Sustainability and the economics of embedded values

Madhavi Venkatesan, Bridgewater State University (Online): Sustainability and the economics of embedded values

Increasing global awareness of natural resource depletion, heightened weather-related volatility attributable to climate change, and the subsequent emergence of multi-disciplinary sustainability programs in higher education have pronounced the void in the explanatory discipline of economics to address the values that have yielded the economic and environmental outcomes observable in prevailing sustainability discussions. Economic theory, models, and analysis are central to a discussion of how individuals interact not only with one another but also with the environment. Further, the implicit inclusion of economics in the daily behavior of individuals and nations strongly influences the observations of global sustainability, including economic equity and social and environmental justice issues.

Unfortunately, economics has been limited to an assessment of an arm’s length market model with no evaluation the implicit and endogenizing values defining rational agent behavior. In this respect, economic modeling has been simplified to account for “process efficiency,” which through the most recent period has been evaluated as cost minimization relative to revenue (or utility) maximization. Costs articulated in this standardized manner have excluded items that were not readily quantifiable or were created as a result of natural resource utilization, degradation, or replenishment. For example, in viewing the environment, common assets such as water, air, and land were not included in production assessments; furthermore, damages resulting to any of these common elements have, for the most part, not been articulated unless indirectly addressed as being a part of social and governmental regulation. Given these omissions and arguably attributable to the same, anthropomorphic environmental impacts related to production and consumption, inclusive of profit and utility maximization have been significant. However, though the value of the environment has not been an articulated or explicit factor, this is not consistent with the environment not being of value.

As a generalized modeling tool it is assumed that what individual economic agents value is what is embedded within the market mechanism that produces economic outcomes. However, limited or myopic decision patterns, along with delegation of implicit values to producers and ancillary marketing and advertising functions may not be consistent with long-term social values. From this perspective, awareness and education programs focused on promoting a holistic understanding of consumption and production outcomes will have the most significant impact in promoting economy-wide sustainability. Raising consumer awareness will augment production and promote operationalized sustainability within the business enterprise, as the consumer is also the most essential stakeholder. However, the fragmentation of the individual consumer has to be coalesced to reach a scale of demand with the capacity to initiate the values-based modification stated. The proposed discussion will build on the endogeneity of values and behaviors in the present market model and will focus on the role and untapped power of the aggregated consumer base in establishing sustainability. The discussion promotes the use of interdisciplinary assessment in targeting and aggregating consumer demand to establish economy-wide sustainability objectives.

Additional materials: INSS 2015_VenkatesanM-4-1-15-FINAL