Below is the text of a lecture given by Rick Boven, a director of Stakeholder Strategies and former director of think tank the New Zealand Institute.
by Rick Boven
Today I’m going to offer some thinking about how the way we think about our environment and the economy affects the outcomes we will experience in the future.
I think many of us if not most of us here have formed the view that both collectively and individually we are not doing as much as we should or could to reduce environmental damage and so we are accumulating risks that threaten the future of our civilisation.
We observe rising real prices as scarcities of energy, water, land, food and minerals emerge. The eco-systems that support us are in decline and the increase in atmospheric greenhouse gases continues unchecked.
The issue is not with the availability of technology or policies, although we do need further development of both. The issue is lack of implementation. It is our will to act that is lacking, and at the heart of our will is the set of ideas that guides us.
I want to start by introducing some people in funny clothes. These are 17th Century Europeans and today’s Bolivians. We are generally disdainful of the ideas of people who dress in funny clothes. We may respect them as defunct or
valued remnant cultures but we know they don’t know much about technology or how to run modern economies.
I’m interested in the ideas of these people and of modern people today. I will focus mostly on our modern ideas and their effects, returning to touch on the Bolivians and the 17th C Europeans a bit later in this talk.
I have developed and will share today many ideas that are different from the mainstream. Either I am wrong or the mainstream is – so to form your own judgement it may help to understand how I came to develop my unorthodox views.
I grew up in a household that valued education and discourse but my parents did not have the opportunity to be well educated themselves.
As a 16 year old, my girlfriend’s father gave me Marx’s Economic and Philosophical Manuscripts to read and at the same time I began studies in psychology and sociology, learning about how people perceive the world, form beliefs and make choices, how societies socially construct their realities and about the processes of social change.
Like a blank sheet of blotting paper I soaked it all up.
Sociologists and to a lesser extent psychologists are insecure about their scientific credentials and so they put a lot more effort than the natural scientists into teaching the philosophy of science. I learned about ideas – theories and paradigms, values and beliefs as a very young man.
Theory interested me but only insofar as it explained the real world. My first job was as a government researcher in social welfare specialising in criminology and the welfare of young solo mothers and their children.
Most academics and professionals are specialists but I was not because I started with a foundation equally in psychology and sociology. I learned how and why is wrong to use explanations from one level of analysis to explain phenomena at another. As an example my research revealed a negative correlation between income level and crime at the individual level but a positive correlation at the aggregate level.
I began to drift from one field to another. I worked as a researcher in medical, educational and legal sociology, a university teacher of research methods, a mathematical psychologist building models of the way people make choices about products and services that did not yet exist, and also as a consultant to academics on computing and statistics.
My core discipline became research methodology and I applied it across the social sciences.
Then I found business, or rather it found me. A series of unplanned shifts led to founding a technology company and then to an MBA and being recruited into a boutique strategy consulting firm. After a few steps that are unimportant here I became a partner in a leading global strategic management consultancy.
In that role I learned how businesses, industries and economies work by advising the leaders of businesses and governments on their strategies. Every project was some combination of a new industry, a new topic, or a new part of the world. I have rarely repeated anything in my work experience.
I was taught to look at the big picture, to think outside the square, to go beyond what was conventional. I discovered I was interested in big questions and difficult puzzles, but only in those with practical implications.
The biggest practical question I could think of was this: what would be the near- term future of humanity as we continued to erode our environment?
One of the things I had learned from many projects is that an important reason businesses fail is because their operating paradigms are well adapted to circumstances that no longer exist. For those projects the role of the strategist was to understand and explain why the old paradigm had become obsolete, work out what paradigm change was required to be successful in the current conditions, help the business leaders to adopt the new paradigm and then ensure they were able to implement the business changes required.
So with that background and my big question, about 25 years ago I formed the hypothesis that the reason the world was failing to respond effectively to emerging environmental issues was that we were using the wrong paradigm.
I set out to understand the paradigm we used, and to explain what was wrong with it. I have always had the opportunity to pursue whatever ideas have interested me and my life course has been the result of doing so regardless of disciplinary or institutional boundaries.
