EXCERPT The Case for Common Sense: An ecological, economic, and social revolution

Making a case for common sense
A classically-trained agricultural economist takes a fresh look at sustainability

By John Ikerd
Posted August 31, 2004

Editors' NOTE:

Retired ag economist John Ikerd recently sent us an email regarding a book he's written about sustainability and how we, as a society and as individuals, can approach it. Ikerd explained that after several rounds of revisions and discussions with prospective publishers, he decided to publish it himself, on line.

For those of you who aren't familiar with Ikerd's career: John grew up on a small dairy farm in Missouri and received B.S., M.S., and Ph.D. degrees in agricultural economics from the University of Missouri. He served as an extension ag economist in North Carolina, Oklahoma and Georgia before returning to his native Missouri in 1989. Over the following decade he worked with the University of Missouri, the USDA and other groups on a variety of projects relating to sustainable agriculture research and education.

As Ikerd himself is the first to admit, his life has been a journey from conventional, conservative, free-market thinking to a more open-minded, even radical outlook. He has always been a prolific and outspoken writer; since his official retirement in 2000 he has published widely on issues affecting small family farmers, including the global food system, agricultural policy, environmental stewardship, organic farming, and much more.

You can read many of Ikerd's essays, speeches, and other publications, including the full text of The Case for Common Sense, at:
faculty/ jikerd

In the introduction to his new book, Ikerd describes how, in 1996, he suffered a massive heart attack while in the doctor's office for a routine checkup. The doctors and nurses restarted his heart and scheduled him for a triple bypass. During his recovery, he re-read the works of Tom Paine, the late-18th century radical thinker whose plain-spoken pamphlet, "Common Sense", helped inspire the American Revolution. What follows is a selection from Ikerd's The Case for Common Sense, chapter 10, "Towards an Economics of Sustainability," lightly edited and published here with the permission of the author.


In the summer of 1996, I was invited to present a paper at a conference on sustainable agriculture sponsored by the American Agricultural Economics Association meetings in San Antonio, Texas. The conference organizers assigned me the topic, “Sustaining the Profitability of Agriculture.” In thinking about how I should approach this subject, I concluded that the economy is not designed to sustain the profitability of agriculture. In fact, our economy virtually ensured that any profits in agriculture are quickly competed away, and thus, profits from farming are inherently unsustainable.

The same would be true of any economically competitive sector of the economy. Any expectation of profits invariably causes producers to increase production, which prevents prices from rising or causes prices to fall, and the expected profits never materialize or quickly disappear. Today, agribusiness corporations are trying to gain control of agricultural markets so they can eliminate competition, control production, and sustain profits through market power. But, profits for farmers, who have no market power, quite simply are not sustainable.

At the conference, I urged agricultural economists to accept the challenge of developing an economy, albeit in theory, where a reasonable level of profits could be sustained. I wasn’t suggesting that farmers should join corporations in trying to eliminate competition, but instead that we should rethink the whole concept of a free market economy. The discipline of economics simply doesn’t give much attention to the overall quality of life impacts of an inherent lack of sustainability of profits in a competitive economy. In economics, profits provide the incentive for continual innovation, so we can have ever-more stuff at ever-lower prices – that’s all that seems to matter. The fate of those who don’t survive the race to produce more and produce cheaper just doesn’t get much attention. Some win and some lose, that’s the discipline of the marketplace, so we are told. Neither does the economic man spend many sleepless nights worrying about what this blind pursuit of materialism does to human societies in general. The satisfaction of consumer demand is the driving force of economic activity. The social and ethical well-being of whole people is beyond the realm of economics.

At the meeting in San Antonio, I argued that a new economics should be developed on the foundation of sustainability; our economy would have to be ecologically sound and socially responsible in order to be economically viable over the long run. I challenged my colleagues to break out of their myopic ways of thinking and to examine their blind faith that short-run self-interests somehow will be transformed into long-run societal well-being. I challenged them to abandon the dogma that we had been taught in graduate school and to develop a new economics of sustainability.

My challenge brought a strong response from many in the audience. Most were slightly shocked that an economist on a program at the AAEA conference would be so critical of the economics profession. However, others seemed inspired by the fact that someone was willing to stand before the profession and to tell the truth about our discipline.

At lunch, the people at my table seemed ready to join my campaign for a new kind of economics. Jim Nelson, a former colleague from Oklahoma, and I had a long conversation following lunch that day. Jim had spent his career in resource economics – trying to find ways to minimize the negative impacts of the private economy on the natural environment. Jim agreed with most of what I had to say, but he didn’t think we needed to develop a new economics – “the old one was not beyond repair,” he said. I disagreed. Jim challenged me to take the first step, to propose a new economics of sustainability – specifically, to outline a theory that wasn’t just a rehash of the old economics.

I accepted the challenge and developed a “white paper” on the subject later that year. I sent the paper to Jim and to more than a dozen other economists who I knew were interested in economic sustainability. I sent the paper also to non-economists who were interested in sustainability issues. I knew if change were to come, it would not likely come through the economics profession. Economists, in general, had too much to lose from changing their old paradigms. I asked for reviews and comments and attempted to respond with revisions and an addendum to the paper. Much of this chapter is rooted in my previous efforts to develop an economics of sustainability.

I concluded that the economy is not designed to sustain the profitability of agriculture. In fact, our economy virtually ensured that any profits in agriculture are quickly competed away, and thus, profits from farming are inherently unsustainable.

The concept of sustainability is far broader than economics – at least as economics it is currently conceived. Daly and Cobb, in their book, For the Common Good (Beacon Press, 1989), refer to the economics of today as chrematistics -- the “manipulation of property and wealth so as to maximize short-term monetary exchange value to the owner.” Sustainability is also broader than ecology or sociology, because sustainability most certainly includes economics. However, sustainability is quite consistent with the root-word for economics, oikonomia – meaning “management of the household (community, society, humanity, biosphere) so as to increase its value to all members over the long run.” Oikonomia includes the management aspects of sociology and ecology as well as economics.

Daly and Cobb propose to address oikonomia through an “economics of community,” which they propose to achieve through new government policies. However, it will take more than new public policy to implement oikonomia. First, people must embrace this new concept of economics as a part of their contemporary culture. They must understand and appreciate the necessity for managing society, environment, and economy, as a whole, not separately, if we are to sustain human life on earth.

. . .

I conceived the new sustainable economy as an inseparable whole, made up of three distinctive components – the personal or individual economy, the interpersonal or social economy, and the moral or ecological economy. The three are clearly interconnected, interdependent, and inseparable, but each has distinct characteristics that warrant their separate consideration.

. . .

The environmental movement has made the public aware of [the] ecological economy. However, the concept of a social economy is neither well understood nor appreciated. First, the social economy is not the macro-economy – the aggregate of individual enterprises. The social economy addresses the interdependence of people within society – not just the adding together of individuals. The purpose of the macro-economy is to facilitate the building of a stronger individual, private economy. The purpose of the social economy is to facilitate the building of a stronger society – of strengthening mutually beneficial relationships among people.

Social capital is the essence of any civilized society. Social capital includes the ability of people to relate to each other, to form families, communities, and nations, to agree on processes of governance and trade, and to share basic principles and values by which civilized people must agree to live. Analogous to stocks of fossil energy, our current stocks of social capital have been built up over centuries by past human civilizations. Without these social resources, we would be living in a barbaric anarchy. Social resources are at least as important as ecological resources in supporting a desirable quality of life.

Stocks of social capital are built up through the development of human culture – the passing from one generation to the next of lessons learned through the struggles of people to achieve more peaceful, productive, and harmonious relationships. Anything that helps us to achieve a higher quality of life through human relationships builds the stock of social resources. Wars, battles, feuds, confrontations, arguments, destructive competition, and other forms of human conflict degrade and destroy social capital. People who have lived in peace for centuries can become bitter enemies, as a consequence of simple misunderstandings. Misunderstandings can lead to conflicts, conflicts to confrontations, confrontation to battles, and battles to wars. The ability to live and work together is destroyed, social capital is depleted, and quality of life is diminished.

