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Ethical Economics - December 2004

The Networker
I. Editor's Note - Ethical Economics And Indiana Nancy Myers
II. Seven Principles Of Life-Enhancing Economics Nancy Myers
  I. Editor's Note - Ethical Economics And Indiana TOP
By Nancy Myers  I was born and grew up in Indiana. Ask people who have never lived in Indiana about their image of the state and they'd probably mention the movie "Hoosiers." And it's true, high school basketball is very important in this small, diverse state. One TV channel at the Indianapolis hotel where I stayed a few weeks ago was given over entirely to that movie, broadcasting it endlessly.But Indiana has a secret: a lively group of upstanding residents from all over the state who would love to create a new reputation for their state. These Hoosiers, who include the owner of one of the state's major professional sports teams, are members of the Hoosier Environmental Council.

One of them, a librarian named Bill Caddell from the little town of Frankfurt, heard about the precautionary principle and passed the information on to fellow Council board members. They invited SEHN to present a precautionary principle workshop in Indianapolis, which is why I was at that hotel, channel-hopping past Gene Hackman pushing his little ragtag team beyond the limits.

More than 100 people showed up for the workshop, including a number of physicians who got continuing education credit for it, thanks to arrangements made by Dr. Indra Frank. Indra is pathologist who recently quit her practice to devote full time to practicing preventive medicine on Indiana's environmental health. That's how serious these Hoosiers are.

For this occasion I decided to do a mini case study around what an economically and environmentally progressive Indiana might look like. That's the origin of this paper. You can see slides and pictures that go with it

If it can happen in Indiana, why not your state?



  II. Seven Principles Of Life-Enhancing Economics TOP
By Nancy Myers

You've heard about the precautionary principle and how it came to be articulated and applied to environmental health, and how this simple principle brings with it a strong set of closely linked ideas and values and practices. In fact it must be applied broadly as well as narrowly. And you can't take a precautionary approach without talking about both economics and ethics.The precautionary principle is the simple Wingspread statement: "When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically." The precautionary approach is everything it takes to put that simple statement into practice, principally:

  • Goal setting
  • Alternatives assessment
  • Burden shifting
  • Democratic participation (right to know, duty to consider all relevant information)

and the set of values that it implies, mainly:

  • Priority and the benefit of the doubt go to the health of people, creatures, ecosystems; and
  • Vorsorge or "forecaring" for future generations.

Why economics?

The 'environmental crisis' has happened because the human household or economy is in conflict at almost every point with the household of nature. - Wendell Berry

Every environmental problem has economic dimensions:

  • It is likely a result of economic activity.
  • Its solution usually implies some economic cost.
  • Allowing the problem to continue also implies costs, some economic and some not traditionally thought of as economic.

This is the traditional way, in fact, of viewing environmental problems and solutions: the cost-benefit paradigm. Economic activity brings benefits. It also brings unwanted side effects. Whether or not we can deal with those side effects depends on how much it costs in terms of money. The main question becomes, Can we afford (money-wise) to deal with problems?Why ethics? An ethical approach says we should take certain actions regardless of economic costs.

We have often seen these approaches as either/or. Those of us who believe in giving priority to the health of people, creatures, and ecosystems believe we should do this no matter what. It's a matter of ethics, period.

But if you're thinking from the economic viewpoint you might resist a purely ethical approach. Economic activity benefits everyone, and we all depend on it. This has played out as a battle between "environmentalists" and "industry" (and those who protect corporate interests). What happens when you pit ethics against economics is that people have to choose sides, and when they choose sides, unless their particular health is at stake, they are likely to choose the economics. Will people choose the wellbeing of future generations over their own economic survival? Most people feel torn between these two sides: jobs v. environment.

Can we have it all? Is there such a thing as ethical economics? Of course ethics can be linked with economics. If we can have a social understanding of business ethics--business conducted according to certain rules of truthfulness and fairness, why can't we have economics that honors life?

I would like to talk about economics that embodies the values on which the precautionary principle is based--giving priority to the health of current and future generations of people, creatures, and ecosystems. This is economic activity that is challenging, exciting, competitive, and at the same time enhances the quality of life in communities.

The precautionary approach points toward some different ways of thinking about economics. Most basically, the literal translation of Vorsorge as "forecaring" applies most aptly to economics.

I've summed up some emerging wisdom about economics, from many wiser and more economic heads than my own, into Seven Principles of Life-Enhancing Economics

  1. Count all the costs.
  2. Treasure your valuables.
  3. Imagine the details.
  4. Buy from your neighbors.
  5. Liberate consumers.
  6. Build for the future.
  7. Form partnerships.

