A Brief History of Western
Economics
How an individualistic frontier society
Grows Interconnections & the Global Commons
Graciela Chichilnisky
Columbia University
July 15 2011
Western Market Economics based on
– Competitive Markets - individualistic: no connection
between people
– Optimal Growth Theory exponential growth of population
and resource use – a frontier society without limits: no
connection with ecological systems
– Cost Benefit Analysis and Financial Models that Discount
the Future – a short term vision: no connection between
the present and the future
A Dictatorship of the Present
So far Western economics
Lacks connections between people, connections
between the economy and the environment, and
connections across generations
Sustainable Development
requires building connections
WHY?
Because humans
dominate the planet
• For the first time in recorded history
• Following an era of rapid globalization
Humans dominate Planet Earth
• We change the planet’s atmosphere, its
bodies of water, and the complex web of
species that makes life on Earth
This means natural resource limits
• As we reach natural resource and environmental limits
The survival of humankind is at stake
• Need connections with the ecology, between people
and with the future of our species
Can Western Economics adjust?
Can Markets become Sustainable?
The Present and the Future
• Cost Benefit Analysis and Optimal Growth theory
exist that do not discount the Future
A Formal Theory of Sustainable Development has
been developed that provides
Equal treatment for future generations
Connects the present and the future
Sustainable Development
(Chichilnisky 1996, 2000, 2006, 2009)
New types of markets
• Market economics can be made consistent with
sustainable goals
• But markets themselves must change
• Individualistic markets must evolve into new types of
markets that I postulated - markets for public goods –
which incorporate conenctions between people and
value the global commons
• They are slowly emerging due to new scarcities: carbon
market of the Kyoto protocol, SO2 markets in CBOT,
new markets for water and for biodiversity.
Need Global markets valuing privately produced public
goods – the global commons
New markets change capitalism
• Markets trading privately produced public
goods are new
• They combine equity with efficiency
Connecting People
• They require limits on resource use
Connecting Economics with
Ecological Systems
New capitalism in the 21st Century
• The basis exists
• Theoretically and in practice
• New markets, new growth theory, new cost
benefit analysis and new GDP measures
• They change the goal of Economics:
• From maximizing profits to optimizing
progress -- and ensuring the survival of the
human species