Corporations transform social capital into economic capital, and in so doing, destroy the social fabric of families, communities, and nations in their pursuit of profits and growth.

Stocks of social capital are inevitably depleted through ordinary acts of human incivility – people are not perfect. This unavoidable loss of social capital is analogous to entropy in the ecological world. Thus, social capital must be continually replenished or restocked if human relationships are to remain positive and quality of life is to be enhanced over time. Social capital can be depleted also through deliberate acts of oppression, exploitation, discrimination, injustice, or even indifference. Such acts became commonplace in the latter stages of American capitalism and have become rampant in our corporatist society of today. Corporations are not human, and thus, place no value on human relationships, other that those that can be exploited for economic gain. Corporations transform social capital into economic capital, and in so doing, destroy the social fabric of families, communities, and nations in their pursuit of profits and growth.

If human civilization is to continue to advance in the future, we must maintain and continually rebuild our stocks of social resources. Thus, the new economy must be designed to halt the senseless depletion of social capital by corporate exploitation. But, the new economy must also encourage and support continual social investments by encouraging mutually beneficial human relationships. Stocks of social capital must be built at rates exceeding their natural rates of erosion, plus rates of unnecessary depletion, if human civilization is to be advanced. This is the fundamental nature of the social economy. The progress of human society demands that our additions to stocks of social capital consistently exceed our continuing withdrawals.

The conventional or individual economy is by far the best understood and most widely appreciated of the three economies. It’s the only concept most people associate with the word economy. When we go to work or go shopping, we are participating in the individual economy. The conventional economy provides the means, by which we meet our needs as individuals, and collections of individuals, through our transactions with other people and our interactions with the natural environment. As I have indicated before, if we lived totally independent and self-sufficient lives, we would have no need for an economy. But our lives can be made better through specialization and trade, and thus, we need to relate to other people. Our lives can be made better through utilization of natural resources that are beyond our personal grasp, thus we need to trade to acquire benefits from those resources to which we would not otherwise have access.

. . .

The individual economy is an important dimension of any modern society. The conversion of ecological and social resources into economic resources is both necessary and legitimate – if we are to live at any level above subsistent self-sufficiency, and if we are to have freedom of individual choice. We must recognize, however, when we convert natural resources into economic resources, fewer natural resources are left to support the ecological economy. When we take minerals from the earth, cut old-growth forests, or farm ecologically fragile soil, we are disrupting the natural ecosystem in ways that may degrade its ability to remain healthy and productive over time.

Certainly, we realize humans benefit from resource extraction, but we must recognize also that humans benefit directly from the natural environment – from breathing fresh air, drinking pure water, and from being good stewards of the air, water, and soil. Whenever we use the conventional economy to extract from nature at rates faster than nature can regenerate; we are degrading the productivity of the ecological economy, and ultimately will degrade our overall quality of life.

We must recognize also that when we convert social resources into economic resources, fewer resources are left to support the social economy. When we go from helping each other voluntarily to working for each other, we have transformed a personal relationship into a business arrangement.

We must recognize also that when we convert social resources into economic resources, fewer resources are left to support the social economy. When we go from helping each other voluntarily to working for each other, we have transformed a personal relationship into a business arrangement. When we start using our social contacts with other people as business connections, we have started to transform friends into business prospects and social gatherings into business conferences. Ultimately, we will begin to compete rather than cooperate. The means by which we relate to each other will become defined by common business practices, rules, or laws rather than by a sense of caring and common human understanding. Certainly, humans benefit from their business relationships, but we must realize that humans also benefit from our purely social relationships – from belonging, caring, sharing, and loving. When we use the conventional economy to extract social resources at rates faster than the rates we reinvest in society, we degrade the productivity of the social economy, and ultimately will degrade our quality of life.

. . .

The new economics of sustainability must be built upon a foundation of an ethical and moral commitment to sustaining human civilization on earth. We must embrace as inalienable the rights of future generations to opportunities as good as or better than our opportunities of today. Only within this context, can we realize and sustain our social rights – to be part of a caring, sharing, civil, and productive society. Our economic rights, in turn, can be sustained only within the context of our rights as members of a civilized human society. The laws of nature are inviolate, and thus, must be accommodated to ensure a sustainable society. The laws of human relationships, likewise are inviolate, and thus must be accommodated to ensure a sustainable economy.

The economic laws of supply and demand, derived from the law of diminishing returns, relate only to individual, material well-being, not to the societal well-being of people today or to the well-being of human civilization. Thus, a sustainable economy must accommodate the natural hierarchy of individual, social, and ecological economics. Issues of conflict thus can be resolved, at least conceptually, by relying on this natural hierarchy. The challenge of translating this concept into reality, which will be addressed in the last chapter of this book, may prove far more difficult.

I certainly don’t claim to have developed the blueprint for a new economics of sustainability. I have barely scratched the surface of what ultimately needs to be done. However, I have no doubt that a new economics of sustainability could, and hopefully will, be developed within the next few decades. The necessary components of this new economics already exist. We only need to put them together to form a new coherent whole.

We already have a private economy that could be fixed to pursue our individual interests, a democratic government that could be used to pursue our social interests, and a constitution that could be amended to reflect more fully our moral and ethical values. All we need now is a shared vision to how the individual economy, the social economy, and the ecological economy should work together to support and sustain a more desirable quality of life. We need a vision of economics as oikonomia (managing to benefit the whole) rather than chrematistics (manipulating to benefit the individual). With this shared vision to guide us, we can begin to make the changes in the parts that will be necessary to create a new whole, a new economics of sustainability, an economics as if people mattered.

Farmers would not feel compelled to drive their neighbors out of business, if they fully considered the negative social impacts of fewer farmers in their community and the negative ecological impacts of having fewer farmers to care for the land.

Thus far, I haven’t answered the initial question of how farmers might expect to sustain profitability in a sustainable society. First, in a sustainable economy, neither farmers nor any other producers would be attempting to maximize profits, but rather, would be attempting to find balance among the economic, social, and ecological dimensions of their operations. So the profits of less efficient producers, from a strictly economic perspective, would not necessarily be lost to competition from producers with lower costs.

Farmers would not feel compelled to drive their neighbors out of business, if they fully considered the negative social impacts of fewer farmers in their community and the negative ecological impacts of having fewer farmers to care for the land. They would willingly form collaborations, with or without the help of government programs, to limit total production to levels consistent with prices necessary to maintain healthy communities and natural ecosystems, rather than attempting to maximize individual profits.

Second, public policies in a sustainable society would not allow anyone to be driven out of business, if their contribution to the social and ecological well-being of their community and society more than offset any economic inefficiency. Their neighbors, and society as a whole, would recognize their positive contribution to the overall societal well-being and would create the necessary economic environment, through public policy, to ensure their continued contribution. Our economic policies today are designed to minimize costs by driving less efficient producers out of business. Sustainable economic policies would ensure the economic sustainability of ecologically sound and socially responsible business operations. However, the profits of those who fail to make a positive contribution to overall societal well-being would not be sustainable. They would be allowed to fail. But, profits of those farmers who do their part to ensure the sustainability of humanity would be made sustainable economically.

Decisions in a sustainable economy should be based on the true value of things – not just on economic value. But, what is the true value of things? This has been a nagging question in the back of my mind ever since my graduate school days. I used to have long discussions with my fellow graduate students at the University of Missouri about market value, intrinsic value, consumer surplus, welfare economics, etc., all of which attempt to determine the value of things. However, I was never satisfied with the outcome of those discussions. I always argued that the true value of things was different from any of the measures of value that we discussed in economics, but I didn’t know how to explain what I meant. I believe an economics of sustainability, ultimately, will have to address the concept of true value.