Principle No. 1: Count all the costs. When environmental problems meet economics, some kind of cost counting goes on. How much is it going to cost to prevent or clean up the damage? If we're going to do economic analyses, we'd better make sure they are complete. The purpose of any good economic analysis is to demonstrate the net gain or loss to the commonwealth of the issue at hand. Gain or loss is not just a matter of finances. But finances are the most convenient, most visible measure, so we have come to rely on them. Good economic analyses are supposed to measure net benefits to society. Can we create more realistic ways to do that? We have to try or we oversimplify the issues and create false pictures.Let me give you an example. Recently SEHN was asked to do an economic analysis of coalbed methane development in the Powder River Basin in Wyoming and Montana. (See for the executive summary and a link to the pdf file for the full report.)

Coalbed methane is natural gas that you get out of coalbeds. The natural gas is trapped in the coal seams by water. So getting the natural gas out means pumping out huge quantities of water. This development will bring to the surface, and mostly waste, trillions of gallons of water in the next 20 years, in an arid region. Water tables will be lowered. Wells will have to be redrilled. Water has a dollar value, especially in this region, where there have been conflicts over water rights.

We calculated that the value of lost, wasted water would amount to $2-10 billion over 20 years. That means up to $400 for every man, woman, and child in Wyoming and Montana every year for 20 years. The value of lost water will be far higher than revenues to the people of the state from the natural gas.

This is not a full analysis of costs and benefits, and it does not weigh every cost and every benefit and put a dollar amount on everything. But it does tell us that we know enough to do better. We know enough to take action to protect our interests, our environment, our water supply, and our pocketbooks. The precautionary principle says, take action when you know enough, even when you don't know everything.

Much of what the environmental movement has accomplished in the past thirty years amounts to counting all the costs, discerning all the side effects, naming all the things that have gone wrong and will go wrong and could go wrong: pointing to the damage. So this is nothing new.

There was one thing wrong, though, with our economic analysis of coalbed methane in the Powder River Basin, and this is a typical problem with all of our attempts to address environmental problems. Our analysis came late in the game.

We were asked to do this study by people who were opposing the development, but the development plans were already well underway, and the vested interests were pushing ahead full speed. Those opposing the development were moving in after the decisions had been made, after the leases had been sold, and the best they were able to do was throw some sand in the gears. The development has indeed slowed in the past year.

But the best time to talk about full costs is early in the process, before the decisions have been made, before the investment has begun.

So the rest of these seven principles have to do with planning and thinking ahead, the aspect of precaution that is forecaring.

Principle No. 2: Treasure your valuables. The first question for precautionary planners is, What do we care about? What is valuable to us? We could even ask what makes us feel wealthy? I asked this question to an adult Sunday School class a few weeks ago, and I was surprised by how few of the answers had to do with money. The gist of the answers seemed to be, as far as money is concerned, I need enough to pay the bills and then some, but really the things that make me feel wealthy are friends and family and my children and books and access to beautiful natural spots and time--above all time to do what I please and enjoy all these things.

As a society what do we treasure? As a state? As a community? This is not an abstract question and we must make it our business to be as concrete about our answers as possible. If we don't, we become like the Indiana county whose Chamber of Commerce boasts about being a center for manufacturing medical devices, specifically, catheters. There is nothing wrong with catheters, although I wonder which plastics they are using to make these catheters. But is this what this community really values about itself?

It's not just our squeamishness in thinking about catheters that makes this a little sad. It's that we know how hard communities work to attract any industry that brings in a few jobs, and they have to prostrate themselves and swallow their pride and give tax breaks and look the other way when the industry pollutes the air and the water and makes its workers sick and, yes, they have to say they are proud of making catheters.

What if, instead, we started with what we value? In a chapter in SEHN's forthcoming book on the precautionary principle, Maria Pellerano and Peter Montague ask, Do you know what assets your community possesses? How many organizations, businesses, public institutions, religious institutions, schools exist within your community? Do you know how much real estate is owned by community members and how much is owned by outsiders? What are the revered spaces in your community (that local corner store or barber shop where people hang out and talk while they are getting their coffee or their hair trimmed; or the park with the gym set and basketball court that is used at least 12 hours a day)?

Developing an inventory of your community's assets will help you understand the diversity of your community and what people consider important to life in the community. There are simple ways to get this information and a number of guides to help you. Here are two that Peter and Maria list:

Kretzmann and McKnight, Building Communities From the Inside Out; A Path Toward Finding and Mobilizing a Community's Assets. Evanston, Ill, Northwestern University 1993. (800) 397-2282.

Community Mapping Tutorial and Atlas

The best thing about this process is you can do it yourselves and get to know your neighbors at the same time. Community development and planning should not be left developers and zoning boards. It is everybody's business and it begins with recognizing what you already have that is valuable. High school students can do this. Religious groups. Civic clubs. And of course, environmental organizations. The more inclusive and diverse these efforts are, the better, and the more political weight they will carry, the more publicity they will generate.

