In his 1996 book, Beyond Growth: The Economics of Sustainable Development, Herman Daly characterizes his understanding of the economy-ecosystem relationship as preanalytic.
Preanalytic understandings are like worldviews or paradigms: a set of basic assumptions about the world and its relationships. Economist Joseph Schumpeter, to whom Daly credits the term, calls them visions.
From Schumpeter’s 1954 History of Economic Analysis:
[I]n order to be able to posit ourselves any problems at all, we should first have to visualize a distinct set of coherent phenomena as a worthwhile object of our analytical efforts. In other words, analytical effort is of necessity preceded by a preanalytic cognitive act that supplies the raw material for the analytic effort. In this book, this preanalytic cognitive act will be called Vision.
In Daly’s vision, the human economy is dependent upon the larger planetary ecosystem, and a simple diagram of this relationship, putting the “economy” squarely within the “environment,” is at the center of a story from the early 1990s, when Daly was senior economist at the World Bank:
The evolution of the manuscript of Development and the Environment is revealing. An early draft contained a diagram entitled, “The Relationship Between the Economy and the Environment.” It consisted of a square labeled “economy,” with an arrow coming in labeled “inputs” and an arrow going out labeled “outputs” – nothing more.
I suggested that the picture failed to show the environment, and that it would be good to have a large box containing the one depicted, to represent the environment. Then the relation between the environment and the economy would be clear – specifically, that the economy is a subsystem of the environment and depends upon the environment both as a source of raw material inputs and as a “sink” for waste outputs.
The next draft included the same diagram and text, but with an unlabeled box drawn around the economy like a picture frame.
I commented that the larger box had to be labeled “environment” or else it was merely decorative, and that the text had to explain that the economy is related to the environment as a subsystem within the larger ecosystem and is dependent on it in the ways previously stated.
The next draft omitted the diagram altogether.
By coincidence, soon after the diagram disappeared from the World Bank drafts, Daly came across it once again. The occasion was a conference panel at the Smithsonian Institution to mark the 20-year update to the controversial book Limits to Growth. Sitting in the audience and thumbing through the new edition, Daly noticed a diagram “exactly like the one I had suggested.”
Daly’s boss, then-World Bank chief economist Lawrence Summers, was on the panel, and during the Q&A, Daly took the opportunity to raise the issue again, this time directly of Summers:
I asked the chief economist if, looking at the diagram, he felt that the question of the size of the economic subsystem relative to the total ecosystem was an important one. …
His reply was immediate and definite: “That’s not the right way to look at it.”
Summers’ “way of looking at it” is consistent with the economic mainstream, which has rejected the worldview that environmental factors might fundamentally constrain economic growth.
In 1973, following the original publication of Limits, economist Robert Solow insisted that the productivity of natural resource use would increase “more or less exponentially over time” and that the world could “get along without natural resources.” He attacked the preanalytic worldview of the “Doomsday Devils” (in “Is the End of the World at Hand?”):
[T]he immanent end of the world is an immediate deduction from certain assumptions, and one must really ask if the assumptions are any good.
Intriguingly, decades later, Robert Solow’s own assumptions seem to have shifted, and he now describes a tightly coupled economy-ecosystem relationship. From a 2007 interview with Steven Stoll (“Fear of Fallowing“):
It is possible … that the United States and Europe will find that, as the decades go by, either continued growth will be too destructive to the environment and they are too dependent on scarce natural resources, or that they would rather use increasing productivity in the form of leisure.
This sketch of a story illustrates two, seemingly contradictory characteristics of worldviews: (what we might call) their robustness and their plasticity. Paradigms shift, but not readily. The entrenchment of dominant worldviews reinforces and is reinforced by established institutions and accustomed norms.
I am reminded of Herman Daly’s words of caution in Ecological Economics: Principles and Applications (co-authored with Joshua Farley, 2003):
Even though our goal may be far from the present state of the world, the latter remains our starting point. We never start from a blank slate. Present institutions must be reshaped and transformed, not abolished. This imposes a certain gradualism. Even though gradualism is often a euphemism for doing nothing, it is nevertheless a principle that must be respected.
Your own visions are welcome here.