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
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
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
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
. . .
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
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
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