November 15, 2010

What every conservation biologist should know about economic theory

Conservation Biology publishes the following reflection on advertising by John Gowdy, Charles Hall, Kent Klitgaard and Lisi Krall (What every conservation biologist should know about economic theory):
The myth that consumers are sovereign in a market economy is promulgated despite the fact that consumer tastes are manipulated by advertising and individuals often have very little control over much of how they live their lives in the face of market forces.
As far as I know, advertising is driven by consumer tastes both on market goods and on advertising content. No matter whether they have "little" or great control over how they live their lives, individuals in a market economy act on their own preferences when they consume, and cater to the preferences of consumers when they produce.

Elsewhere in their essay Gowdy et al. contend that competitive markets will never work because people are altruistic and irrational, that biodiversity and natural ecosystems have infinite value and that discount rates should be zero. As good peak-oilers, they also share their opinion on future commodity supplies. If they are right there is much money to be made going long in commodities markets. However, they also caution that money will probably make you unhappy. On the other hand, your happiness should not matter. With no time discounting, only the happiness of future generations matters.

1 comment:

  1. The subject of advertising is a good one I think, and deserves some in depth treatment that gets beyond superficial impressions. Economics is generally a philosophy that is based on assumptions, and in order to be a social science needs to refer to experimental findings to test those assumptions. Greg Mankiw at Harvard has begun to discuss externalities, meaning real world costs which have been excluded from the cost accounting by an enterprise. Both Jeff Sachs and Joseph Stiglitz and others have begun to examine the concept. The concept of externalities is a good one, I think, to begin to bridge into the other disciplines of social science which are relevant to economic philosophy.
    Gowdy et al are trying to alert people of real world externalities. While defenders of orthodox economic philosophy might simply reassert their own assumptions, they can't say they haven't seen the argument touching on externalities.
    A good example of these interactions is in the stories A Civil Action by Jonathan Harr, and Erin Brockavitch by Grant and Soderbergh. Economic practices by various corporate/business enterprises and their executives had real world effects on communities and their environments that they externalized. The real world legal system could only be influenced to a limited extent in those cases, especially in the case of Erin Brockavitch and the utility concerned.
    An example I like even better is that of Ray Anderson and his company Interface Carpets. He as CEO and his associates were advised by clients of their concerns, and Anderson et al read Paul Hawken's book The Ecology of Commerce which described a range of environmental problems. They did not respond in typical ideological fashion by externalizing and denying their responsibilities. Instead, they have become leaders in internalizing their costs, and benefits.