I understood how businesses, industries and economies worked, and a fair bit about technology and science from my work and history from my reading but I didn’t know much about theoretical economics so I enrolled for a PhD in economics with the topic – the role of ideas in managing trade-offs between economic and environmental objectives. Along the way I completed Masters’ courses in some relevant theoretical subjects – microeconomics, macroeconomics, the history of economic thought and environmental economics.
I was really shocked! The world the economists studied bore little resemblance to the world I understood. To illustrate, economists generally assume everyone has the same costs and prices and then they use mathematical techniques to identify short term equilibria in unchanging, or more technically, stationary contexts. Strategists like me seek cost and price differences to create sustainable real world long term advantages for their clients in evolving domains.
Mainstream economists are not students of global environmental processes and risks and yet their theories were the ones being used to manage the global economy. That seemed inherently risky.
And with very few exceptions the mainstream economists’ world-views excluded history, psychology, social ecology, ideas, environmental and planetary science, and their specialist theories did not address the way these domains interacted to determine future human well-being.
The economists were specialists. I was not. Over the 10 years it took to complete my doctorate I first transferred into management and then environmental science. And I pushed beyond diagnosis of the problem towards developing environment management strategies.
It is also relevant that during that time I was a director of one of NZ’s leading banks, and chaired the risk committee of that bank for several years. I learned about risk and about how managers engage with risk and learned that few people have a sound understanding of the principles required for decision-making in conditions with risk and uncertainty.
I have come full circle in a way and in the role I’m performing here today I am a psychologist again, a psychologist of our society, focussing on the pathologies of environment management understanding, if there is such a field.
My diagnosis is that at the heart of our most important and dominant cosmologies, paradigms, theories, values and beliefs are ideas that are both wrong in fact and so harmful in effect that they are very likely to destroy our civilisation.
So much for the introduction and my outrageous claims, let us consider some specific ideas. I will start with cosmology.
A cosmology is an explanation of how the world came to be as it is or how it works. I’m going to focus on two aspects of modern Western cosmology; the idea that a benign natural world provides for us and the idea that change occurs gradually.
Modern Western cosmology inherited the idea that nature provides for us; that it is there for us to exploit. We believe nature is fundamentally benign, and that it changes slowly and gradually.
Some of us believe in addition that our deity will provide some assurance of continued well-being if we behave as we should..
The idea that nature will always provide for us is so entrenched we take it for granted. It is like gravity, an assumed part of our world. Before the Renaissance investigations, and the theoretical developments of the Enlightenment, everyone knew that if you dropped something it fell – you did not really need an idea of gravity because anything else was unthinkable.
In a similar way we do not recognise our assumption about nature providing for us. I am aware of two words in English that represent aspects the idea; panglossianism and cornucopianism. They have slightly different meanings but my point here is that neither word is in common use in our modern society. We
don’t need to talk about whether or not nature will provide for us because we all have a shared understanding that it will.
In contrast, the Bolivian Indians and other indigenous societies I am aware of have cosmologies that encourage harmony with the environment and prevent over-exploitation. Indigenous people are generally strongly connected with the land that supports them and have cosmologies to encourage long term sustainability.
Our Western cosmology, with its permission to exploit the environment almost without limit, has provided an important competitive advantage to Western society over traditional societies like the Bolivian Indians, allowing us to take resources from the environment and dump wastes into the environment without much restraint, protected and comforted by the economists’ assumption that there will always be substitutes or technological solutions if issues arise. Note I said assumption not conclusion – because that is what it is – an assumption.
The second feature of our cosmology I want to highlight is gradualism. Darwin was only half-right when he described evolution as a gradual change process within a stable world. The paleontological record shows instead that important steps of evolution occur rapidly when environmental conditions change. Gould called it punctuated equilibrium.
Similarly our climate scientists model future climate change as a gradual continuous process despite the climate record showing punctuated equilibrium too, often with rapid step changes between climate conditions, and evidence that the last 10,000 years have been a period of remarkable stability.
