environmental economics.　　

The most important characteristic of such a classical environmental economics theory is that it makes the market economy self-evident. Thus, for example, even in the case of regulatory measures for carbon dioxide, which is regarded as the main cause of climate change, it is left to random market principles such as emission trading.

However, recent environmental projections have called for specific numerical targets for global average temperatures to be set and measures to be taken. For example, the Paris Agreement, the latest climate change framework treaty, calls for limiting the global average temperature increase from pre-industrial times to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above levels. 

Emissions trading is an environmental version of the market economy approach, in which the adjustment of supply and demand is left to random market transactions, but this unplanned approach makes it impossible to achieve specific numerical targets and only creates a new commodity: emissions credits. 　

In the classical school of environmental economics, another more advanced theory tries to step into the introduction of indirect production regulations such as environmental taxes. However, as long as capitalism is assumed, it is impossible to impose such a high tax rate that would significantly reduce the profits of capital enterprises, and many capitalist enterprises will maintain the conventional production system even if they have to bear a lukewarm environmental tax.

In this respect, the Stern Review submitted in 2006 by British economist Nicholas Stern in response to a consultation by the British government advocates changes in the energy system and technology in general based on environmental forecasting models, which is a step beyond classical environmental economics theory.

Because of its in-depth content, the Stern Review has the influence of an international guiding document that goes beyond a government report. At the same time, it has been criticized by many traditional environmental economists, including William Nordhaus, the first person from the field of environmental economics to win the Nobel Prize in Economics (2018). From the point of view of our concern here, the Stern Review has at least three limitations due to its classical framework.

First, although unavoidable given the nature of the report as a response to a government consultation on climate change issues, it is limited to climate change and does not cover biodiversity, hazardous industrial waste, and other issues that cannot be reduced to climate change.

The very measures taken to combat climate change are limited to the transformation of energy systems and technologies, and do not go into the quantitative and qualitative management of production. This is an inevitable consequence of classical economics, which is based on a market economy and does not envision a planned economy. 　

Furthermore, there is the limitation of the cost-benefit-effect theory that it uses as its methodology. Cost-benefit effects, which is essentially a capitalist profit calculation technique, naturally excludes high-cost measures that reduce profits. It is also a logic that prioritizes economic calculation over environmental ethics, especially impact on GDP, the most important macroeconomic indicator in capitalism. 

The fact that even the Stern Review, which is quite progressive for a classical school, has these limitations is precisely a manifestation of the limitation of classical environmental economics itself. As long as the capitalist market economy is assumed, it is impossible to combine the economy and the environment in an intersectional manner.　

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 3.2.

Chapter 3: The Relationship between the Environment and the Economy

3.2. Role of environmental ethics 

Although scientific environmental forecasting is the foundation of a sustainable planned economy, there is, in fact, a fundamental driving factor that cannot be governed by pure science alone in the great transformation of the market economy, which seems to be more and more firmly entrenched on a global scale, into a planned economy. That is environmental ethics. 

There is no set theory as to what exactly should be included in an environmental ethic, but what is almost universally accepted is the principle of "intergenerational ethics," in which the present generation assumes responsibility to future generations with respect to the conservation of the global environment. This principle is also generally accepted in environmental conservation theories based on the market economy. 

However, as long as the market economy is assumed, such ethical principles must also end up in generalities. This is because a market economy is supremely concerned with "how much profit can be made in the here and now. This is symbolized by the instantaneous transactions in the securities and exchange markets, but the essence is the same in commercial transactions in the general industrial world.

It is the market economy that is thoroughly concerned with the present time axis, and this is the "logic" of capitalism, the ideological framework of the market economy. Unless such "logic" is abandoned, intergenerational ethics will end up as a subject. In fact, the source of skepticism, which is the antithesis of climate change theory, can be seen as a repugnance and repudiation of this environmental ethic, more than a scientific objection. 

On the contrary, in a sustainable planned economy, intergenerational ethics will be established as the ethical foundation, along with environmental prediction as the scientific foundation. In order to truly put intergenerational ethics into practice, rather than just talking about it as a topic, we need a major shift to a planned economy on a global scale. 　

That said, if everything has an end, the day will come when the planet Earth itself will come to an end. If that is the case, then it is even possible to have an ephemeral idea of making the best use of the global environment as much as possible right now, which we might call the "environmental feast theory."

Capitalism, which prioritizes the time axis of the present, has a strong affinity with this environmental feast theory. In particular, measures to deny the finite nature of natural resource extraction, or to consciously estimate the limit point over a long period of time in order to hasten the development of high-value natural resources, are representative examples of environmental feast theory. 　

However, as long as intergenerational ethics is emphasized, it follows that even if the death of the global environment or the earth itself from natural causes is inevitable, we should at least ensure that the earth does not die from anthropogenic causes. A sustainable planned economy is the most fundamental global environmental protection measure for this purpose.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 3.1.

Chapter 3: The Relationship between the Environment and the Economy

3.1. Science and forecasting 　

The most fundamental foundation of a sustainable planned economy is environmental forecasting based on science, before any other economic theory. This is because a sustainable planned economy is an economic structural measure to essentially prevent possible future environmental degradation and environmental death of the earth. 　

The question in this regard is whether science can withstand the act of forecasting. Science consists of the accumulation of analytical intellectual activities, and analysis is usually an activity to analyze and clarify the causes and mechanisms of some event that has already occurred, not necessarily to foresee events that may occur in the future.

This is reflected, for example, in the fact that despite dedicated attempts to foresee disasters such as earthquakes, no methodology for accurate prediction has yet been established. Pessimism about disaster foreseeing also persists. While it is possible to analyze disasters that have occurred, it is impossible to foresee disasters that may occur. 　

It is true that it is extremely difficult to accurately "foresee" the occurrence of specific disasters, but disasters do not occur suddenly and unexpectedly, but rather, they are manifested as disasters at a certain point in time through a process of long-term natural change. Therefore, it is possible to recognize the natural changes that lead to disasters and to make long-term "forecasting."

In summary, scientific forecasting is possible, although scientific foreseeing is extremely difficult. The foundation of a sustainable planned economy is environmental forecasting as such scientific forecasting. In fact, scientific environmental forecasting has been actively conducted in recent years in relation to climate change, which is now an urgent issue. 　

However, these climate change forecasts are often rejected by skeptics. Moreover, skeptics, or politicians under their influence, often rise to deny or mitigate environmental measures based on climate change projections.

As is the fate of scientific forecasting, it is difficult to draw conclusions with absolute certainty. This is the difference from the case of analyzing an event that has already occurred. Forecasting an event that has not yet occurred, by its very nature, must be a probability theory that includes the possibility of modification. Therefore, the emergence of skepticism cannot be ruled out. 　

Therefore, scientific environmental forecasts should be built around short-term forecasts with high probability, while being aware of the existence of skepticism and open to the possibility of modification, and distinguishing between long-term and short-term forecasts, with long-term forecasts limited to those that represent merely one possibility.

Therefore, even if scientific environmental forecasts are used as the basis for specific economic planning, they should be reflected in relatively short-term economic plans (three-year plans) based on short-term forecasts. Long-term forecasts, on the other hand, are used as a reference material to determine the direction of the next and subsequent plans.

👉The papers published on this blog are meant to expand upon my On Communism.