What’s wrong with conventional Economics? with Sigrid Stagl

Aug 2, 2017 by

by Julia Talk and Alexander Woywode

On Friday morning, Sigrid Stagl, professor for Ecological Economics at Wirtschaftsuniversität Wien, touched upon the crucial question of “What’s wrong with conventional economics?”. In her lecture, she gave us some insights into market fundamentalism and ecological economics. She first presented the main ideas and concerns of these approaches and at the same time inspired us to reflect on critical questions related to the current economic system such as:

–      “What are markets and where did they come from?”
“What forms of power do we know and who holds power?”
“What is development?”

Prof. Stagl pointed out that economics as a science needs to acknowledge the complexity of reality and to include perspectives of social and ecological sciences. Furthermore, economics should be seen as a science because it allows questioning and discourse. Moreover, economics needs to consider the uncertainty of reality and at the same time focus on multiple goals, rather than having efficiency as the only and main goal. Finally, economics as a discipline needs to recognize social and ecological concerns as internalities rather than externalities, as all three (economy, society and ecology) are interlinked and interdependent.
Having this as the basic approach to economics, the idea of ecological economics is that the economy needs to be embedded in nature, taking into account that economic processes are always also natural processes, and dependent on nature.

Alex’s perspectives

Sigrid Stagl especially grabbed my attention with the statement that it is not possible to understand economics completely or to describe it as a simple system. Nowadays, we develop models for nearly everything and try to describe the reality with numbers. With the models switching hands from scientists to e.g. politicians, the awareness of externalities decreases and attempts to describe complex processes get formed simplistic solutions.

When Sigrid Stagl described the rebound effect, I was reminded of my studies in Georesources Management and my Master’s thesis about the optimization of resource use over the whole lifetime of buildings. Current laws optimize buildings only with regards to the energy consumption during the utilization phase. All the resources used in construction or even the energy consumption in the construction- and end-of-life-phase are not included in the optimization process. The more you optimize just the utilization phase, the more Rebound effects arise in terms of additional resource consumption in other lifecycle phases. To reduce resource consumption and the concomitant environmental effects new approaches would be required that broaden the view over time and space and also to all resources. In my opinion, a change of economic or consumer values is needed. This is because currently the aim for decreasing environmental effects stands in contradiction to the incentive of economic growth and the accumulation of status symbols.

Julia’s perspectives

In this lecture, I really understood the crucial fact that we are able to change the “rules” (e.g. agreements, norms, conventions) and institutions of the system. Markets for example are nothing naturally given, but they are created by humans. By realising that, it empowers us as individuals to rethink, redesign and reform the conventional economy and its institutions and most importantly the implications and values on which the economy is founded.

Rethinking power relations is also important regarding market power. Who determines the price? Who holds the monopoly? Who gives power? And, finally, how can we empower individuals? I found particularly remarkable for the question of power that we have the power to change the narrative of the economy. The power of human potential can truly be released if we are changing our mindsets and worldviews from scarcity to abundance, and freeing ourselves from obsolete assumptions.

Let’s think out of the box of “business as usual” and create new narratives of an economy of abundance and values that acknowledge the wellbeing of the earth as a whole. We can get back to being stewards of the Earth by being designers of an economy that cares about the Earth, cares about the people and allows sharing with all beings – for the wellbeing of all. It needs an economy that respects, acknowledges and gives life – rather than reduce it.