Principle No. 3: Imagine the details. In 1992, a few years after he became the first president of the independent Czechoslovakia, Vaclav Havel took time to reflect on his dreams for his country. In an essay called "Beyond the Shock of Freedom," he articulated a clear and detailed vision of what he would like his country to be like in 10, 15, or 20 years. Havel described everything from how many political parties there would be to how people would feel about their lives. Here is a sample:

Life in the towns and villages will have overcome the legacy of grayness, uniformity, anonymity, and ugliness inherited from the totalitarian era. It will have a genuinely human dimension. Every main street will have at least two bakeries, two sweet-shops, two pubs, and many other small shops, all privately owned and independent. Thus the streets and neighborhoods will regain their unique face and atmosphere. Small communities will naturally begin to form again, communities centered on the street, the apartment block, or the neighborhood. People will once more begin to experience the phenomenon of home. It will no longer be possible, as it has been, for people not to know what town they find themselves in because everything looks the same.

I recommend reading the whole essay for a model of how to imagine the future, and the power of detail in this imagining. It's in Summer Meditations (1992).Another important guide is the Ahwahnee Principles for community and regional development. (Judith Corbett and Joe Velasquez,"The Ahwahnee Principles: Toward More Livable Communities," Western City Magazine, September 1994).

This is just another way of saying we need to set goals and imagine the details of what we want our future to be. We can explore in our own communities what we want environmentally, economically, and socially. What kinds of jobs and businesses does the community want? What makes a business a good neighbor? What resources does the community have (and need) for attracting or developing, those jobs? What are the community's social goals--good food, housing and medical care for everyone, access to an education, control of crime, and good quality of life? How much green space do we need to make our community livable and how far should it be from a typical home? Many of these questions and ideas will pop up if you do community asset inventories and mapping.

Principle No. 4: Buy from your neighbors. Indiana Main Streets is an organization that helps communities think through both what they have and what they want for the future, and one economically sound principle it stresses is the importance of keeping as much money as possible circulating locally in the community. Treasuring your valuables and imagining the details of the future you want will help communities imagine what they can do to enhance what they already have and do more to meet the vision themselves, rather than depending on outsiders to come in and sell all the goods and create all the jobs.

On one level the argument for this is obvious. All the making and buying and selling you keep in the community is far more economically productive for the community than anything that simply flows through the community. Indiana Main Streets and others have determined that only 6 cents of every dollar spent with a big box retailer stays in the community. For a chain store it's 20 cents of every dollar, but every dollar spent with a sole proprietorship keeps 60 cents circulating in the community.

For the many and deeper cultural, social, spiritual, and economic reasons for developing local economies, read Wendell Berry. Here are a few quotes from a recent essay:

In a viable neighborhood, neighbors ask themselves what they can do or provide for one another, and they find answers that they and their place can afford. This, and nothing else, is the practice of neighborhood. This practice must be, in part, charitable, but it must also be economic, and the economic part must be equitable; there is a significant charity in just prices. ...

A viable community, like a viable farm, protects its own production capacities. It does not import products that it can produce for itself. And it does not export local products until local needs have been met. ...

For several good reasons, [people] are beginning with the idea of a local food economy. People are trying to find ways to shorten the distance between producers and consumers, to make the connections between the two more direct, and to make this local economic activity a benefit to the local community. They are trying to learn to use the consumer economies of local towns and cities to preserve the livelihoods of local farm families and farm communities. They want to use the local economy to give consumers an influence over the kind and quality of their food, and to preserve and enhance the local landscapes. They want to give everybody in the local community a direct, long-term interest in the prosperity, health, and beauty of their homeland.  --Wendell Berry, "The Idea of a Local Economy," Orion, Nov.-Dec. 2004

Principle No. 5: Liberate consumers. In their book Your Money or Your Life, Joe Dominguez and Vicki Robbins make a strong and persuasive link between a healthy frugality and happiness. There is such a thing as enough, they say, and they provide formulas for working out how much is enough--and that's not just a moral concept, it's also an emotion, a feeling of satisfaction. They point out that consuming more than we need, more than enough, is not only a terrible waste of the earth's precious resources; it also makes us unhappy. Of course we are not conscious of that, so we try to assuage our unhappiness by consuming more, and we're caught up in an endless cycle that is destructive to ourselves as well as our planet. It's time to liberate ourselves from endless, pointless consumption. Do we need to be convinced? Here's Berry again.

