The Wealth of Nature

The Wealth of Nature: How Mainstream Economics Has Failed the Environment

Robert L. Nadeau
Copyright Date: 2003
Pages: 336
https://www.jstor.org/stable/10.7312/nade12798
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  • Book Info
    The Wealth of Nature
    Book Description:

    Virtually all large-scale damage to the global environment is caused by economic activities, and the vast majority of economic planners in both business and government coordinate these activities on the basis of guidelines and prescriptions from neoclassical economic theory. In this hard-hitting book, Robert Nadeau demonstrates that the claim that neoclassical economics is a science comparable to the physical sciences is totally bogus and that our failure to recognize and deal with this fact constitutes the greatest single barrier to the timely resolution of the crisis in the global environment.

    Neoclassical economic theory is premised on the belief that the "invisible hand" -- Adam Smith's metaphor for forces associated with the operation of the "natural laws of economics" -- regulates the workings of market economies. Nadeau reveals that Smith's understanding of these laws was predicated on assumptions from eighteenth-century metaphysics and that the creators of neoclassical economics incorporated this view of the "lawful" mechanisms of free-market systems into a mathematical formalism borrowed wholesale from mid-nineteenth-century physics. The strategy used by these economists, all of whom had been trained as engineers, was as simple as it was absurd -- they substituted economic variables for the physical variables in the equations of this physics. Strangely enough, this claim was widely accepted and the fact that neoclassical economics originated in a bastardization of mid-nineteenth-century physics was soon forgotten.

    Nadeau makes a convincing case that the myth that neoclassical economic theory is a science has blinded us to the fact that there is absolutely no basis in this theory for accounting for the environmental impacts of economic activities or for positing viable economic solutions to environmental problems. The unfortunate result is that the manner in which we are now coordinating global economic activities is a program for ecological disaster, and we may soon arrive at the point where massive changes in the global environment will threaten the lives of billions of people. To avoid this prospect, Nadeau argues that we must develop and implement an environmentally responsible economic theory and describes how this can be accomplished.

    eISBN: 978-0-231-50776-9
    Subjects: Economics, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. INTRODUCTION
    (pp. ix-xiv)

    Once, during a flight from San Francisco to Washington, D.C., I observed vast numbers of trucks and milelong strings of railroad cars moving along extensive networks of highways and tracks that threaded in all directions like a circulation system in some giant organism. Products from factories and farms were moving through these arteries toward distant cities and coastal ports, while raw or processed materials were flowing in the other direction to processing and manufacturing plants. I imagined that the web-like connections between electric power plants, transformers, cables, lines, phones, radios, televisions, and computers could be compared with the spine and...

  4. CHAPTER 1 SPACESHIP EARTH Homo economicus and the Environmental Crisis
    (pp. 1-18)

    In July 1969 the Apollo II spacecraft emerged from the dark side of the moon and its on-board camera panned through the vast emptiness of outer space. Against the backdrop of interstellar night hung the great ball of earth, with the intense blue of its oceans and the delicate ochers of its landmasses shimmering beneath the vibrant and translucent layer of its atmosphere. The distances between us seemed suddenly contracted, the ecosystem vastly more fragile. But the impression that sent the adrenaline flowing through my veins was the overwhelming sense that the thing was alive! The teeming billions of organ...

  5. CHAPTER 2 THE NOT SO WORLDLY PHILOSOPHERS Metaphysics,Newtonian Physics, and Classical Economics
    (pp. 19-36)

    The ground on which the entire elaborate structure of neoclassical economics stands is the assumption that Adam Smith uncovered the lawful workings of market economies. In this chapter I will demonstrate that this assumption is false, and in the next I will disclose that the creators of neoclassical economics misused and manipulated mid-nineteenth physics in a failed attempt to ground metaphysical assumptions about the invisible hand in physical reality. After these economists wed the natural laws of economics to the mathematical formalism of mid-nineteenth century physics, the metaphysical foundations of these laws took on a new disguise. The form of...

  6. CHAPTER 3 THE EMPEROR HAS NO CLOTHES The Neoclassical Economists and Mid-Nineteenth Century Physics
    (pp. 37-76)

    The nineteenth-century economists who attempted to clothe economic theory in the raiment of scientific knowledge made no overt appeals to metaphysics. But they did embrace the view of the classical economists that natural laws have a prior existence in an immaterial realm and act outside or between atomized parts (economic actors and firms) via a chain of causation to maintain the stability of wholes (market systems). The fact that the creators of neoclassical economics translated this conception of natural laws into some mathematical formalism from mid-nineteenth physics and that this resulted in an economic theory that would soon be widely...

