Lecture 05/Prompt 07: Policy and Economics
Take Away Points:
- Define cost-benefit analysis
- Understand the source of surplus value
- Understand the difference between a consumer model and an ethical model
One of the main points of environmental ethics is that change of our relationship to the environment requires a change in our social systems. As Magdoff and Foster point out, globally capitalism is the predominate background system in our lives: capitalism is so prevalent that we don’t notice it’s importance–it is merely a background hum that we take for granted (695). So, any change in our attitude towards the environment will require some degree of systemic change–whether that is complete rejection of the capitalist system or severe alterations to the system as it exists now.
What is it that is problematic about capitalism in regards to the environment? What impact does it have on us as individuals?
Consumer vs Citizen
Capitalism functions under two assumptions. The first is that individuals make selfish decisions that ultimately promote the general good. The second, as Mark Sagoff points out in the reading today, is the assumption that we make decisions primarily as consumers–we value things by using limited economic resources. The more economic resources we are willing to use towards something, the more valuable that thing is to us. If the economic resources we are willing to spend on something are equal or less to the benefit it provides us, then we should spend those resources in that pursuit. This is the heart of cost-benefit analysis.
The question is: Is this the only important way we value? And, if not, why should we treat it as all that is important in making decisions about the environment?
Let’s look at an example that you should be familiar with: higher education. A school sets tuition and the amount of tuition is it able to charge has to do with the amount the consumer (in this case the student and family) are willing to pay for the education the school provides. Education is considered very important because it tends to set the amount of money you will earn over the course of your life (in other words, how much economic resources you will have to spend).
Now compare the original non-capitalist (frankly socialist) system of education that existed in the US into the late seventies/early eighties to the archly capitalist system that exists now:
- Non-capitalist: The government pays resources directly into education. Public schools focus primarily on educational resources.
- Capitalist: The government pays resources to students and their families through the use of loans. Students then choose the school. As the last few decades have shown us, the decisions about what school to choose are not largely determined on educational strength, but facilities (think about any college tour you took: here is the dining hall, here is the library, here is the student union, here is the fountain, and so on). Schools now fight over resources by fighting over students. And they do this largely by providing non-educational goods–taking resources away from educational goods.
If the current model tells us anything, it is that we generally do not value education for education, but for purely instrumental purposes. Perhaps this is only right. Perhaps not. The point, however, is that a consumer model entails the prioritization of certain things. Education is not one of them (except in a perfunctory sense). Neither is the environmental.
Under capitalism, the environment is fundamentally a source of resources. If, as consumers, we value things only instrumentally for our own comfort (pay attention to Sagoff’s examples), then what chance does the environment have. Let’s be honest, the environment is not generally comfortable. I certainly prefer my house to the ground.
Yet, focusing just on individuals as consumers–as the capitalist individual–reduces us quite a bit. Is a consumer all we are? And if it isn’t, then why should our consumer identity be all that matters in environmental debates (or plenty of other debates for that matter)?
What about the things that we say we value, but we rarely act on as an individual? Does this mean we don’t truly value these things? Or does it mean that our consumer identity is the strongest identity because it appeals to our base selfish pursuits? If this is the case, is it what we want to prioritize in our ethical thinking? In other words, if consumer behavior is exactly what we tend to oppose as ethical beings, should we change ethics to meet consumer behavior or should we try and reject or limit the realm of consumer behavior?
Foundations of Capitalism
The problem with rejecting the consumer point of view is that it is reinforced daily. Surrounded by a capitalist system, a capitalist way of life, capitalist decision making, capitalist products, capitalist everything, how exactly do you change your individual behavior? The basic (if not simply) answer is to change the system–to change the conditions around you to make other kinds of actions more automatic. This is why Sagoff tries to support systemic change, while clearly failing to act on the system he wants at an individual level.
To better understand this, we need to understand the course of value. To do that, we will look at the work of Karl Marx.