First, I do not believe it is possible to develop a single measure of true value. The economic value of anything is a value determined by scarcity in a competitive marketplace. Each person votes with whatever dollars they have, or can get, and the price paid by the highest bidder determines the economic value. Economists talk about different concepts of economic value. Things have average values, marginal values, total values, and all-or-nothing values, to name a few. But, these are all economic values, determined by scarcity – the relationship between supply and demand – and measured in terms of dollars and cents. And, economics provides but one means of determining the value of anything.

The social value of a thing is different from its economic value – although economists mistakenly attempt to assess social value by using economic measures. The social value of anything must be determined by giving every participant an equal voice in the valuation process. In a civilized society, we are all of equal inherent social worth. For example, if we wanted to discover the value of something in the social marketplace, each person would have to be given the same number of dollars to spend so they would have an equal voice in determining the value of whatever was offered for sale. In the real world, the nearest we come to measuring social value is through the process of buying and selling public goods and services. In these cases, the government acts on behalf of the people, and theoretically, each person has an equal voice in influencing their purchase decisions. Thus, we should never expect economic values to be reflected in public decisions to buy or not buy public goods or services. Government should never be run like a business. Economic and social values are fundamentally different.

In addition, the ethical or moral value of anything is different from its economic or social value. The moral value of a thing cannot be determined in the marketplace or in the voting booth, but must be determined by a process of consensus. The moral value of anything must reflect our common sense of its worth. To determine the moral value of a thing we would have to bring people together, without money and without votes, with a commitment to agree on the relative worth of things. They would have to reach consensus. In all probability, they would not rank the value of diamonds as high as the value of air or the value of a sports hero or rock star as high as the value of a schoolteacher or a nurse. I have no doubt such a group could reach a consensus concerning the ethical or moral value of things. And, such a process ultimately must be used to determine the values of things in the long-run ecological economy. The long run ecological value of something cannot be measured in dollars and cents nor determined by votes – it must reflect a consensus of our common sense of its worth.

To determine the moral value of a thing we would have to bring people together... to agree on the relative worth of things....In all probability, they would not rank the value of diamonds as high as the value of air or the value of a sports hero or rock star as high as the value of a schoolteacher or a nurse.

So, I suppose the true value of a thing must somehow reflect the whole of its economic, its social, and its ecological or moral value to humanity. More important, however, no single best measure of true value exists – in spite of the common practice of giving economic value priority over everything else. In addition, no appropriate means exists for converting one type of value into another – in spite of the popular practice of converting social and ecological values into economic terms. Finally, the maximum true value of a thing will be realized when there is balance and harmony among its economic, social, and moral values. The search for an economics of sustainability should bring us closer to realizing the maximum, total, true value from the individual, social, and ecological economies.

This is my vision for a better future – a post-industrial society. It is a vision of a society in which productivity and progress arise from the creativity and imagination of people, in which new organizational paradigms are based on living biological systems rather than lifeless machines. It is visions of a society motivated by the pursuit of a more enlightened self-interest that recognizes the social and ethical as well as individual dimensions of quality of life, in which a representative democratic government is committed to the pursuit of the common good. It is a society served by a new economic system designed to ensure the sustainability of human life on earth.

My vision for the future is that of an economy, society, and ecosystem working together, in harmony, to sustain a more desirable quality of life for all people of all times. This, I firmly believe, would be a fundamentally better world. I don’t have to prove that such a world would be better – it’s a matter of common sense. This is a vision of the future worth pursuing.

This is a vision worth fighting for – a vision worthy of revolution.

To read and/or download the full text of The Case for Common Sense, visit either of John Ikerd's websites at www.ssu.missouri.edu/faculty/jikerd/ or http://hometown.aol.com/jeikerd/.