Georgescu-Roegen : the right man at the wrong time
Bioeconomic analysis sees new technology as a set of Man's most sophisticated exosomatic organs. A stick picked up in the woods as a club meant a stronger arm, one of the earliest examples of an exosomatic organ. According to Georgescu-Roegen (1980: viii), Man's exosomatic evolution has brought with it three "predicaments", or unpleasant situations from which escape seems difficult. The first is conflict between various human communities or cultures. Thus Homo indicus is different from Homo americanus, in that the former travels more by foot and the latter by car. The predicament may also reflect differences in taste. The second predicament is the conflict between the two social classes of governors and governed. The third predicament is ranges of technically-sophisticated equipment, such as PCs, the Internet, and mobile phones today. This equipment is continually changing, and creating problems about haves and have-nots. We see this today in the area of e-commerce, where certain countries including Japan, South Korea, the USA, and Sweden are ahead of the field.
Georgescu-Roegen's bioeconomics builds on one major principle: mankind must not discount the future. By this he means that the price of a resource should be determined by all potential buyers, including those who are not yet born. "And since future generations cannot be present now, we should bid in their place" (op. cit.: xii). This problem is highly relevant today, since past generations have raised their standard of living by imposing debt burdens on future generations. Thus, we may say that our current degradation of the environmental and the living conditions on the planet is a result of our economic theories.
Georgescu-Roegen begins from the assumption that mankind is going to be around for a long time: "the dinosaurs lasted hundred and twenty millions years". If this assumption is correct, or so long as we do not know how long mankind will exist, we should manage our natural resources with care. Marginalist economic theory typically models economic problems as if each generation were the last. When economies are put under heavy strain, the chances of war will increase. Georgescu-Roegen (op. cit.: xi) reminds us that "all major wars have had no main objectives other than the possession or the control of natural resources". We have seen recent proofs of this whether it is in the form of America's war on Iraq (geopolitical logic) or with recent Chinese investments in Africa (geoeconomic logic). The difficulty with the discounting problem is that we have no way of knowing what resources future generations will need and how long they should be discounted for and, we could add, at what rate. To help resolve this question the aim of Georgescu-Roegen is: a world organization whose role be to decide the acceptable rhythm of depletion of mineral resources and their distribution among all nations according to a rough criterion of hierarchical needs. (op. cit.: xii)
This is the idea of the World State, a project which will become relevant in the 22nd century at the earliest. It is in turn largely a question of human political and social evolution.
Georgescu-Roegen follows Schumpeter's idea that the evolutionary approach is not an economic "theory" in the marginalist sense of the word, but must be more of an "analysis". His first book (Georgescu-Roegen 1966), in which he outlines his thoughts on evolutionary economics, is entitled Analytical Economics:
... theoretical science is logically ordered knowledge. A mere catalogue of facts, as we say now a day, is no more science than the materials in a lumber yard are a house. (p. 15)
... if the cornerstone of science is the dogma that all phenomena are governed by mechanical laws, science has to admit that life reversal is feasible. (p. 83)
Instead Georgescu-Roegen suggests that economic analysis should follow the formula set by Cuvier: nommer, classer, décrire (name, classify, describe) - what is called a taxonomic process, or filing system. This same search for a universal principle of classification once led to the birth of formal logic. Theoretical science is a logically ordered description. Marginalist economic theory is an attempt to show that mathematics can be the logic for the study of economic phenomena. But, whereas the purpose of economics is to understand economic facts, the purpose of pure science is not prediction, but knowledge for its own sake (Georgescu-Roegen 1971: 37). This is the excuse science gives for not always producing realistic findings. Georgescu-Roegen rejects all accurate predictions in the social sciences: "No analytical device can allow you to describe the course of your future actions" (op. cit.: 335). He instead agrees with the Hegelian approach we find in Schumpeter: "If economics is to be a science not only of 'observable' quantities, but also of man, it must rely extensively on dialectical reasoning"(op. cit.: 337). Dialectical reasoning cannot be exact, but can be largely correct. It implies that we attempt to express ourselves in numbers, weights, or some other measure. "Hence careful reasoning and analysis should be the backbone of economic, as Marshall suggested" (ibid.). Dialectical reasoning opened the way of literary economics, where both sides of each argument are weighed up. That is also very much the tradition of critical theory applied throughout this book.
