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.
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:
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.
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
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
||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