Monday, July 22, 2013

Limiting Unsustainable Growth by Using Economic Tools

Monetary and Fiscal Policies for a Finite Planet(15 page pdf, Joshua Farley, Matthew Burke, Gary Flomenhoft, Brian Kelly, D. Forrest Murray, Stephen Posner, Matthew Putnam, Adam Scanlan and Aaron Witham, Sustainability, Jun. 20, 2013)

Today we review a very thoughtful article that examines fiscal and monetary measures that would transform unstable boom or bust economic systems that affect both the economic and ecological worlds into steady-state economies. The authors point out the much greater complexity of the laws of ecology and the need to constrain economic measures that create the debt and ecological crises seen in many countries today. In short, “Tax What We Take, Not What We Make”.

Economic growth
Key Quotes:

“The laws of ecology impose even tighter constraints on economic activity than the laws of physics….when ecosystem structure is removed and waste returned… ecosystem functions are affected”
“two ecological requirements for a steady-state economy:
  • humans cannot degrade or deplete any element of ecosystem … faster than it can restore itself without eventually crossing some threshold beyond which that component of the structure is gone
  • humans cannot emit waste into any finite system at rates greater than it is absorbed or, else, waste stocks will accumulate, eventually harming humans and/or the ecosystem.”
“Modern economies use fiat currencies, which are not backed by any physical commodity.…. backed largely by the taxation power of the government”

“Essential public goods and services for a SSE[steady-state economy] include health and family services, food security, public utilities and banking systems, education, media, arts and ecosystem conservation and restoration.”

“In the area of fiscal policy, we recommend a change from taxing value added to taxing throughput, including depletion, land use and pollution….Tax What We Take, Not What We Make”

“Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas lying around….”

Public credit money could provide a counter-cyclical feedback loop to economic cycles, in addition to supporting adequate investment in critical public goods, without increasing debt levels.”
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