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Dissing equilibrium
February 11, 2010 - 11:18pm

I was talking to an economist this week. (She's not an environmental economist -- I don't know whether that would have made a difference or not.) The topic was the dependency of economic activity on a supply of natural resources. I was able to negotiate an expansion of the definition of "resources" to include sinks as well as sources, but the discussion still didn't get very far.

Whether it was the root cause of our communication problem or merely a symptom, I noticed that she kept coming back to the concept (or at least the term), "equilibrium".

Now I've studied enough economics to place the point of equilibrium at the intersection of the demand curve and the supply curve, but I don't see how the concept is relevant to a discussion of resource utilization when the resource in question is treated as cost-free and infinitely available. For natural resources like iron ore, I can imaging an equilibrium price (at least temporarily). For natural resources like the atmosphere, I simply can't.

More to the point, I don't see the use.

I could be wrong here, but I got the impression that my interlocutor was considering the economy (national, global, or otherwise) as a simple closed system which could be equilibrated by proper management of its internal pieces. If so, maybe that's the root of our disconnect, because I've never considered it such.

To my mind, an economy is a subsystem of a society. And a society is a participant in -- and therefore a subsystem of -- an ecosphere. The higher level systems set the conditions in which the subsystems must operate. Subsystems can affect the status of their supersystems, but not with impunity. Higher level systems tend -- over time -- to be more stable than their components. Indeed, one of the ways higher level systems achieve that stability and survival is by sacrificing components to save the whole. Thus, the question for an economy (and a society) is not whether equilibrium can be attained (or even identified), it's how to live and operate within constraints imposed at a higher level.

That's one of the reasons why I can't begin to understand arguments along the lines of "we can't afford to mitigate (much less reverse) climate change -- it would put too great a burden on our economy." It's also probably one of the reasons why I don't put knowledge of which urban neighborhood to stay out of after dark on the same level as understanding the forces of nature. (Neighborhoods are temporary. Nature, in some form, is forever.)

The economist in question is tenured, so I suspect she's very good at her specialty. But, like so many faculty members, I can't help thinking that she's missing the bigger picture. And I can't help hoping she doesn't pass that myopia on to too many students. ("Too many", like the term "more", sometimes means "any".)

 

 

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