The idea of an economy based upon several kinds of ruin may seem a contradiction in terms, but in fact such an economy is possible, as we see. . . . We have before us the spectacle of unprecedented "prosperity" and "economic growth" in a land of degraded farms, forests, ecosystems, and watersheds, polluted air, failing families, and perishing communities. . . .

As a consumer, one does not know the history of the products that one uses. Where, exactly, did they come from? Who produced them? What toxins were used in their production? What were the human and ecological costs of producing them and then of disposing of them? One sees that such questions cannot be answered easily, and perhaps not at all. Though one is shopping amid an astonishing variety of products, one is denied certain significant choices.Principle No. 6: Build for the future. But we must talk about the larger economy and goods produced in our communities that are part of it, and the jobs produced by it. How does a state or region develop and attract the right kind of industry? You want good jobs, you want to produce good and durable goods for which there is a strong and continuing market, and you want to protect and enhance all aspects of the quality of life in communities. This is a tall order. Fortunately, the future may be on our side. Some markets are moving exactly in the right direction.

I'm going to talk about the sector I know best, the RV industry that dominates north central Indiana. This industry was built on local innovation and local craftsmanship. My uncle was one of the pioneers. He set up shop just after World War II and began producing what were then called house trailers and soon came to be known respectfully as mobile homes. They helped meet the huge postwar housing demand. Then they tapped into the growing prosperity of the 1950s by meeting a growing demand for vacation and retirement housing. My uncle opened up a distributorship in Florida.

Meanwhile, back in Indiana, others got into the business, supplier factories sprang up, the innovation continued. New products created new demands--the recreational vehicle concept opened up all kinds of possibilities: the turtle top, the converted van, and eventually that behemoth known as the motor home. And the industry branched into manufactured housing, which we all know as those half-houses being towed down the interstates as wide loads.

All of this was built on local innovation and local skill. The core of the workforce in the RV industry--not the majority but the core-- is Amish, the extra hands who are not needed on the farm. The Amish have a terrific work ethic. They take pride in the quality of their craftsmanship, and to the delight of their bosses they don't believe in unions so there are seldom any labor disputes. And the RV industry has been the engine of great prosperity in northern Indiana.

So far so good. A thriving local economy supplies both the region and the nation with a product for which the demand has been high. Can northern Indiana live economically happily ever after?

No, for several reasons. The first is that, like much of the industry that sprang up after the war, the RV-manufactured housing industry quickly came to depend on synthetic, chlorine-based materials: cheap, abundant, lightweight PVC plastics and foams. And many of these are manufactured in the area. The result is that Elkhart County, Indiana has the second highest airborne emissions of carcinogens of any county in the nation.

The second is that, with rising fuel prices, the RV industry is rapidly going down the road of the dinosaurs. One can even see some physical resemblance in the mammoth motor homes.

What can Elkhart County do? Another round of innovation is called for, and it may be happening. In the last few years a new product has been developed. It's called the Park Model RV and a few of the companies are making versions of it, including my late uncle's company. It's a hybrid of the manufactured house and the RV--it looks like a house but it's small enough to come in one piece so it can be pulled by a truck. It comes on an axle but it's meant to be put in one place and left there unless it has to be moved. It is more like the old mobile homes, but prettier, more homey. One thing the industry did well was to develop really efficient use of interior space.

The Park Model is being marketed as a vacation home, a guest house, a student house, or even a starter house. Prices start under $20,000. The demand has suddenly increased for these little cabins and the manufacturers are having trouble keeping up.

Some of these are still made of plastic, but some are mostly natural material. How hard would it be to design a model with a really tiny ecological footprint--one that was energy independent and waste free? That is where the market is going, but I'm not sure the RV industry has quite caught on.

Which brings me to the last principle:

Principle No. 7: Form partnerships. We don't have to let business and the market figure these things out all by itself. That can take a lot more time than we have. We can help each other think ahead, to forecare for our communities and our states. We must form new kinds of connections, partnerships, and networks, crossing the usual divisions.

How can universities help the RV industry design ahead of the market? How can churches help farmers stay on the land? What should people who are concerned about the environment do about consumerism? How does all of this relate to poverty? To sprawl?

Once we start thinking about all the implications of the precautionary principle, of forecaring, it becomes apparent that all of this and more is part of the same picture. It can seem overwhelming, or we can see it as an opportunity to form partnerships, to build alliances as we work for the common good, because all our separate causes and issues are part of it.

It would be wonderful if the state of Indiana were to set an overarching goal of developing a reputation as the cleanest, greenest state in the nation. It could become the home of green building and the nontoxic, energy-saving technologies of the Twenty-First Century. It could be the land of pristine organic farms, not just Amish ones, and lovely Main Streets, and excellent schools where children learned about the value of the place where they live. We can imagine that future and we can make it happen.