  7. CHAPTER 4 NO FREE LUNCH Mainstream Economics and Globalization
    (pp. 77-112)

    Economic planners who attempt to chart the future of the global economy are increasingly aware of the damage being done to the global environment by economic activities. But virtually all efforts by these planners to understand, much less effectively deal with, the environmental impacts of globalization have been frustrated or undermined by assumptions from neoclassical economics. The most insidious of these assumptions in environmental terms is that market systems are closed and that natural resources have no monetary value unless or until such a value is established by price mechanisms that operate within these systems. The creators of neoclassical economics...

  8. CHAPTER 5 A GREEN THUMB ON THE INVISIBLE HAND Environmental Economics
    (pp. 113-132)

    Research in environmental science clearly indicates that global economic activities are massively disrupting the web of interactions between parts (organisms) and compromising the ability to the whole (ecosystem or biosphere) to sustain the growing number of our species. The causes of this problem may be staggeringly complex, but the most effective way to deal with it seems obvious. We must use scientifically valid measures of the damage done to the global environment by our economic activities as a basis for assessing the costs of this damage in economic terms and develop means and methods for including these costs in the...

  9. CHAPTER 6 SCHISMS, HERESIES, AND KEEPING THE FAITH Ecological Economics
    (pp. 133-148)

    The ecological economists have made numerous attempts to incorporate scientifically valid measures of the damage done to the ecosystem by economic activities into the framework of neoclassical economics. Scholarship in this discipline is also replete with carefully developed and documented reasons why neoclassical economic theory fails to account for the costs of doing business in the global environment. The mistake, if one can call it that, made by the ecological economists is the presumption that assumptions about part–whole relationships implicit in the mathematical framework of neoclassical economic theory can be revised.

    Given the enormous extent to which assumptions about...

  10. CHAPTER 7 THE REAL ECONOMY IN BIOLOGY Emergence and a New View of Order
    (pp. 149-162)

    Charles Darwin (1809–1882) was a great admirer of the work of Isaac Newton, and his theory of evolution is predicated on a relationship between atomized parts (organisms) and wholes (species) that mirrors the relationship between parts (atoms) and wholes (physical systems) in Newtonian physics. Darwin was also greatly influenced by two classical economists who premised their theories on the part–whole relationship in the classical paradigm—Adam Smith and Thomas Malthus. Darwin’s notebooks reveal that he read a number of Smith’s works, including The Theory of Moral Sentiments, during the summer of 1838 and 1839. Although there is no...

  11. CHAPTER 8 THE REAL ECONOMY IN PHYSICS Cosmic Connections
    (pp. 163-184)

    In 1905, five years after Leon Walras published Elements of Pure Economics, an obscure patent office clerk in Geneva published three papers that signaled the beginning of the second scientific revolution. The “new physics” that Albert Einstein and others developed over the next thirty years undermined every assumption about the character of physical reality in the physics on which neoclassical economic theory is based.¹ More important for our purposes, it also disclosed a relationship between parts (quanta) and whole (cosmos) that is remarkably similar to the relationship between parts (organisms) and whole (ecosystem) in the new biology. Part of what...

  12. CHAPTER 9 TOWARD A NEW THEORY OF ECONOMICS The Costs of Doing Business in the Global Environment
    (pp. 185-206)

    I suspect that few mainstream economists actually believe that the choices made by economic actors are actually guided or determined by perfect knowledge of the consequences of their actions. Yet most do appear at least to believe that the natural laws of economics actually exist and this belief tends, in practice, to absolve economic actors in particular and market systems in general of any responsibility, moral or otherwise, for the state of the global environment. There may be some truth in the claim that neoclassical economics in practice tends to promote the development of democratic institutions, but it also denies...

  13. CHAPTER 10 THE CEREMONY OF INNOCENCE Science, Ethics, and the Environmental Crisis
    (pp. 207-224)

    This book began with a reminiscence about the awe and wonder I felt, as did so many millions of others, in 1969 when we first saw a televised picture of the whole earth taken by cameras on the Apollo II spacecraft. For a time, this image seemed to be pervasive in American culture—it appeared on posters, on the covers of popular magazines, in films and movies, and in an impressive number of ads in both print and electronic media. Like any visual image repeated with great frequency in a variety of different contexts, the whole earth image seemed to...

  14. NOTES
    (pp. 225-240)
  15. INDEX
    (pp. 241-258)