Add to that, data gathered by Zhang and his colleagues who studied the collapse of approximately 90 civilisations during the last 1000 years. Civilisations collapse often. Around 90% of the civilisation collapses were associated with climate change. Nature did not provide and the civilisations were not stable.
Of course we think we are different.
Over 60 years of relative stability and safety combined with rapid economic and population growth have reinforced our cosmological assumption that we live on a fundamentally benign and stable planet that we can exploit without concern for the consequences.
A paradigm is a mental model of an important aspect of the world we live it. It is like a lens that we use to make sense of the world.
As a psychologist and a strategist trying to understand the paradigms we use to manage the economy-environment interaction I wanted to be sure that my explanation of the future would also explain the past. If a strategist’s proposed paradigm cannot explain the past it has failed a fundamental test.
Many of us were taught history as the stories of kings and queens, wars and discoveries without much structural pattern and with little relevance for understanding how our modern world works or for our future.
A more relevant historical lens for our purposes today focuses on the development of technology, because technology is at the core of the modern world. We can look back at a continuous process of technological development as we advanced from the stone-age to the computer age.
Looking back from our stand-point of advanced technologies, we understand progress as the underlying theme and it seems natural to expect progress to continue indefinitely into our future. We anticipate regenerating organs, artificial intelligence, solar system exploration, immortality via the singularity and interstellar travel. And we expect to be surprised by unanticipated yet wonderful technologies.
Both our historical understanding and our anticipation of the future have the physical environment present in the background as our cosmology prescribes; providing for us and changing only gradually. The environment has not had a prominent role in our understanding of history. Environmental history is a new discipline and its findings are not yet widely understood.
Godel and Popper have convinced modern philosophers directly and indirectly most of the rest of us that technology innovation and human affairs are inherently unpredictable, and therefore we cannot predict our future.
Partly as a result of their influence we now know the modern world as a confusing place where we are worried about future stability and risks but we have no explanation or intellectual framework that offers us a way to anticipate the future.
Unlike most other modern thinkers, I view history as predictable, within limits.
In particular I think we can reduce the uncertainty about some important features of our future in ways that can help us reduce societal risks.
I will explain why.
It is modern food production efficiency that has allowed humans to escape from farms to cities and to specialise so that advanced technologies can be developed and used to change our lives.
When you look at the world through the lens of food supply you no longer see a process of continuous development but instead can discern human history as another punctuated equilibrium process.
The first equilibrium is the hunter-gatherer era, with population densities limited by the inherent productivity of forests, savannahs and coastlines, and the technologies humans used to obtain their food. Population densities were very low relative to today.
The invention of the technology of traditional agriculture about 12,000 years ago dramatically increased the productivity of a unit of land so that populations grew rapidly for a time and then stabilised again.
The genetic evidence indicates that farming spread because farmers migrated to new lands, presumably because populations grew beyond the capacity of local farmlands to support them. Migrating farmers were able to claim high quality land because of their larger family sizes and therefore higher replacement rates and because of their imperative to defend the high quality land that provided their livelihoods.
For many thousands of years until the 18th Century, there was another period of equilibrium. The global population grew slowly. Population was constrained by the amount of suitable farmland available, by the productivity of traditional agricultural technologies, and by the available human and animal energy supply.
Then everything changed again. The technology of industrialised agriculture using fossil fuels has increased the productivity of farmland by a factor of ten or more. Shipping, conquest and trade allowed the resources of the whole world to be fed into the developing Western economies.
As the proportion of the population required for agriculture reduced from around 80% to less than 5%, people migrated to the cities to develop an industrialised society which produced and continues to produce technological innovations that further enhance agricultural productivity.
Population grew by a factor of almost 10x and income per person globally by about the same ratio. Global output increased by a factor of about 60x and is projected to increase another 4x (to ~250x what it was in 1800) by 2050.
Fossil fuels and technological innovation made the environmental constraints that had controlled population functionally irrelevant. Aggregate environmental constraints could safely be ignored, and they were.
But the Earth is finite and output has grown dramatically during the growth phase so environmental constraints are re-emerging now
Looking at history through this food technology lens we can identify another example of punctuated equilibrium. The hunter-gatherer and traditional agricultural eras are the long term equilibria.
