2012 ConferenceThe Green Economics Institute Annual Conference will take place 19th- 22nd July 2012 at Mansfield College, Oxford.
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Green Markets
Graciela Chichilnisky
Columbia University, New York
December 18 2008
The global financial crisis has enhanced concerns for the future of the market. Markets up and downs seem now worse than ever, reaching global proportions never seen before. Many believe that global markets have created the environmental crisis of our times, and to a large extent they are right. For the first time in history humans dominate the planet, and through global markets we consume resources in ways that alter the planet's climate, its water bodies and its biological mix. A voracious use of resources in the industrial countries is driven by exports from developing nations, and low resource prices amplify the cruel discrepancies in consumption between industrial and developing countries, the North and the South. Many believe that market prices project the wrong human values -and can never represent a human value system. Biologists see the loss of biodiversity caused by industrialization during the last sixty years as one of the four or five largest incidents of destruction of life on the planet, 1,000 times larger than fossil records. 25% of all mammal species are now extinct -- and they are our evolutionary cousins delivering a clear message for our own species.
Oscar Wilde once said that economists know the price of everything and the value of nothing. Was he right? Is the global empire of the market reaching its natural end?
Yes and no. It is true that market prices are out of step with human values today. The inexpensive fossil fuels used for production since World War II - exported mostly from developing nations and consumed mostly in the rich nations - emitted enough carbon to alter irreversibly the earth's climate with catastrophic consequences. We now realize that low prices of resources, forests, water, animals, do not represent their true value. But then in 1997 we created the carbon market of the Kyoto Protocol, a new type of market. Kyoto was the first global agreement to limit carbon emissions, and its market already traded already $80 billion and is expected to become the largest commodity market of the world. This market trades the rights to use the global commons, the planet's atmosphere, and its market signal - the price of emissions - is already changing the energy production and consumption in the world's markets. The energy market is the mother of all markets, and 20% of all investments in Silicon Valley are on clean energy. Obama sees clean energy as the market opportunity of our times. Some of us, who were involved in the Kyoto Process and the creation of its carbon market are helping develop similar market mechanisms for other global commons, global biodiversity and the global use of water. The problem is high in the international agenda at the United Nations and the EU.
Yet this does not mean that markets are the final solution, or that they are always a solution. It means that they can be a good means to an end - they can help send signals to change our economic behavior. But the values themselves are something different. In the case of markets for biodiversity we need to make choices about the species we need to conserve. We are already making such choices. They are impossible choices, some may say. And we have to orient ourselves by values - not by markets. Oscar Wilde is right, and new results in economics obtained by the author explain why sustainable development is really all about the future of our species, a future that we all share, and a future that we can never anticipate. The choices we make today matter. But the problem remains wide open, because the economics of the future is by its own mathematical structure ambiguous and uncertain. There is a deep ambiguity that emerges inevitably in the stern, rigorous mathematics and the economic analysis of the future. In my work it has been identified with Kurt Godel's mathematics of ambiguity. It says we can use markets to define value - as Gerard Debreu once famously established, following Adam Smith. But it also says that we cannot always "construct" the market solution. The response is ambiguous. It is yes but no. There are solutions, but they cannot be constructed. This ambiguity is troubling but we should embrace it. It means that no machine, no algorithm, can ever be constructed that replaces human values and human decisions. In the deep ambiguity between market prices and human values, the logical space between Wilde's statement and Godel's mathematics, lies the meaning of human freedom.
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