A Brief History of Western Economics

How an individualistic frontier societyGrows Interconnections & the Global Commons

Graciela Chichilnisky Columbia UniversityKey Note Speech

Ecological and Economic InterdependenceThe Capital InstituteNew York University

June 15, 2011

Western Market Economics based on

– Competitive Markets - individualistic: no connection between people

– Optimal Growth Theory exponential growth of population and resource use – a frontier society without limits: no connection with ecological systems

– Cost Benefit Analysis and Financial Models that Discount the Future – a short term vision: no connection between the present and the future

Dictatorship of the Present

So far Western economics

Lacks connections between people, connections between the economy and the environment, and connections across generations

Sustainable Development

requires building connections

WHY?

Because humans dominate the planet

• For the first time in recorded history

• Following an era of rapid globalization

Humans dominate Planet Earth

• We are changing the planet’s atmosphere, its bodies of water, and the complex web of species that makes life on Earth

This means natural resource limits

• As we reach natural resource and environmental limits

The survival of humankind is at stake

• Need connections with the ecology, between people and with the future of our species

Can Western Economics adjust?

Can Markets become Sustainable?

The Present and the Future• Cost Benefit Analysis and Optimal Growth theory

exist that do not discount the FutureA Formal Theory of Sustainable Development has

been developed that provides

Equal treatment for future generationsConnects the present and the future

Sustainable Development (Chichilnisky 1996, 2000, 2006, 2009)

New types of markets• Market economics can be made consistent with

sustainable goals• But markets themselves must change• Individualistic markets must evolve into new types of

markets that I postulated - markets for public goods –which incorporate connections between people and value the global commons

• They are slowly emerging due to new scarcities: carbon market I created within the Kyoto Protocol, international law since 2005 trading $200Bn/year; SO2 markets in CBOT, new markets for water and for biodiversity (Chichilnisky (1992, 1996, 2000, 2002, 2009, 2010, 2011)

Need Global markets value privately produced public goods – the global commons

New markets change capitalism

• Markets trading privately produced public goods are new

• They combine equity with efficiency

Connecting People• They require limits on resource use

Connecting Economics with Ecological Systems

New capitalism in the 21st Century

• The basis exists

• Theoretically and in practice

• New markets, new growth theory, new cost benefit analysis and new GDP measures

• They change the goal of Economics:

• From maximizing profits to optimizing progress -- and ensuring the survival of the human species