PATHWAYS TO SUSTAINABLE DEVELOPMENT:

Co-optimizing Economic Welfare,Employment, and Environment

Nicholas A. Ashford, PhD, JDProfessor of Technology & Policy

Massachusetts Institute of Technology

Copyright © 20010Nicholas A. Ashford

Extraction

industries

Manufacturing

Agriculture

Transportation

Energy

Services

Housing

ICT

SOLUTIONSEducation & Human Resource Development

Industry Initiatives

Government Intervention/Regulation

Stakeholder Involvement

Financing Sustainable Development

Consumer

Consumption

Commercial

Consumption

Government

ConsumptionPROBLEMSInadequate Goods & Services

Toxic Pollution

Climate Disruption

Resource Depletion

Biodiversity/Ecosystem Integrity

Environmental Injustice

Employment/Purchasing Power

Economic Inequity

MAJOR SYSTEMIC PROBLEMS� Fragmentation of the knowledge base

� Inequality of access to economic & political power

� Tendency towards ‘Gerontocracy’» technological and political ‘lock-in’

» usually, but not always, accompanied by concentration of economic wealth and political power

� Market imperfections -- prices don’t reflect real costs of goods and services

� Limitations of perfectly-working markets» Disparate time horizons - costs now, benefits later

» Delay in recognizing problems (Limits to Growth)

» Inappropriate production & consumption patterns

� Failure to engage individuals in the society to realize their human potential ~ social exclusion

� Corruption

Factor Endowments

� Land� Material Resources (natural and physical capital)� Energy� Labor capable of performing physical labor� Know-how (intellectual human capital)� [innovation systems][1]� Built capital (bridges, roads, rail systems, ports, dams ~ infrastructure) � Information and Communication Technology (ICT)� (Health and Environment)[2]� Structural capital (knowledge and productive routines held by

organizations) � Networks and Outsiders (linking organizations, people, and entrepreneurs)� Social capital (knowledge held by consumers and citizens)

1] Universities, research institutions, technology and knowledge transfer agencies, human resource development institutions.

[2] Good human health (both physical and mental) and an unpolluted and preserved environment (what could be called ‘environmental capital’) are increasingly regarded as essential for maintaining the productiveness of human and natural/physical capital.

Economic Welfare, Employment, and the Environment

� Are all affected by both technological innovation and globalized trade

� Are in a fragile balance

� Are inter-related and need to be addressed together in a coherent and mutually reinforcing way

Environment

Technological change &

globalization(trade)

Work Economy

Copyright © 2006 by Nicholas A. Ashford.

Technological change and globalization (trade) as drivers of change within and between three operationally-important

dimensions of sustainability

The Importance of Work

and the Workplace� Work is combined with physical and natural capital to

produce goods & services.

� The workplace is the place where comparative advantageis exchanged - i.e., a marketplace.

� Work is the main means of distributing wealth and creating purchasing power.

� Work provides a means of engagement in the society.

� The workplace provides an important social environmentand mechanism for enhancing self esteem.

� Industrial & economic policy, trade policy, and environmental policy have important consequences for employment and OH&S

Improving labor Productivity

� increase worker skills» increase labor productiveness» rewards to workers are increased

� use/develop better hardware, software, and manufacturing systems» increase capital productiveness» workers’ share of profits are decreased

� better matching of labor with natural/physical capital, and with information & communication systems» increase joint labor and capital productiveness» rewards are increased for both owners and workers» human-centered knowledge-based work has the potential, if

designed properly

Theoretical implications of decreasing labor contenfor employment and for the environment

� Lower costs of goods and services

� Lower prices

� Increased demand and sale of goods and services» in the original industry/market

» in new markets (influenced by increases in disposable income and producer-created demand)

� Are more workers hired than displaced?» It depends on whether growth in production outstrips

(capital) productiveness growth

� May require or stimulate a continual throughput economy with increasing consumption» => adverse effects on environmental sustainability

