This is Brian Czech on the “trophic theory of money”:
Due to the fundamental structure of the economy, the size of the economy – as measured by GDP – is a perfectly valid indicator of environmental impact. Agricultural and extractive sectors form the base, which must expand to support the growth of manufacturing and service sectors – yes even the “information economy.” This structure, which is the closest thing in economics to an inescapable law of physics, gives us the “trophic theory of money,” which says that the level of expenditure (GDP, in other words) is proportionate to environmental impact including such tangibles as biodiversity loss, climate change, and pollution in the aggregate.
It makes perfect sense that the overall scale of human activity is proportional to environmental impact, at least for a given level of technological knowledge, which doesn’t change very fast. Where I think he is wrong is the idea that money is a good measure of that impact. If you drew a pyramid showing the environmental impact of various sectors of the economy, starting with the lowest “trophic levels” like agriculture, forestry, and mining, and continuing up to the service and information sectors, it would indeed be a pyramid – agriculture, forestry, and mining would have the biggest ecological footprints, then the footprint of various sectors would decrease as you worked your way up the scale.
However, if you drew the same pyramid based on the contribution of each sector to GDP, it would be inverted, with agriculture, forestry, and mining representing much smaller numbers of dollars changing hands, and higher-tech sectors much more. The reason, I think, is that agriculture and mining have been around forever, and have become very efficient from an economic perspective (although we certainly don’t count their true costs in an environmental sense). The rate of technological change is low in those sectors, and we have turned them over to a small number of firms that know how to operate very efficiently and drive costs down, making small profit margins on a large scale. Relative to historical levels, prices are low enough in these sectors that we can largely take these goods and services for granted, and the majority of us have some money left over to spend on more frivolous goods like electronics.
The high-tech industries are rapidly evolving and have many players competing against each other to come up with novel things that we have just figured out we are willing and able to pay for. The profit margins in these sectors, and the total number of dollars changing hands, are much larger. This allows a larger number of players to compete at smaller scales.
A fun place to look at these statistics yourself is the U.S. Bureau of Economic Analysis’s interactive tables.
This critique misses virtually all the nuances comprising the trophic theory of money, not to mention the key point that money supplies (such as M0) and flows (GDP most notably) aren’t about parsed-out portions of the economy such as trophic levels, but rather aggregate economic activity as adhering to the complete trophic-level structure.
Readers who really want to know about the trophic theory of money should read the overview article here:
https://royalsoc.org.au/society-publications/current-issue
I don’t get a lot of substantive comments, and I appreciate yours even if it was a bit sharply worded. I read through the paper and I have no fundamental disagreements with it. It makes sense that having an agricultural surplus frees most of humanity up to pursue activities higher up the trophic pyramid, and it makes sense that GDP is a measure of that activity.
If I could engage in dialogue with Mr. Czech, I would ask him about his assertion on p. 79 that R&D has nearly reached its limits in terms of technology being able to reduce environmental impacts per unit of GDP. It seems to me that there are technologies that could change that. As a thought experiment, consider orbital solar panels beaming energy to high-rise farms. The environmental impact per unit of land could be quite low in theory. No undiscovered future technologies would be required to do this – it would be an extension of existing technology. Fusion power would be an example of a technology that does not yet exist, may never be accessible to us, but is nonetheless consistent with the laws of physics.
I suppose if we did this, it might permit the population to continuing growing until we reach some other limit to the planet’s carrying capacity, such as ability to dissipate waste heat. I’m an engineer and I am not questioning the laws of thermodynamics, only how long we might be able to postpone a reckoning with them. If we could postpone it, say, 1000 or 5000 years, that is a pretty long time frame in the life of our species even if just the blink of an eye in the life of our universe.
I am not suggesting or predicting that this is the path that we are on. The path we are currently on is ruining the land, atmosphere, and oceans, and probably has us headed for a sharp contraction in the agricultural surplus at some point in the next few decades. There is nothing governments are doing at the moment that makes me hopeful this situation will turn around. The consequences will certainly be exactly what the paper is suggesting – a contraction in GDP, a return to subsistence farming for many people particularly in poor countries, and a lot of human misery.
Thanks for your response. We appear to be much on the same page.
As a next step, I encourage you to sign CASSE’s position on economic growth: https://steadystate.org/act/sign-the-position/. Please also encourage others to do the same, if you are willing.
As another next step, I can try to put you in touch with Brian so you can hopefully engage in dialogue. Please let me know if you’re interested, and feel free to connect with me via email – rdharding2@gmail.com.