In a recent article on the The Conversation web site, several senior policy researchers have put forward a proposal to scrap the Productivity Commission and replace it with a Sustainable Development Commission .
The central core of their proposal, however, is not just about renaming an institution — it is about a paradigm change in how we think about economic growth and development: from the current neoclassical economic paradigm to a new emergent view which situates the economy as nested within, and dependent upon, the biosphere . As John Day and Charles Hall have recently argued, such a change would be on par with, and as equally warranted as, the transition from the Ptolemaic theory that the sun rotates around the earth, to the more correct Copernican view that the planets rotate around the sun. 1
The Productivity Commission, along with pretty much the entire Canberra bureaucracy and most university economics departments, are rooted in the (Ptolemaic) neoclassical economic paradigm. This paradigm is wholly inadequate for understanding and assessment of the global ecological crisis we now find ourselves in. The existing paradigm is simply not adequate to the reality it is supposed to be explaining and providing policy prescriptions for. We should also bear in mind that in the world of policy and politics, paradigms are often buttressed by particular interests and lobby groups.
For the Productivity Commission and much of the rest of the policy establishment, the neoclassical economic paradigm is simply the horizon of common sense, as invisible and unquestioned as the air we breath. It was on display again in the Commission’s recent enquiry into migrant intake into Australia — see details of my submissions which critique its neoclassical assumptions here.
Some may be unaware that ‘environmental economics’ is simply neo-classical economics with a few add-ons, such as contingent valuation, which are supposed to translate environmental values and services into monetary values. But these neoclassical approaches are doomed to failure, for many reasons, not least of which are: (a) a failure to theorize the problems of biophysical and thermodynamic limits; (b) the problem of incommensurables – all things cannot be measured by a monetary standard, and even if they were, monetary (market) value does not necessarily reflect real value; and (c) a flawed assumption of ‘infinite substitutability’ whereby it is believed that scarcities in particular resources can always be overcome by scientific-technical innovation. The latter important point is clearly explained in a recent paper2 by John Day et al (citations removed):
One of the major critiques of neoclassical economics is that it reduces the complexity of real production processes to capital alone. According to this viewpoint, human capital, manmade capital, and natural capital are absolute substitutes for one another … In essence, the idea of absolute substitution is based on the false notion of presumed unlimited capital …. This misinformed assumption perpetuates the fallacy of infinite growth on a planet of finite resources. But it seems that most economists believe that technological progress is an all powerful process that will replace resources with ideas indefinitely.
The developing fields of ecological economics, biophysical economics and green political economy are promising starting points for the emergent paradigm – but most certainly these are not embraced at the Productivity Commission.
Whether the PC could be reformed, or whether setting up another independent institution with a sustainability mandate is a better option – these are questions for serious consideration. Either way, it is a question of how to address a massive failure in policy and politics, whereby we seem to be standing by helplessly while the ecological crisis is gaining on us (case in point: the recent carbon pricing debacle in Australian politics). It may be wishful thinking to hope that another new institution will help. Possibly it could help foster a more inclusive debate, and draw in the emergent paradigm which is being excluded by neoclassical dominance.
Some may remember the ill-fated Resource Assessment Commission back in the early 1990s, which tried to undertake integrated assessments of some resource issues. The Commission did experiment with what were then thought to be the risqué methods of environmental economics. As an institutional innovation, the RAC failed for reasons that are well-documented in a Masters thesis by Ian Holland3 Any designers of a new Sustainable Development Commission would be wise to review those lessons.
- Day, J.W. and Hall, C., 2016. Moving Away from a Ptolemic (sic) View of the Human Economy. In America’s Most Sustainable Cities and Regions (pp. 255-274). Springer New York. ↩
- Day, J.W., Moerschbaecher, M., Pimentel, D., Hall, C. and Yánez-Arancibia, A., 2014. Sustainability and place: How emerging mega-trends of the 21st century will affect humans and nature at the landscape level. Ecological Engineering, 65, pp.33-48. ↩
- Ian Hamilton Holland. 1999. Essence and Decision. The Case of Coronation Hill.Thesis (Masters), Griffith University, Brisbane. ↩