Advances in Ecological Economics series
Chapter 4: Towards an environmental macroeconomics
Environmental economics, as it is taught in universities and practiced in government agencies and development banks, is overwhelmingly microeconomics. The theoretical focus is on prices, and the big issue is how to internalize external environmental costs so as to arrive at prices that reflect full social marginal opportunity costs. Once prices are right the environmental problem is ‘solved’ – there is no macroeconomic dimension. There are, of course, very good reasons for environmental economics to be closely tied to microeconomics, and it is not my intention to argue against that connection. Rather I want to ask if there is not a neglected connection between the environment and macroeconomics. A search through the indexes of three leading textbooks in macroeconomics (Barro, 1987; Dornbusch and Fischer, 1987; Hall and Taylor, 1988) reveals no entries under any of the following subjects: environment, natural resources, pollution, depletion. Is it really the case, as prominent textbook writers seem to think, that macroeconomics has nothing to do with the environment? What historically has impeded the development of an environmental macroeconomics? If there is no such thing as environmental macroeconomics, should there be? What might it look like? The reason that environmental macroeconomics is an empty box lies in what Thomas Kuhn calls a ‘paradigm’, and what Joseph Schumpeter more descriptively called a ‘pre-analytic vision’. As Schumpeter emphasized, analysis has to start somewhere – there has to be something to analyse. That something is given by a pre-analytic cognitive act that Schumpeter called ‘vision’.
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