New Era Economics and the Commons - 16 May

Over the past forty years, human demand for renewable resources has overwhelmed the Earth’s capacity to produce them.

During this same period, ecological economists like Kenneth Boulding, Nicholas Georgescu-Roegen, Herman Daly and Robert Costanza have been considering the interdependence and coevolution of natural ecosystems and human economies in time and space.

The present economics of utility, efficiency and cost-benefit analysis arose from the 19th century economics, which was based on Newtonian physics.

19th century economics made three major errors which remain in our current system -- all of which demonstrate that the idea of a value-free economics is unrealistic and unsustainable.

In the first place, 19th economics was conceived as a closed equilibrium system with no inputs from or outputs to the outside world.

In other words, all energy originates and stays inside the system.

The second problem with 19th century economics is that it was developed before the Second Law of Thermodynamics was discovered, and this recognition has still not been incorporated into the economic system.

Hence, there is no measure of entropy in our current economics to account for the disorder or randomness in the system that is increasing through time.

These two errors led to a third error.

Modern economists believe that self-interest and perfect rationality are the drivers of human incentives in the economy.

These views of human nature are made on the assumption that all of the variables in economics are causal.

It’s becoming more and more apparent that we cannot continue to base our social exchange systems simply on causal units like currency, prices, contracts, households, factories, corporations, jobs, consumer demand, individual preferences that follow rates of growth which are not commensurate with the biosphere in which they exist.

Consumer demand, markets, technologies, business plans, stocks of natural resources are not static variables but ever evolving.

How do ecological economists make sense of this?

Between the realm of linear causality and the realm of no causality or interaction among variables lies the area of complexity science.

From systems theory, complexity theory, information theory, physics, biology and other areas we are learning that complex systems have a high diversity of components and a dense network of interactions between these components.

Ecological economics, which is also known as biophysical economics or bioeconomics, looks at the intertwined and mutual causality and the dynamic feedback loops between a system’s multiple components.

Using complexity theory, ecological economics analyzes the flows of energy and materials that enter and exit the economic system.

Ecological economics recognizes the economy as an open system with inputs and outputs.

In this model, beneficial forms of solar, mineral, human and animal energy are absorbed from outside the system, but often end up as unwanted byproducts such as gases, waste and pollution.

Living organisms, river systems, ecosystems, urban networks, social systems and business networks are examples of complex stock and flow systems.

Flows of matter, energy, information or money concentrate in a stock and are then recycled as a flow, whether this flow-stock cycle is instantaneous or involves delays of varying duration.

As Nobel Laureate Elinor Ostrom explains in Governing the Commons, “Resource systems are best thought of as stock variables that are capable, under favorable conditions, of producing a maximum quantity of a flow variable without harming the stock or the resource system itself”.

Recent literature on the commons reflects another aspect of complex systems.

The commons looks at the differential levels of human interactions within social-ecological systems as holons -- basic organizing components which are also parts of a larger unit, which in turn is part of a greater whole, and so on, all of which is scalable up or down.

Hence, the beingness of the human being involves more than a steady-state or natural order in which systems regulate and stabilize themselves through a network of feedback loops.

We know that nature and society are both whole-part systems, self-evolving and self-ordering.

Why, then, are our material, biological, pyschological and social systems continually clashing?

It’s becoming clear that another whole-part system exists besides those of society and nature.

Increasing attention is being given to the possibility of similarly nested tiers of components -- wholes which supersede yet include preceding wholes -- within the personal and intersubjective experiences and intentionality of the users and managers of social-ecological systems.

This is why we may be misled if we merely follow the outlines of the Gaia Hypothesis.

Typically, Gaia is defined as a complex entity involving the Earth’s supporting systems, including the biosphere, atmosphere, oceans and soil.

This system is said to be seeking an optimal physical and chemical environment for life on our planet.

But Gaia is more than this.

The commons shows us that Gaia does not exist on its own, but is a collaborative effort -- the joint creation of all who live on it.

In other words, Gaia is not simply a material and organic construct -- it also involves human consciousness and culture.

Why are these human interiors so little researched in ecological economics?

The study of multitiered hierarchies involving the psychological, ontological and hermeneutic characteristics of human beings in organized interactions, which may be of specialized interest in some fields of inquiry, is often viewed as beyond the scope of the social sciences and ecological economics.

Hence, many attributes of interior human development, such as cognitive awareness, individual knowledge, rationality, self-identity, autonomy, moral capacity, responsibility, leadership, organizational capacity, common understanding, trust, reciprocity, shared worldviews, collective interpretations and cultural values, are identified in ecological economics as meaningful but disaggregated, non-quantitative, or exogenous variables.

But in the commons studies, the experimental investigation into these interior qualities as multilevel developmental units -- or holarchies -- of the individual or group users and managers of social-ecological resource systems is helping researchers develop new methodological safeguards against reducing these interior attributes into their behavioral or institutional correlates.

This is increasing the internal validity and reliability of the objective measures of complex interaction effects and outcomes involving a resource system, its units, its rules of governance and its participants’ actions -- particularly in terms of the personal choices, capacities, implicit knowledge, decision-making, intrinsic values and motivations for self-interest or group cooperation on the part of resource users and managers.

In his book Full-Spectrum Economics, for example, Christian Arnsperger cautions against economic models that rely primarily on a structuralist emphasis on inputs and outputs in complex systems without including the interiors of human consciousness.

The holons of society, nature and self are increasingly being discussed by commons researchers, including Ostrom and her associates at Indiana University, as well as many scholars affiliated with the International Association for the Study of the Commons.

There is a growing understanding on the part of these researchers that human behavior involving the co-governance and co-production of a commons is shaped (more or less) commensurately by the human brain, the mind and culture, and social relations.

Scholars like Dr. Leandro Meyer and his associates in Brazil have accumulated clinical evidence that the integration of the holarchies of

a) physical and biological development

b) human interior development

c) and institutional development tends toward

heightened behavioral freedom; 

declining egocentrism; 

growing inclusiveness and care for others, external objects and conditions;

greater mutual understanding through communication; 

expanded cooperation; 

and increasing acceptance of normative sanctions

These findings suggest that the theory and praxis of whole-part systems may lead to a worldview of developmental stages unfolding through a progressive evolution of nature, self and culture -- each of which appears to have its own internal drives toward greater complexity, greater unity and greater consciousness.

Further research focused on the differentiation between vertical (experiential and cultural) and horizontal (behavioral, social and systemic) holons -- and their reintegration at a higher order of biopsychosocial holarchy -- is needed.

The study of multitiered hierarchies involving the psychological, ontological and hermeneutic characteristics of human beings in organized interactions with resource systems can also be viewed in terms of the complementarity of stocks and flows.

This is where the commons becomes a vital part of tracking the metabolism of society and nature.

Like natural ecosystems, human economies are complex stock and flow networks: some commons are stocks (soil, water, technology, atmosphere, air, minerals, DNA) and some are flows (electromagnetic spectrum, knowledge, ideas, arts, culture, social networks).

This suggests to us a new theory of value.

The most irreducible fact in economics is that resource systems are either be depletable (natural, material) or replenishible (natural, solar, social, cultural, intellectual, digital).

The only way depletable and replenishable resources can be conceived as an economic unity is through the relationships and connectedness that human beings share with them through the progressive evolution of

nature (physical and biological development)

self (human interior development)

and society (institutional development)

Value does not originate independently through communities or their resources, but in the relationship of the communities to those resources.

This has many implications.

The separation or distancing of the human mind from life and matter is the basis of economic and political dysfunction.

Presently, the private economy depends on the goods and services provided by the public sector; the goods and services provided by the public sector are dependent on the commons; and the commons an expression of mind, life and matter.

So this lack of integration between private goods, public goods and common goods is the reason that we are constantly struggling to recognize how the individual fits in society and how society can support personal growth and creativity.

When the individual is set in competition with the whole, the moral will and creativity of the people are suppressed.

Mind and body are seen as separate units, our being is split from our actions.

This leaves us starved for the equality and freedom which express the interrelatedness of human life and which can arise only through our commons.

We have begun to recognize that the society which sees itself as an inevitable polarity between the social good and individual rights destroys the forms of life that are rooted in the commons which are the source of our livelihood and well-being.

The commons offer a way of integrating the whole and the self, the collective state of the world and the state of individual being.

We are in the midst of a civilisation-wide transition from hierarchical governance and institutional forms to ones which are based upon decentralization and peer-to-peer interaction.

The norms and rules which are being developed to oversee collective resources sustainably involve peer-to-peer management and open source models.

Innovative models and tools are emerging that enable us now to organize and coordinate our activity in new ways, transforming the nature of community and social institutions.

These systems include free software, open hardware groups, open media and educational models, open collaborative research in commerce and science, and horizontalist decision-making by social activists.

Thanks to this growing evolutionary impulse, a new production and governance logic of learning-by-doing has become possible.

 As resource users become directly involved in the process of production, their local ideas, learning, imagination, deliberation and self-corrective action are embodied directly in their collaborative activities.

This expands the distribution of the means of production and decision-making far more widely than through top-down systems.

When consumers become co-producers of the goods and services they receive and organize, their mutual activity transcends privatization, centralization and the idea that institutional change can come only through a traditional command structure or social hierarchy.

As these evolutionary forms of technology and culture alter the nature of resource exchange systems, communities are engaging around projects in a deeper and more powerful way, creating new ways of interacting and coordinating social and economic life.

We have recognized the complexity of social and natural systems in the external world, but we’ve only begun to see that the realization of these systems takes place through the human mind and culture.

Hence, from the standpoint of the commons, we are indeed co-creators of the Earth.

The commons are not just resources as measured by their flow of energy, materials and ecosystem services in terms of biological evolution, sustainability, environmental quality and economic development.

They are also the set of relationships these resources create, including the communities that use them, and the cultural and social practices and property regimes that manage them.

The commons show us that value does not originate independently through communities or their resources, but in the relationship of the communities to those resources.

Our task is ultimately to reconcile nature, society and self in a commons-based economy where commons are the stocks and flows of the resources themselves, the people who preserve, produce, manage, access and use them, and the social relationships that unite these resources with the people.