Capitalism and Environment

The economic process involves and affects a large number of aspects. While classical economics is concerned mostly with the entrepreneur, other economists have emphasized other economic players (Karl Marx the worker, Thorstein Veblein the technocrat, John Stuart Mill and John Maynard Keynes the government). But there has not been nearly enough discussion of a very important, although passive, element in the economic process; and this oversight in economic theory has cost dearly to economic vibrancy and to the health of the world.

That element is nature.

In libertarian capitalism, property is described as nature converted into productive use. But no value is seen for nature. With a major input into the economic process, that is greatly affected by the economic process, and whose health has great effects on people’s health, quality of life, and economic vibrancy, not being valued or quantified, the pricing system of capitalism fails to quantify a vast range of its effects. And this has resulted in the worst aspects of capitalism: The failure to disincentivize blind and destructive practices such as the burning of Amazon rainforest to make ranches that last for two years at the conclusion of which the land is desertified; and the failure to incentivize intelligent, ingenious, innovative practices that maximize utility to the consumer while minimizing destruction, pollution and waste.

While many people concerned for the well-being of the environment see capitalism itself as poison, I am not of the same opinion.Capitalism works correctly when both the inputs and outputs are rightfully priced. when economic activity fails to quantify what it destroys, pollutes and poisons – when for that reason it finds it profitable to destroy priceless treasures that man has not created and cannot conceivably recreate in order to realize minimal utility – the economic activity becomes destructive to a far greater extent than it becomes productive. And it is by quantifying these treasures for all that they have to offer people, as well as for what they intrinsically are, that can be disincentivized the myopia and destructiveness of an incompletely constituted capitalism while can be incentivized the ingenious and intelligent practices that actually create wealth.

When the Chinese government sought to quantify the health effects of economic activity throughout the nation, it had to suppress the survey, as it showed the health effects effectively bringing the economic growth in many regions to zero. The severity of health and environmental effects in places such as Linfen negates much of the growth achieved. Meanwhile there are plenty of effective and affordable smokestack and effluent filters on the market, and all it takes is quantifying the health and environmental effects and including them in the pricing to make it vastly profitable for the Chinese manufacturers to implement these filters and vastly reduce the damage of their economic activity to the health of the population.

The same is the case with economic system itself. Rainforest deforestation, ocean acidification, and global warming have only got as big as they did because nature has not been computed in economic process. And it is only by computing nature in economic process that capitalism stands to function as advertised, with incentivization for its benefits and disincentivization of its worst aspects.