Strategic Interventions� Change Production & Service Systems (meet needs in a new way

– Dematerialization, energy-efficiency, new energy sources, pollution/waste prevention

– Shift to re-manufacturing & product services (e,g, photocopy machines, cars)

– System changes, e.g., in manufacturing, transportation, housing, agriculture

– Tax/regulate pollution and energy use

– Remove ‘head taxes’ from labor, e.g., health care, unemployment insurance

– Change labor/capital mix from manufacturing to services � utilize higher skills and labor inputs

– Reward and incentivize innovation

� Change Demand– Education, use of counter-advertising & regulating commercial advertising

– Constrain consumption by using tax policy

� Change Finance System– Banking, lending, and mortgage regulation

– Tobin tax on currency speculation

� Education and Human Resource Development (supply & demand)– Affecting political and purchasing choices/upskill workers

� Create meaningful, rewarding, and safe jobs (not by trickle-down)

IIIIVV

Environment

Technological change &

globalization

Work Economy

Toxic PollutionClimate Change

Ecosystem DisruptionResource Depletion

● Skills● Wages● Purchasing Power● Job Security● Health and Safety● Job Satisfaction ● Number of Jobs

● Changing international division of labor

● Changes in the nature of work

● Development & environment(industrialization)

● Investment & environment

● Trade & environment

● Improvements in competitiveness, productiveness, and the use of physical, natural, & human capital● Economic changes (arising from labor replacement & capital relocation● Financing growth and development

● Increased environmental footprint from the need to increase employment & industrial throughput

I

IIVI

● Regulation of Health, Safety &Environment Affects the Economy

and Growth.

● Environmental/energy improvements create or change the nature of employment.

Roles of Government Roles of Corporations

Minimal State/

Utilitarianism

Capitalist (laissez

faire) approach to

policy and markets

Rawlsian Government

Government acts as

trustee for stakeholders;

Interventionist approach

to policy and markets

Profit Maximization

Capitalist (laissez

faire) approach

Corporate Social and

Environmental

Responsibility (CSER)

Sustainable

Industrialization

‘Value’ Consumers

Purchasing based

upon the price and

perceived value of

products and services

Green Consumers

Purchasing based upon

the environmental and

social impacts of

products and services

Roles of Consumers

Continuum Continuum

Continuum

Shareholders’

Concerns

Citizen &

NGO

Concerns

Different Operating Postures that might be adopted by Government, Corporations,

& Consumers in the Context of Citizen, NGO, & Shareholder Scrutiny

TECHNOLOGY-BASED STRATEGIES FOR IMPROVING PRODUCTIVENESS, EMPLOYMENT, and

HEALTH, SAFETY, & THE ENVIRONMENT

� SHIFT ATTENTION FROM PROBLEMS TO SOLUTIONS

» Technology Options Analysis vs.Technology/Risk Assessment

� DESIGN AND IMPLEMENT COMPREHENSIVE TECHNOLOGICAL CHANGES» to improve productiveness, employment and health, safety, and the environment

● EXPAND THE SCOPE OF INNOVATION AND THE DIMENSIONS OF THE ’DESIGN SPACE’

- ‘design space’ refers to the dimensions along which the designers of technical/social systems concern themselves

- expanding the available socio-technical design space includes simultaneous considerationof the determinants of competitiveness, environment, and employment

- distinguish between ‘sustaining (incremental) innovation’ and ‘disrupting (radical) innovation’

- the needed major product, process, product services, and system transformations may bebeyond those that the dominant industries and firms are capable of developing easily, at leaby themselves

● ADDRESS ALL DIMENSIONS OF INNOVATION:- technological, organizational, institutional, and social factors

� REQUISITES FOR CHANGE: Willingness, Opportunity/Motivation, & Capacity/Capability

� INTEGRATION, NOT MERELY COORDINATION, OF EFFORTS IS ESSENTIAL