If a man takes no thought about what is distant,
he will find sorrow near at hand.
- Confucius (551-479 BC)
James Stodder, (Economics PhD., Yale 1990)
Lally School of Management & Technology
Rensselaer Polytechnic Institute at Hartford
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*
I. Interest as Self-Interest:
1) Is maximizing Shareholder Value sustainable?
2) Is accurate Carbon Pricing sustainable?
II. Interest as Social-Discounting:
3) Is maximizing Expected Present Value
sustainable?
4) Can we Balance current needs with long-term
survival?
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1)
* Shareholders = low commitment, demand high returns
regardless of long-term effects.
* GM a glaring example: failed to make the long-term
investments of Japanese, Germans, or Ford (family).
* Other systems ensure larger stakeholder voice:
German banks and co-determination; Japanese
Kereitsu and Lean Management promote-from-within.
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*
http://www.worldenergyoutlook.org/publications/weo-2012/
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2) Right
* GE considers US carbon pricing necessary for economy,
but does Cradle-to-Cradle (C2C) anyway.
*Mercedes GLK-Class first car in the world to receive
Environmental Certificate from TUV* (Technical
Inspection Association), setting EU standards for LCA.
* Right Pricing is necessary, but it is not sufficient.
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* http://www.tuv-sud.com/home_com
7/12/2016
http://www.daimler.com/Projects/c
2c/channel/documents/2003772_Env
ironmental_Certificate_Mercedes_Be
nz_GLK_Class.pdf
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Consumption (C), Regeneration (R)
Two Kinds of Sustainability
C > R:
Stock ↓
C = R(S)
C < R:
Stock ↑
Stock (S)
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Consumption (C) Regeneration (R)
Two Kinds of Sustainability
Maximum
Yield
Stock (S)
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Consumption (C) Regeneration (R)
Two Kinds of Sustainability
Maximum
Sustainable
Welfare
Maximum
Yield
Stock (S)
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Consumption (C) Regeneration (R)
Two Kinds of
Sustainability
Max EPV (C)
“Enlightened
Selfishness”
Max Sustainable
Social Welfare
“The Green
Golden Rule”
Stock (S)
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*Formalizing the
Green
Golden
Rule
http://www.amazon.com/Valuing-Future-Geoffrey-Heal/dp/0231113072
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Consumption (C) Regeneration (R)
Stability of Green Golden Rule
Maximum
Maximum
Sustainable
Yield
Welfare
Stock ↑
Stable
Stock ↓
S1
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Stock (S)
Stock ↓
S2
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Consumption (C) Regeneration (R)
Stability of Max Sustainable Yield
Stable
Stock ↓
Stock ↓
Stock (S)
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Consumption (C) Regeneration (R)
Stability of Green Golden Rule
Maximum
Maximum
Sustainable
Yield
Welfare
Stock ↓
Stock ↓
Stable
S1
Sustain
Stock ↑
Stock (S)
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* Viable Balance between Efficiency & Resilience
(Goerner, Lietaer, Ulanowicz, Ecol. Econ., 2009)*
* http://www.sciencedirect.com/science/article/pii/S0921800909003085
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Consumption (C) Regeneration (R)
Two Different Discount Rates
Old Econ:
Max EPV(C)
r>0
“Dictatorship
of the
PRESENT”
New Econ:
Max EPV(C, S)
r=0
“Dictatorship
of the
FUTURE”
Stock (S)
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*
* Dictatorship of the Future:
The Stern Review (2006): r = 0.1%
* Dictatorship of the Present:
Nordhaus Critique (2007): r = 3% → 1%
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*
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http://www.worldenergyoutlook.org/publications/weo-2012/
7/12/2016
Graciela Chichilnisky, Economics E-Journal (2009):
*The “Chichilnisky Criterion”
• Starts with a focus on sustainable consumption,
gradually shifts toward sustainable welfare.
• Requires a gradual transition from r > 0 to r = 0
(thus becoming more ‘future oriented’).
• There is evidence that this is how most people
naturally discount the far future anyway.
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* Evidence on discounting from anthropology, animal
behavior, and experimental psychology:
http://evolutioninstitute.org/sites/default/files/external_docs/The%20evolution%20of%20hyperbolic%20discounting%20Implications%20for%20truly%20social%20valuation%20of%20the%20future.pdf
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“Management is not about
maximizing profits or shareholder value in the short
term. That may be relatively
easy to do if the corporation is
willing to sacrifice its future.
Nor is management about
investing everything into the
long-term prospects. It may
be impossible to survive the
cash flow constraints or the
risks and uncertainties of
making investments without
seeming rewards.” (p. 341)
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* Viable Balance between Efficiency & Resilience
(Goerner, Lietaer, Ulanowicz, Ecol. Econ., 2009)*
* http://www.sciencedirect.com/science/article/pii/S0921800909003085
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*
*Efficient Carbon Pricing, Maximizing Shareholder Value,
Maximizing Expected Present Value – all are insufficient
for sustainability if not based on Green Golden Rule.
*Because of this insufficiency, firms aiming at very long-
term success will go beyond what is currently required.
*A Falling-Discount rate is “nature’s rule” in successful
ecosystems. Most traditional cultures of spirituality and
stewardship also foster the Green Golden Rule.
*Similarly, a contemporary path to the Green Golden Rule
must build a social and moral consensus toward the
future. (If forced, that could be a real dictatorship!)
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