Ha-Joon Chang is one of my favourite economists, and I appreciate his critique of modern capitalism and how it serves the poor. But one of my criticisms, which I mentioned in my review of his last book, is that there is little room for the environment in Chang’s writing. They might occasionally get a passing mention, but environmental issues aren’t part of his main analysis. In an age of climate injustice, that rather undermines his ambitions for a more equitable global economy.
He also failed to distinguish, as most economists do, between growth in rich countries and poor countries. With an environmental perspective, growth in already developed countries is by no means an unalloyed good. As long as growth is coupled to rising energy and resource use, which it is, further growth locks us into a destabilised climate, depleted resources, debt and a degraded environment. All of which makes growth in poorer countries almost impossible.
So in reading Chang’s new book, Economics: The User’s Guide, I was curious to see whether he had caught up with the postgrowth perspective at all. I’m pleased to report that he has – or at least, he’s certainly read Tim Jackson’s Prosperity Without Growth.
Here, Chang argues that environmental constraints need to be taken “extremely seriously”. Climate change and the over-drawing of renewable resources means that “we are going to run out of planet, so to speak, if we do not find ways to control the impacts of our economic activities on the environment.”
Of course, developing countries still need to grow. Growth is needed to raise living standards, and to pay for climate change adaptation too. But what of developed countries? “Given that they are already consuming the vast bulk of the world’s resources and they have far fewer needs to increase consumption, the rich countries need to reduce their consumption, if we are to dampen the extent of climate change.”
That doesn’t necessarily mean falling quality of life though – by addressing inequality, overall consumption could fall while allowing those who don’t have enough to have more. Then there’s the need to consume differently, rather than less – measuring our quality of life more through the culture that we create together than the quantity of our private possessions.
Chang draws a helpful distinction between economic growth and economic development, a theme I may have to return to in more detail in a separate post. Economic development is about productive capacity, and Chang suggests rich countries could continue to develop – they should just take the rewards in shorter working hours rather than in increased consumption. Not all production is created equal either. We want to grow production of those goods and services that help us fix environmental problems, including renewable energy.
It’s great to find these ideas in Chang’s book, ensuring they’re not left out of his introduction to economics. The bad news is that they occupy 8 pages of a 500 page book, so it’s not exactly central. The idea that developed countries like Britain should hold back on consumption and reduce working hours – that’s a huge political and cultural change. If Chang is serious, then it needs to be elaborated. That view of sustainability is almost entirely absent from our politics, and it won’t happen by itself.
Now that Ha-Joon Chang has opened the door to true sustainable development, here’s hoping he steps right through and writes his next book about it.
The Earthbound Report 
I’d also like to see you return to this point of ‘distinction between economic growth and economic development’. As someone who works in aid and development this is a big point for me… Am I supporting ideas that will support people to have access and opportunity or am I supporting them towards a failed model of economic growth…?
A recurring problem for development agencies and poverty campaigners. E F Schumacher developed his idea of Buddhist Economics in response to it. Oxfam have elaborated a whole philosophy of people-centred development (see the From Poverty to Power blog and book). Chang divides things in a slightly different way, and I’ll write something about his approach next week.
Super – thanks for the reference and I am always keen to think and know about good/positive/sustainable growth (political/social/economical/etc…). Just like we want to see countries trade their way out of poverty not aid their way out of poverty but that is a whole other can of worms as well…
I recently sent a simple economics question to Ha-Joon Chang to which of course he doesn’t need to respond and hasn’t as yet.
The question which stymies all and I mean all, those who should know but have never thought abut it is , “What is the fundamental source of economic wealth/growth?” (This surely must be the very first fact to be pointed out in the very first lesson in any economics course, which obviously is not done).
That the answer requiring just two words one of which is ‘the’ must be obvious to those of ‘Make Wealth History’.*
Other economists, including Deirdre McCloskey, Piketty and many UK MPs and MEPs do not understand the question. They answer that it is industry or more employment or more investment, education etc. etc. I suppose they don’t understand the word ‘fundamental’. The real answer and what it means is seemingly beyond them which is very dangerous.
* The real fundamental source which we can do nothing about (as yet anyway (!) is the sun). The other which we can and should is, well, obvious.
Ah, you caught me out there. I was going to say ‘land’, but of course without the sun and our exact distance from it, we’d just have a frozen ball of rock.
There are an awful lot of steps between raw sunlight and economic growth though, so I’m not surprised the fundamentals get taken for granted.
