Die

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Dr. Joachim H. Spangenberg Professeur invite,
Université de Versailles Saint-Quentin-en-Yvelines
, France Vice President, Sustainable Europe
Research Institute, Vienna, Austria
Economics and sustainability or the need for
more complexity
Presentation at the 2nd Conference Integrative
Approaches Towards Sustainability Jurmala,
Latvia, 11-14 May 2005
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Terminology

• Sustainable development
• is a process, and sustainaility its objective,
• based on extending the spatial and temporal
  perspective in all directions,
• while integrating the dimensions.
• The four dimensions are
• The natural environment (environmental dimension)
• Society and its systems of rules for decision
  making (institutional dimension),
• The population and its capabilities (social
  dimension)
• The economy (economic dimension).

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Dimensions and their Interaction nouns and
adjectives the prism
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Sustainability is a macro phenomenon

• Quality of life for this generation, future
  opportunities for those following us (the key
  categories in the Brundtland definition) are
  aggregate terms, undefined for the micro level.
• Not (individual or representative) agents and
  their motives are analysed, but the results of
  complex systemic interactions.
• In sustainability analysis, micro models must be
  founded in macro theory, not vice versa.

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Standard economics assumes

• a quantifiable permanent income,
• earned from at best four capital stocks
  (man-made, natural, human and social capital),
• which can be monetised,
• and their use is optimised in terms of maximum
  revenues over the life time of a (immortal?)
  capital owner.

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Its not suitable, as

• it is based on assuming strong comparability or
  even commensurability in all four dimensions,
• at best, it adds the dimensions all options are
  defined with reference to the economic process,
  i.e. disintegrated, including the complementarity
  identified by ecological economists,
• its models are deterministic or at best dynamic,
  but not based on self organising, let alone
  evolving systems (evolutionary economics cannot
  predict),
• and thus its methodological tool box is not
  suitable to analyse problems of sustainable
  development (nor other processes of co-evolution).

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Weak vs. strong sustainability is NOT the
question substitution

• is not defined and makes no sense in most other
  relevant disciplines,
• is not applicable in real world projects,
• is heavily contested in politics.
• Substitution is not a distinguishing feature of
  different kinds of sustainability. The
  weak/strong debate does not reflect
  sustainability, but the complexity deficit of
  economic theory (see prism).

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Cybernetic system analysis

• analyses the level of system complexity and
• provides information about the resulting
  characteristics of system behaviour, to
• determine the appropriate level of complexity for
  any model capable of explaining the system and
  the question to be analysed (e.g. how complex a
  model must be to properly describe the evolution
  of an economy).
• It can be used to specify the level of complexity
  in a given set of economic models, based on the
  assumptions they incorporate, and thus to explain
• Which kind of systems they can adequately model
  and which they cannot.

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Five levels of complexity

• Undetermined systems, only the border between the
  system and its environment is unambiguously
  defines no statement on system development
  possible.
• Evolving systems, the components can be
  identified and distinguished, their interaction
  is context dependent learning development.
• Self-organising systems, the system elements are
  identical to a representative agent, their
  behaviour follows a normal distribution
  stochastic development.
• Dynamic systems, the interaction of system
  elements is standardised starting conditions and
  system rules define a pre-determined
  development.
• Deterministic systems and equilibrium models
  reproducible results are determined by the
  assumed system parameters no development.

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Result

• The economy is (like society, environment and
  population) an evolving system.
• Economics works with (mental and electronic)
  models which are valid only with strong
  limitations in scope and time.
• A disequilibrium theory of co-evolving systems is
  needed as the basis for the economics of
  sustainability.

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Orientor Theory analyses the conditions for
sustained viability of evolving systems,
considered equivalent to system sustainability.

• Characteristics of resulting orientor
• the environment
• Normal state Existence, reproduction
• Resource scarcity Effectivity
• Diversity Capability to act
• Variability Security
• Change Adaptability
• Other actor systems Co-existence

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Orientors for all dimensions apply
Source Martin OConnor, modified
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Deriving criteria e.g. the economy
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e.g. the eco-nomy, cont.
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Standard economics is attractive due to

• the predictability of results in its
  deterministic systems,
• the timeless reactions (the situation before and
  after any action taken can be compared),
• the resulting availability of cost-benefit-analys
  es,
• and thus the guaranteed existence of an
  unambiguously optimal solution.
• None of these characteristics is available in
  complex evolving systems. It will not be easy to
  convince decision makers to use more adequate
  concepts.

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Good bye

• Thank you for your attention.
• For further information and
• to download publications
• you are invited to visit the
• Sustainable Europe Research Institute
  atwww.seri.de

Dr. Joachim H. Spangenberg SERI Bad Oeynhausen,
Germany Joachim.Spangenberg_at_seri.de