We are living within a punctuation state. We do not live within the industrial era, as we generally assume. We are living at the end of the transition to the era of industrialised agriculture.
This punctuation must end too so we should expect eventually to enter another equilibrium state. The growth phase must end because the Earth is finite and the stresses resulting from overshooting the sustainable output are already apparent.
Ecological footprint analysis shows we would need around 1.5 Earths to be sustainable today so we are well beyond sustainability already. We will need around 2 Earths by 2050 if current trends continue and we will have done a lot more damage by then.
There must be a correction unless we can dramatically increase environmental productivity. The more we grow beyond the sustainable output the greater the risk and the larger the scale of the output collapse that is coming and the worse will be the state of the global environment after the collapse.
The societal management issue for us is how can we change course get as close as possible to a soft landing to limit the human harm caused by the collapse and
retain a physical environment robust enough to feed a population sufficiently large and concentrated to support a specialised and complex civilisation.
So our strategy choice has important consequences. If we continue to believe that we are on a path of unconstrained progress we will maximise output growth and if I am correct too then we will collapse hard.
On the other hand, if we adopt the paradigm of punctuated equilibrium we will manage risk to aim for a soft landing. The paradigm we adopt will determine our future.
You may be wondering why I’m so convinced that we are heading for an overshoot crisis. There are three reasons. First, environmental historians are discovering that human societies normally overshoot and collapse and why should we be different? Second, simple modelling demonstrates that overshoot and collapse is an expected outcome in our present circumstances. Third, applying a little arithmetic to our environmental circumstances indicates that output growth must soon convert to decline unless some really heroic and implausible assumptions are made.
I will turn now of the theories we use to manage our economy-environment interaction.
Here I want to focus on the economic theories used to guide the economic policy decisions that affect our economies and our environment.
I call these ideas “theories” as a short-cut for our purposes today. Theories are hypothesis that have withstood rigorous empirical testing and these have not. They are mostly axiomatic assumptions and not true theories but they are used as if they are theories.
Keynes wrote that we are all slaves to the ideas of dead economists. I agree wholeheartedly.
Like psychology, economics is a very broad subject with diverse views and it includes debates about the kinds of subjects I am traversing here. But the modern conventional economics that is taught in introductory classes and to business school students, and is used by policy-makers, is founded on neo- classical theory with a neo-liberal political tinge. It is that economics which is the dominant foundation for modern economic policy development.
There are many economic critiques of the simple conventional economics that is so widely taught, including especially the ecological economics school.
However, modern leaders and policy-makers must be able to vocalise and argue for the prescriptions of modern conventional economics. People who do not support these economic prescriptions lack credibility as leaders and are often subject to ridicule.
When business strategists like me explain to business leaders that their paradigm has become obsolete the conversation goes much more smoothly if we first explain that their old paradigm was once adaptive and worked well but that circumstances have now changed so their old paradigm is no longer working well for them, and therefore needs to change.
To shortcut that process here in the interests of time and to be a bit provocative I state simply that many of the foundation assumptions and economic theories applied in practice, by our policymakers and political leaders, are wrong and harmful.
The slide shows five important “wrong” economic theories and propose corrected versions of these theories that collectively comprise a proposed revised economic paradigm.
The fourth one is the one I dislike the most. The free-gifts and free disposals assumption allows economists to ignore the consequences of economic activity for the environment. The assumption states that you can take resources from the environment and dispose of wastes into the environment without regard to anything other than the resource extraction cost and the waste disposal cost.
There is not enough time today for me to talk through all of the relevant theories, which collectively define the mainstream economic approach to the economy-
environment interaction. The slide shows the conventional form on the left hand side and my proposed revisions on the right hand side. You can judge for yourselves which set of theories you would prefer to use as the foundation for 21st Century economy-environment policy.
I should hasten to add that these theories were not always as wrong as they are today. During the 19th and 20th Centuries they were reasonable theories to use but circumstances and have changed and the economic paradigm has not.