I think the difference between you and the whole school of economics is that the discipline of economics was set up to investigate the causes of the rapid increases in wealth that were coming through in 18th century Europe (compared to the millenniums before then).
Before the industrial revolution there was very little growth so your preexisting fundamentals were there but not creating the rates of growth seen by Smith and beyond. That is what economics seeks to explain, so I think they may be answering a different question.
Yes looking at economic causes and developments have always been more important and necessary since the Ind. Rev. and are continually mulled over but that was not my question which is just as important if not more so, in this time of resource depletion and burgeoning world population and its needs, to address where economics is going.
That this fundamental question and the ramifications implied in the simple answer which seemingly stumps those who should have it at their fingertips shocks me. They are only able to answer a different question.
I think though the answer to your question “What is the fundamental source of economic wealth/growth?” would be a glib ‘Humanity’, with ‘Human ingenuity’ being a slightly longer version. Not really sure what you are expecting.
As I have my own idea of what the fundamental source is it seems obvious to me but perhaps not universally so.
My answer is the biosphere or environment from which all wealth is derived. Do you think this is right? If not please give your idea(s).
Trying to continually increase wealth from a source which can be degraded if misused, and is being so, is not a sensible idea. That no one who promotes this continual growth and has no thought where this wealth fundamentally comes from and every aspect of it, is foolish. One might as well promote getting richer by increasing the rate of taking money out of an ATM machine without a thought that a bank balance has been set up and which increased withdrawals cannot continue with only a constant top up or a depleting balance.
One will get richer in the pocket this way, up to a point. As this is obvious to all it surprises me that my wealth source is not to economists.
I am open to correction – I don’t like to stick with a untenable thought.
It has been human ingenuity as to how we used the resources in this biosphere that has increased human wealth and welfare. The biosphere long pre-existed humanity without money, computers, robots or mortgages. So the causes of wealth must be linked to humanity.
Human wealth, that is the economy, can expand in two ways, the use of more materials or using them more cleverly. Human ingenuity means we are using resources in more efficient methods even while we are using more at the same time. An example is before the 1940s a chair pretty much had to be made from solid wood. With the invention of PVA we could make chipboard from wood offcuts that would otherwise have been thrown away. Human ingenuity increasing our wealth while using fewer resources.
Therefore it is possible for the economy to continue to expand, for wealth to expand, even if we did not increase the amount of resources used.
Yes all what you say is right but my question is not about the causes of wealth nor how we use resources.
Perhaps you think me obtuse but from your post your question is: “What is the fundamental source of economic wealth/growth?” ‘Source’ is where something comes from. To which the answer is that wealth and growth of that wealth comes from human ingenuity in using the resources to hand in new ways. So humanity is an essential component. As is the Earth, the Sun, the Universe and the laws of physics. But economic wealth is a human construct. Without humans there is no economic wealth.
Economics is about human welfare. Humanity is at its centre. The study of biology or ecology is a separate discipline, though they can have useful overlaps. You seem to be akin to asking a biologist “What is the fundamental source of life?”and looking for the answer: ‘Astrophysics’ which doesn’t help very much in working out why that butterfly is red. It isn’t what biology is about, even if yes ultimately without astrophysics life couldn’t exist.
I look at it this way. A piece of gold jewellery is made by human ingenuity. But if there is no fundamental source of gold no amount of human ingenuity will make it. If you posit that through technology gold or other resources can or could be manufactured one still needs fundamental physical sources to start with.
Without humans there is no ‘economic’ wealth of course but we are dealing with humans living on the produce of the Earth and aren’t they only the tools not the fundamental source of our wealth?
The thought just struck me that we might mean different things by wealth. It is a very indefinite term depending on context. Perhaps if you define your meaning then it might be easier to answer.
I understand that the ultimate source of the resources we use to create our human wealth is from the Earth but that really doesn’t tell us much just as knowing that ultimate source of those resources is from elements created in Supernova. Interesting but irrelevant.
You say your question is one “which stymies all and I mean all, those who should know but have never thought abut it is” .Rather I’d say it is so obvious that it adds nothing to continue to consider it which is why they don’t. It isn’t a profound point that changes anything.
“Rather I’d say it is so obvious that it adds nothing to continue to consider it which is why they don’t. It isn’t a profound point that changes anything.”
Are you saying that you have never considered the fundamental source of your own personal wealth, how it could change by others or by how you use the wealth etc. – this knowledge would add nothing to you?
