Nicholas Georgescu-Roegen and the Nobel Prize in economics

16 May, 2012 at 17:42 | Posted in Economics | Comments Off on Nicholas Georgescu-Roegen and the Nobel Prize in economics

In the postwar period, it has become increasingly clear that economic growth has not only brought greater prosperity. The other side of growth in the form of pollution, contamination and wastage of resources has increasingly emerged as perhaps the greatest challenge of our time.

Generally one can say that traditional –  neoclassical – economic theory  basically claims that an additional investment in technical and economic development is the only solution to the environmental problems. Biotechnology and other technical advances make it possible to minimize resource and energy use and reuse waste products. Nature is fundamentally robust and resilient. Many so-called neoclassical environmental and resource economists have used cost-benefit analysis, welfare and price theory to extend the traditional economic theory to include also applications to environmental issues. However, this has not resulted in any paradigm shift in the perception of growth and the environment. It has mostly confined itself to quantify the societal costs associated with negative externalities on the environment.

Against this view of the link between economic growth and the environment, ecologists have argued that environmental problems can lead to irreparable damages to nature. Against the neoclassical theory’s view on the economy as a balanced and harmonious system, where growth and the environment go hand in hand, ecological economists object that it can rather be characterized as an unstable system that in an  accelerating pace consumes energy and matter, and thereby pose a threat against the very basis for its survival.

The Romanian-American economist Nicholas Georgescu-Roegen (1906-1994) argued in his epochal The Entropy Law and the Economic Process (1971) that the economy was actually a giant thermodynamic system in which entropy increases inexorably and our material basis disappears. If we choose to continue to produce with the techniques we have developed, then our society and earth will disappear faster than if we introduce small-scale production, resource-saving technologies and limited consumption.

Following Georgescu-Roegen, ecological economists have argued that industrial society inevitably leads to increased environmental pollution, energy crisis and an unsustainable growth.

Georgescu-Roegen and ecological economics have turned against the neoclassical theory’s obsession with purely monetary factors. The monetary reductionism can easily lead to that one ignores the other factors having a bearing on human interaction with the environment.

I wonder if this isn’t the crux of the matter. To assert such a thing really is to swear in the neoclassical establishment church and nullifies any chances of getting the prestigious so-called Nobel Prize in economics.

After a radio debate with one of the members of the prize committee  twenty years ago, I asked why Georgescu-Roegen hadn’t got the prize. The answer was – mirabile dictu – that he “never founded a school.” I was surprised to say the least and wondered if he possibly had heard of the environmental movement. Well, he had – but it was “the wrong kind of school”! Can it be stated much clearer than this what it’s all about? If you haven’t worked within the neoclassical paradigm – then you are excluded a priori from being eligible for the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel!