Good food for good thought

Seed: How, if at all, does steady-state economics apply to the current financial crisis?

Finance is based heavily on things called “present value maximization models”—which means, essentially, that you’re discounting the future by a presumed rate of growth. You run an exponential growth equation backward to get a present value. So via the discount rate, growth is fundamentally built into finance. Well, that’s a very big assumption because the biosphere of which we’re a part is not growing.

One of my intellectual heroes, the Nobel Prize– winning chemist Frederick Soddy, put it another way. He said the problem in our economy is the one thing that economists have in their system which does not obey the laws of physics. And that is money. Money is the symbol of wealth, and yet it operates on laws which contradict the laws that wealth operates on. It’s very strange to have a symbol system that operates in ways that are fundamentally different from the thing being symbolized.

Seed: Do you think that in the future all economics will necessarily be ecological economics?

That’s what I expect. I mean, we’re faced with two impossibilities. On the one hand, it’s politically impossible to stop growth. On the other hand, it’s biophysically impossible to continue it ad infinitum. So, which impossibility is fundamentally impossible? Well, you know, I’ll take my chances with trying to change the politically impossible, because I don’t think I can change the biophysically impossible.

Rethinking Growth

2 thoughts on “Good food for good thought”

  1. Parabéns, Val, é a primeira vez que vejo um “blogue político” português apontar para
    um artigo sobre o tema mais importante da actualidade.

    Bom trabalho, Aspirina!

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