I ask you to ask the next five or so people you meet my question and see if the answer is obvious. Only one person I have asked, of many, has given a good answer – ‘land’.
Well, given that my answer was ‘human ingenuity’ you can see that I have considered the fundamentals of economic wealth. I’ve thought about it deeply but I don’t think I came to the same conclusions as you (as have many of the economists you traduce who I’m sure have thought longer and harder than you or I).
People aren’t just tools, they are the start and the end point. Wealth is a human construct. Wealth is measured in terms of human welfare. Why is anything done by humans except for the benefit one way or another of humans? Without human intelligence and effort iron ore is just dirt, not stainless steel knives; silicon chips would just be sand and Harry Potter stories would be unthought ideas. Since we can not have economic wealth without humans they are fundamental, but that isn’t the answer you want. You can have more than one fundamental factor.
Saying the Earth is fundamental for wealth is glib and reductionist. It is as obvious and as uninformative as saying the Earth is fundamental for laughter or poker or anything else on Earth.
An interesting discussion. The trouble with fundamentals is that in many ways we don’t need to think about them when everything is working. I don’t consider the foundations of my house from one year to the next. I don’t have to think about breathing in and out as I go about my life.
However, that would change if cracks started to appear in my walls. And asthma can cause us to be suddenly confronted with the realities of breathing. Likewise, when the economy goes wrong, perhaps reconsidering the roots of it may offer a fresh perspective and lead to solutions. That’s certainly true of our energy systems. By understanding the true source of all energy, the sun, we can focus on accessing that energy as directly as possible.
As for the role of humanity, of course – there’s no economic growth in nature. It’s entirely a human construct, so human ingenuity is essential. And there’s a whole lot of other things that would be crucial to the process, some of which will lead to insights and some which won’t.
“….you can see that I have considered the fundamentals of economic wealth. I’ve thought about it deeply but I don’t think I came to the same conclusions as you (as have many of the economists you traduce who I’m sure have thought longer and harder than you or I).”
Why don’t you go back to my posts and understand what I am talking about and then when you have understood it then make pertinent points other wise it is a waste of time to respond to your posts.
You are proving my point that few even understand the question.
I was happy to takes Jeremy’s very even handed summing up as an end point.
Given the esteemed group who also don’t understand your question it is a position I’m happy to be in. When you go around asserting that lots of people who are experts in a field are wrong because they haven’t come to a conclusion you want to a question you can’t even define (still waiting for your definition of wealth) then you do seen a tad silly.
I would have summed up our little discussion as two fire safety officers arguing over want is fundamental to a fire, one saying fuel, the other heat when we know it is a triangle of fuel, heat and oxygen. Without any one a fire can not happen so all three are fundamental.
” asserting that lots of people who are experts in a field are wrong ”
You are doing it again!! Where did I say the experts are ‘wrong’? Obviously your comprehension of written material is somewhat lacking so this discussion is a pointless exercise.
Attempting to justify your position has done you no favours.
This is boring but you should read what you write.
In your post of June 25, 2014 at 10:46 am you say your question “stymies all and I mean all, those who should know but have never thought abut it is.” You say your question should be the first fact pointed out at economics courses. Then that “Other economists, including Deirdre McCloskey, Piketty and many UK MPs and MEPs do not understand the question.”
All very self important and pompous for a question that you still can’t define properly. I don’t agree with you so now I can’t understand your question either. That puts me with McClosley and Piketty. I think I’d rather be with them. Now when you get your Nobel I’ll look very silly but until then we’ll just agree to differ.
Back from hols.
http://steadystate.org/picketty-acknowledges-a-limit-to-inequality-will-he-acknowledge-the-limits-to-growth/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DalyNews+%28The+Daly+News%29
Excerpts from the article: (link above)
“Picketty Acknowledges a Limit to Inequality-Will He Acknowledge the Limits to Growth?
Posted: 17 Jul 2014 09:00 AM PDT
by James Magnus-Johnston”
“EF Schumacher wrote
…economists themselves, like most specialists, normally suffer from a kind of metaphysical blindness, assuming that theirs is a science of absolute and invariable truths, without any presuppositions. Some go as far as to claim that economic laws are as free from ‘metaphysics’ or ‘values’ as the law of gravitations.”
“…and teaching a new generation of economists that all financial capital is fundamentally a gift from nature.” (and the old generation too I say)
Have you made your suggestion directly to Ha-Joon Chang, Jeremy?
I haven’t, but that’s a good idea.