Further, generally speaking, the economists who proposed them did not intend for them to be used as they are today.
The theoretical framework defined in the left hand column, which I label the “dominant economic paradigm” was developed during the growth phase to manage economies and promote growth. It says nothing about how the growth phase will end because it does not contemplate the growth phase ever ending.
The mainstream production theory, the Cobb-Douglas function, provides another illustration of the disconnect between economy and environment. The theory states that production depends on technology, capital and labour with no role for the environment.
On-going growth is in a sense guaranteed by the Cobb-Douglas production function, which has some resemblance to a perpetual motion machine.
Global environment constraints do not have a role because they are assumed away.
Unfortunately the economic theories have become so entrenched within the community of influential leaders in the modern world that many important people continue to act as if they are true today.
In contrast, many natural scientists, environmental historians, ecological economists and activists have concluded that the growth phase must end soon because as Paul Gilding so eloquently and simply says “the Earth is full”.
So there is an undeclared war in progress between the high priests of 20th century economic orthodoxy and the less organised critics of economic orthodoxy who are concerned about the risks of overshoot but do not yet have a coherent alternative societal management paradigm to offer.
Paradigm conflicts of this type are common in the natural sciences, and well understood, but they are less well recognised when they take place in the domain of societal management, except in the political sphere where there are well- recognised contests among ideologies.
One important economic theory prescribes separation of ideas in the form of values and beliefs from economic thinking. In origin, purpose and function this theory partitions academic thinking to reduce complexity and to protect the boundaries of academic disciplines.
Modern conventional economics usually assumes that individuals value only consumption and that more is better. The idea of the value of consumption began as a philosophical abstraction based on observation, progressed to become an assumption to make the economic maths easier and then became a societal goal and a personal norm. Governments that do not provide on-going increases in consumption are usually replaced.
I have concluded instead that a wider range of values and beliefs are economically relevant, and further that our ideas co-evolve with societal circumstances.
To illustrate, consider some core values of the era of traditional agriculture – the seven deadly sins. Several of these sins; greed, pride, envy and gluttony functioned to limit consumption in a resource constrained world.
With growth as the primary goal however, these values became counter- productive and so they have been reversed.
Instead, conspicuous consumption, beating the Jones’, greed for more money, gluttony and pride in the new big fast car are important values in modern societies throughout the world.
Unfortunately those values have finally achieved dominance over the traditional values at a time when they are most harmful.
So what we see is that ideas are not absolutes; they are adaptive. Ideas affecting behaviour, behaviour affects outcomes and outcomes affectideas in a continuous co-evolution that redefines our understanding of the historical process.
The challenge for us now is to adopt a new set of ideas that can help protect us from the worst consequences of the overshoot crisis that now inevitably faces us in the not-too-distant future.
In another context I have developed a set of values that I believe are adaptive for the world we are now living in.
As you would expect, given what I have already said, I think many of our beliefs require revision too.
I’m going to focus here only on only three wrong beliefs which in combination form the major unrecognised obstacle preventing us from accomplishing changes that would bring us closer to a soft landing.
The first wrong belief is that we can and should continue to pursue economic growth without worrying overly about the risks being created. I won’t speak further on that now as I hope I have explained already why I have concluded that continuing with maximisation of economic growth as the principal societal objective function is a path to disaster for modern civilisation.
The second wrong belief is that government and business leaders will respond effectively to manage any environmental risks on our behalf.
This was one of the biggest surprises for me. It is the conclusion I find scariest too. And it is not widely understood among those of us who have rejected the dominant paradigm.
In strategic management consulting you are always looking for the critical insight; in the jargon “the insight that cracks the case”. Those insights can come from applied theory, from empirical analysis, from observing the behaviours of industry participants or sometimes just from listening attentively.
I was listening to a Minister explain why he would not support an environmental policy that we both knew was good policy and he said “I cannot do this because my constituents would not support it”.
That seems obvious and innocuous until you think about what it really means. What he meant was that he was not a leader, he was a follower and that he followed the lead of his voters. Well that’s what we should expect in a properly functioning democracy isn’t it?
