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Professor Ove Jakobsen Centre for Ecological Economics and Ethics Bod Graduate School of Business Climate Bottom Meeting Windows of Hope in Copenhagen Christiania 8. Dec. 2009 Circulation economics - A new economic paradigm

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Challenges Increasing awareness that our global natural, cultural, and economical systems are endangered (eg. Climate, finance and poverty crisis), are forcing us to realize that decisions made on the basis of local, short-term economic criteria, in the long run can produce disastrous results.

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Problems to be Solved Sustainable scale of production and consumption Fair distribution of resources and wealth Efficient resource allocation

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Paradoxes To solve the financial crisis we recommend initiatives to stimulate economic growth, while we know that a continued growth in the economy worsen the environmental problems To achieve attractive contracts we bribe the decision-makers even if we know that it reduce the rationality of the market. To enhance our own competitiveness, important information is held back even though we know that it undermines the trust between the actors in the market

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The Need for Change We can't solve problems by using the same kind of thinking we used when we created them Albert Einstein We are the first generation to be confronted with the unpaid bills and the last generation to get away with it ystein Dahle

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Economics and Metaphysics Economists 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 gravitation Conventional economics offers a very misleading view of how the world actually operates, and needs to be replaced (Ormerod 1994)

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The Mechanical Worldview The universe is understood as a machine (clockwork), completely causal and deterministic All that happen have a define cause and give rise to a define effect The future of any part of the system could in principle be predicted with absolute certainty if its state was known in detail There is no capacity for creativity, spontaneity, self- movement, or novelty in the mechanistic worldview

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The actors in the market are isolated individuals (atomism), related to each other only externally The market is a mechanism based upon interplay between egocentric individuals seeking their own ends The goal of science is to control, manipulate and exploit nature Economics based on a mechanical worldview

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The Organic Worldview The earth is a system comprised of closely interacting and interdependent subsystems The earth and its constituent systems are dissipative structures Since every system is connected to and dependent of all others, everything evolves together over timeIt is the essence of life that it exists for its own sake, as an intrinsic reaping of value It is the essence of life that it exists for its own sake, as an intrinsic reaping of value Change is the rule rather than the exception

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Circulation Economics based on an organic worldview Economy, nature and culture are integrated parts within a living organism The interplay between economy, nature and culture possess properties like dynamism, evolution, integrity and change Throughput of material and spiritual energy are affecting the integrating structures and processes Economy has the ability, through human action, to restructure and reform processes in ecosystems and societies of which they are a part Theory and practice in constructive interplay with the cultural and natural environment

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The moral Dimension Toward a New Economics Neo-classical economics (NCE) presuppose that people seek to maximize utility, New economics (NE) asserts in addition that people have morality as a source of evaluation NCE treats the market as a separate self-containing system, NE asserts that the economy is a subsystem of society and culture NCE assumes that the market is basically competitive, NE argues that cooperation between interrelated actors are fundamental We are members of one-another (Baldwin 1902) Amitai Etzioni (1988)

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Interdependent Relationship Ecosphere Sociosphere Economy

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The Value Triangle Economy Welfare Culture Quality of life Nature Basis of existence

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Economy, nature and culture It is one thing to argue that companies have to make money to survive, but quite another to argue the far stronger position that companies exist exclusively to make profits for shareholders (Zadek 2001)

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Life quality in the perspective of positive psychology The pleasant life Positive emotions about the past, present and the future The good life Using your signature strengths to obtain abundant gratification in the main realms of ones life The meaningful life Using your signature strengths and virtues in the service of something much larger than your selves

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Production Distribution Consumption Redistribution OutputInput Nature Economy Energy Material Energy Material Culture Knowledge Values Knowledge Values Circulation economics

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Evidence of global limits Source and sink The global ecosystems source and sink functions have large but limited capacity to support the economic subsystem Imperative: Maintain the global economy to a sustainable size The path to sustainability will be through qualitative improvement rather than quantitative increases in throughput.

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The Communicative arena Communicative arena Customers Suppliers Employees Bank/Assurance Competitors Owners Distributors Re-distribution State/government NGOs Research Universities Art Church Politics Local community Economy Culture/ Nature

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Provides a remedy for the lack of coordinated planning and action in the circular value chain. Open up for a dialog between economic actors and spokesmen representing other sectors in the society, including nature and culture Co-ordinate the interaction between the actors on the market, and to integrate values from economy, nature and culture The communicative arena

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Epilogue A synthesis of the previous presentation leads to the following conclusions; Economics can no longer be studied in terms of competition between isolated actors Individual parts do not exist neither in nature nor in culture, only integrated networks, and these form and shape each other On the one side economic activity depends on access to matter and energy from nature and knowledge and values from culture (input) On the other side both social and eco-systems are affected by the output from economic activity

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Changes to be made From competition to cooperation From atomism to holism From value monism to value pluralism From linear to circular value chains From welfare to quality of life