Until Marx’s critique of capitalism, it was generally accepted among economists that the source of all value (just another word for economic resources) was human labor (the work that an individual puts into creating or achieving something). Profit (surplus value, extra value) is created by selling what is created or achieved at higher than the cost of creating or achieving it. There are two ways of creating surplus value:
- paying the person creating the object less than their labor is worth and
- making the laborer’s work more efficient so that they can create more value in the same amount of time (and so be paid even less for their work).
Marx simply pointed out that this is exploitation. And so Economics quickly changed its theory of the source of labor. But Marx was basically right. Where Marx went wrong was in supposing that capitalism would become more and more pure–in other words, tend away from external control of the market. This is clearly false: you don’t get things like minimum wage (as inadequate as the law is) or child labor laws in a completely free market.
But what Marx revealed was that we have to understand a capitalist system that does (purportedly. It doesn’t really) pay a worker what their labor is worth as always aiming at greater and greater efficiency. Since capitalism aims at continual growth (wealth can only be created through the creation of more profit) efficiency must become the primary goal of capitalism. Individually, we now know that psychologically we compare our present circumstances to those around us. So, as wealth increases for people in an area the drive to increase one’s own wealth increases.
There are many problems inherent in the foundations of capitalism (you are all familiar enough with outsourcing to understand how as a country as a whole moves up economically it does so on the backs of other countries), but what concerns us most in this course is, naturally, the environment. Increased drive to more resources (after all, isn’t that all wealth is–a larger pool of resources?) means that other resources need to be consumed to produce them. Money is value divorced from labor.
Another thing Marx’s critique fails to see is the possibility of inherent value in the material of production: i.e. natural resources. The environment is ultimately at the very bottom of any capitalist system. Further, while the labor pool is a finite resource, it can be overcome through mechanization (which increases efficiency). Natural resources on the other hand can actually be completely finite–we use them up before they can be replenished.
Cost-benefit analysis is based on individual choices and the assumption that individual choices will ultimately favor the general good. But reducing individual choice to a consumer model ignores other things that we might value in different ways.
Pause to Consider:
- What is cost-benefit analysis?
- What is a potential problem with using a consumer model of individual choice?
- What does Marx claim is the source of surplus value? Why is this a problem?
Purpose: Because capitalism is such a background condition to everyday life in America, those of us who have lived here all or most of our lives or have lived here (or in another capitalist country) for some time tend to think in terms of the consumer model of decision making. In this assignment, you will review your work in the course to this point in order to examine your claims in relation to the consumer model of choice.
Word Count: The best posts will be around 500-600 words.
Before You Write
Today’s readings provide many good reasons to be doubtful that the consumer model of choice is the best (or even just only) way to make decisions about important issues. You have now been writing in this course, dealing with environmental issues, for a week. Choose your favorite post and read it thinking about these questions:
- Are you thinking about the balance between the benefit to you versus the cost to the world? If so, do you think this is the best way to think about decisions you need to make?
- How much would you sacrifice to change the way humans interact with the environment?
- If you are not using the consumer model, what do you value above your economic resources? Do you actually act from these other values or do you tend to still act in line with the consumer model?
With these questions in mind, analyze your own post in terms of its relation to the consumer model.
- If your post uses the consumer model, do you now disagree with your own post or do you stand by the model?
- If you disagree with your post, explain why and talk about what you think should be valued.
- If you agree with your posts, explain why the consumer model is the right model for this situation.
- If you think you are justified, explain why and talk about why you think the values you use are better than those represented by the consumer model.
- If you think the consumer model makes more sense, explain why and talk about how the consumer model is the right model for this situation,
Be sure to link to the post you are talking about at the top of this post.
- Read: Sagroff: At the Shrine of Our Lady of Fatima, or Why Political Questions are Not All Economic [669-677]; Magdoff and Foster: What Every Environmentalist Needs to Know About Capitalism [691-712]
- Post: Prompt 07 | Due 1:00 PM EST
- Comment: On at least 3 Group Member posts | 1st Due 8:00 PM EST | All Due Jan 18, 8:00 AM EST
- Comment: On Lecture 05 | Due Noon EST
- Take: Review Exam 02
- Join: Video Discussion abt Animal Rights and Liberation in the Virtual Classroom @ 8:00 PM EST