In his next major book Georgescu-Roegen discussed the law of entropy, based on ideas of the German physicist Rudolf Clausius, who held that change undergone by matter and energy must be qualitative change (197.: 1). Georgescu-Roegen argued that an economy is a biological process governed by the law of entropy, not by the laws of mechanics. The book is a critique of Homo economicus, in which Georgescu-Roegen takes up the objection that economics as a science strips Man's behaviour of every cultural propensity, which is to say that Man is treated as acting mechanically (ibid.). Georgescu-Roegen's thermodynamic approach to economics is based on Carnot's work on entropy from 1865 and Boltzmann's from the 1870s.
A cultural propensity may be a factor in economic growth, as when cultural activities in countries such as France, Spain, or Italy encourage the growth of tourism. It might have been similar observations that led Spengler to the thesis that economic growth depends upon the degree of compatibility between the economic components of the respective culture (op. cit.: 362):
Evolution appears so mysterious to us only because man is denied the power of observing other planets being born, evolving, and dying away. And it is because of this denial that no social scientist can possibly predict through what kinds of social organizations mankind will pass in its future. (op. cit.: 15)
Had economics recognized the entropic nature of the economic process, it might have been able to warn its co-workers - the technological sciences - that "bigger and better" washing machines, automobiles, and super jets must lead to "bigger and better" pollution. (op. cit.: 19)
Economic theorists like Robert Solow, Joseph Stiglitz, and Paul Samuelson have praised Georgescu-Roegen's mathematical contribution, but none of them have shown any interest in his ideas on evolutionary economics and bioeconomics. None could have failed to notice that Georgescu-Roegen was Schumpeter's favorite student at the Harvard Graduate Seminar. So it was impossible to ignore him; but his thoughts deviated too much from existing theory. Herman Daly (1999) has asked how long neoclassical economists can go on ignoring Georgescu-Roegen's contributions. For instance, what will future generations say about the fact that we are systematically denuding the planet of oil and gas, resources which may be needed for more important tasks in the future when alternatives are not available? Faced with the threat of global warming, environmental deterioration, and now the financial crisis, Georgescu-Roegen's economics are long overdue for a review.
Solow and the marginalists assume that natural resources can always be substituted. His well-known work in growth theory is based on an aggregate production function in which resources do not appear at all: it takes production to be a function solely of capital and labour (Daly 1999: 15). This is like expressing improved cuisine as a function of a cook and a kitchen, forgetting the ingredients. The Solow-Stiglitz variant of the Cobb-Douglas function including resources is expressed as:
- where Q is output, K is stock of capital, R is the flow of natural resources used in production, L is the labour supply, a +a +a =1, and a>0. In reality, increase in capital implies depletion of resources; and if K->°°, then R will rapidly be exhausted by the production of capital (Daly 1999: 17). Georgescu-Roegen calls this a "conjuring trick". Land and resources have been eliminated, on the argument that capital is a near-perfect substitute. If so, then resources could equally be substituted for capital (reverse substitution). To do that would run counter to the whole direction of neoclassical theory, which is to deny any important role to Nature (op. cit.: 18).
None of Georgescu-Roegen's ideas on the biophysical foundations of economics were ever canonized by inclusion in Samuelson's famous textbook. There has been no interest in Georgescu-Roegen's ideas at MIT, the American Economic Association paid little attention to his death, and hardly a trace of his influence is left in the economics department of Vanderbilt University, where he taught for twenty years (op. cit.: 13). One reason may be that few economists understood his ideas with their emphasis on advanced mathematics, physics, and biology109. He may also have been too interdisciplinary for his own time. A further reason may be that he is said not to have been easy to work with. A deeper explanation would be that if one accepted Georgescu-Roegen's ideas, the consequence would be a complete paradigm shift in economics. The political and economic implications of accepting his theories would amount to nothing less than a revolution in the way we organize our lives, and it is perhaps one we are not yet ready to undertake.
Georgescu-Roegen's own explanation of why his ideas were never accepted was in terms of a Romanian proverb: "In the house of the condemned one must not mention the executioner". After arguing his case for decades without ever getting much response, Georgescu-Roegen gave up on standard economics and resigned from the American Economic Association (op. cit.: 15). In his own words "I was a darling of the mathematical economists as long as I kept contributing pieces on mathematical economics" (Georgescu-Roegen 1992: 156).
Schumpeter too had come to the United States as a two-edged sword, like Georgescu-Roegen later. Influenced by Léon Walras and W.S. Jevons, economics departments in the USA, especially after the Second World War, decided to base development of their discipline on the mechanical perspective. To many critics this system quickly came to look more like a church than a community of independent thinkers. However, despite enthusiastic espousal of the mechanical approach in the USA, one American economist was never willing to abandon Georgescu-Roegen's ideas: namely, Kenneth Boulding, one of the strongest independent thinkers of all American economists.