But you cannot have it both ways. You cannot rely on government leadership to solve environmental issues when the system is set up to ensure that our governments are followers.
If you think that’s bad then consider the implications of the three to five year electoral cycle of modern democracies. Each election our so-called political leaders must submit themselves to judgement by voters whose primary value is ever-increasing consumption and who will vote governments out if they are not effective in providing it.
So if governments won’t lead effectively then what about businesses? Surely business leaders will step up to protect their own long term interests. We all understand now I think that the economy and the environment are mutually dependent.
We do observe many business leaders who are stepping up to improve environmental outcomes and here I should acknowledge especially my friends at Pure Advantage who are making great efforts to develop New Zealand’s green economy.
But a careful examination of incentives is required; these business leaders are environmentally motivated but they also gain a business benefit from their environmental efforts, or at least face no business cost.
That is not a criticism at all. That is as it should be. With few exceptions, modern businesses have a core purpose of providing value to shareholders.
The law governing the behaviour of company directors is clear. Directors must act in the interests of the company. If they don’t they should be sacked and may also be subject to legal sanctions.
If a business leader decides that he or she wants to improve environmental outcomes in ways that impose net costs on the business then that leader must resign and will no longer be a business leader.
If environmental issues arise from business activities the business leaders must take the side of the business unless regulations prevent them from doing so. That is why self-regulation does not work.
So businesses could be led by governments imposing regulation but governments are unlikely to impose strong regulations if there are trade-offs required between economic and environmental outcomes.
Alternatively, businesses could be led by consumers but consumers will usually prefer more consumption over improved environmental outcomes because more consumption is what consumers have come to value most.
My conclusion is that we cannot rely on government or business leaders to respond effectively to the environmental issues that threaten our future.
If that seems bad then I have some good news, finally. The third wrong belief is that individuals cannot do anything worthwhile to reduce environmental risks.
We all know that if we change our own behaviour to reduce our carbon footprint or our ecological footprint it will make no difference at all because others will continue to damage the environment.
From the argument I have just made we could conclude that our efforts should be focussed instead on convincing governments to regulate and convincing business to stop their environmentally damaging activities.
We should also recognise, however, that governments and businesses will not do as we ask, because they must fulfil their respective roles as followers of voters and consumers. So that won’t work either.
What we should do is influence other individuals, focusing on opinion leaders. That is the only way that a sufficient constituency of voters and mass of consumers will be assembled to lead our governments and businesses.
The world’s environmental activist organisations have made a huge strategic error in failing to see this. In focusing their efforts on trying to influence governments and businesses directly without sufficient support they have missed the opportunity to build widespread support among individuals and cost us valuable time.
Ultimately in our modern world, only individuals can lead governments and businesses. That can only be achieved by motivated individuals influencing sufficient other individuals to establish critical mass.
That is why I am here, trying to convince you to join me in the effort to influence others who will influence others until there is sufficient momentum. We have a psycho-pathology of our engagement with our environment and we can only cure ourselves collectively.
My subject today has been the psychology of the history of the economy- environment interaction.
In conclusion I want to make just three points.
First, I want to show you a quote from Barbara Tuchman who studied the giant stuff-ups made by societies though history from Troy to Vietnam.
Second, if we acknowledge the importance of ideas and of our physical environment we can discern historic processes that offer the potential to anticipate and manage aspects of our future. Our behaviour is determined by our ideas and the combination of our structural circumstances and our behaviour will determine the outcomes we will experience in our future.
We will observe those outcomes and change our ideas in response, establishing a continuous co-evolution of ideas, behaviours and outcomes.
Third, many of us assume that modern humans are protected from the kinds of risks I am concerned about because we are so clever that we will respond as required, and that we will develop and deploy wonderful technologies that will overcome all our problems.
I am sceptical but acknowledge it might be true. But it will only be true if we actually are clever. It will not be enough to just assume we are clever.
So I expect that 200 years from now, when people reflect on the damage done to the Earth during the Age of Waste they’ll say “look at those people in their funny clothes. What strange ideas they had”.