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The Basic-Surplus Structure of Economics in Ecological Economics March 29, 2020

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The Basic-Surplus Structure of Economics in Ecological Economics March 29, 2020 The Basic-Surplus Structure of Economics in Ecological Economics March 29, 2020. Terrance J. Quinn, Middle Tennessee State University Highlights Basic-surplus field equations provide intrinsic structure of the economics part of ecological economics Discoverable and verifiable in facts and data obtainable from actual businesses small and large, banking, local and international finance Reveals that the circular-flow model is not explanatory Reveals that the contemporary notion of economic growth – “volume” – is fundamentally flawed Provides an economic theory that normatively is in support of ecological and cultural sustainability Abstract In the context of ecological economics, this paper provides an introduction to some technical aspects of a so far largely unknown (and in that sense new) view of how economies function. No mere model, it is explanatory of instances. It is discovered and verified in data and facts from actual businesses small and large, communities and ecologies, actual production and provision, credit, profit, and activities in the financial sector. The new view is accessible and, at the same time, remarkably reaching in its implications and its potential for further development. Among other things, it becomes obvious that the circular-flow model is, at best, superficial description. Rather, in any economy, there are five functions and two mutually dependent flows, basic and surplus. Also evident is that that contemporary measures of “economic growth” - “volume” - are fundamentally flawed. What is possible, instead, is economic progress that intrinsically is in support of ecological and cultural sustainability. Along the way, and in the Appendix, I make note of various topics, elaboration of which cannot fit into this article. Once there is interest in implementation, through collaboration, developments in locally and globally informed “pure and applied” theory, and new textbooks will emerge as needed. Keywords: basic, surplus, exchange economy, innovation, double-surge, pure cycle. 1 Corresponding author: Terrance Quinn (Professor Emeritus), Middle Tennessee State University, Murfreesboro, TN 37132 USA. E-mail address: [email protected] (T. Quinn) 1. Introduction: World Calls for New Economics This paper is about the possibility of better economics. But is “better” needed? One doesn’t need to be an economist to know that there are major problems. We need only ask: ‘How are mainstream economic models working out?’ To put it mildly, there are “substantive failures … in addressing reality” (Spash 2012). As Hagens recently observed, “environment, economies [and societies] are at a crossroads” (Hagens 2020). But there are also signs of hope. Groups and individuals worldwide have been asking for change. In academic circles, Kate Raworth, Robert Costanza, Clive Spash, Luca Coscieme and many others have been advocating for policies, institutions, and planning that would ensure ecological sustainability and human wellbeing. Greta Thunberg, courageously, has been calling for action. As recognized in ecological economics there are, of course, many factors to consider, including the “economics component.” “Ecological economics personally challenges those trained in mainstream theory to move beyond their orthodox education and leave behind the flawed theories and concepts that contribute to supporting systems that create social, ecological and economic crises” (Spash 2020, p. 1). Part of what is lacking, however, is consensus on what, precisely, the alternative might be; and in what ways mainstream theory is flawed. In the context of ecological economics, this paper provides a brief introduction to technical aspects of a so far largely unknown (and in that sense new) view of how economies function. No mere model, it is explanatory of instances. It is discovered and verified in data and facts from actual businesses small and large, communities and ecologies, actual production and provision, credit, profit, and activities in the financial sector. The new view is accessible and, at the same time, remarkably reaching in its implications and its potential for further development. Among other things, it becomes obvious that the circular-flow model is, at best, superficial description. In any economy, there are five functions and two mutually dependent flows, basic and surplus. It can also be seen that the contemporary notion of “economic growth” - “volume” - is fundamentally flawed. What is possible, instead, is economic progress that intrinsically is in support of ecological and cultural sustainability. 2 Along the way, and in the Appendix, I make note of various topics, elaboration of which cannot fit into this article. Secs. 9, 10 and 11.1, especially, will require serious pause, with concrete examples. A list of topics in the Appendix goes further, which I include in order to indicate something of the reach of the new theory. I expect that these will be sorted out in due course. For, once there is interest in implementation, through collaboration, developments in locally and globally informed “pure and applied” theory, and new textbooks will emerge as needed. Secs. 1-3 provide context. Secs. 4-10 introduce elements of the new view. Sec. 11 consists of a few concluding remarks. The last two paragraphs of the paper point to progress that will be possible through implementation of an historically emergent structuring in what heretofore has been called “transdisciplinary” (ISEE 2020). Those further issues, however, will be taken up in subsequent articles. 2. Contexts 2.1 Ecological economics The contemporary framework for ecological economics is a “triple-structure.” Emphases vary, but the main idea is to combine economics, society and nature ((Illge and Schwarze 2009), (Costanza et al., 2016), (Raworth, 2017, p. 22), (Robert Costanza 2020, p. 3), (Kirchherr, Reike, and Hekkert 2017), (Giampietro 2019), (Spash and Smith, 2019), (Washington and Maloney 2020), (Castañeda del Río et al. 2020)). Much of the literature is on the triple-structure as a whole, includes models, and the development of potentially suitable policies. Part of the literature focuses on “the economics part.” General recommendations include, for instance, that economics be “eco-centric,” that there be “Earth jurisprudence,” and “ecojustice.” Models are of “post growth economics,” “non- growth,” “steady state,” “degrowth,” “low-growth” and “slow-growth” ((Weiss and Cattaneo 2017), (Kostakis et al. 2018)). There is also an emerging interest in “circular economics” ((Korhonen, Honkasalo, and Seppälä 2018), (Kalmykova, Sadagopan, and Rosado 2018), (Kirchherr, Reike, and Hekkert 2017), (Lieder and Rashid 2016)). So far, however, economic content is mainly defined by mainstream models (even when controlling GDP is not the only goal (Hardt and O’Neill 2017)). This is not a new observation. But new questions can be raised (sec. 3). (Regarding the influence of the neoclassical tradition on ecological economics, see, e.g., (Spash 2020), (Spash 2019), (Pirgmaier and Steinberger 2019, p. 1), (Giampietro 2019), (Pirgmaier 2017), (Plumecocq 2014), (Spash 2013) and (Illge and Schwarze 2009).) And so the problem remains: “that the structure of the global economy must change to avoid social ecological collapse poses the questions of how that can be achieved and what sort of economics is necessary” (Spash and Smith 2019, p. 1). 3 But is not progress already being made with models that appeal to the triple- structure? Is not the “sort of economics necessary” ecological economics? And will not ecological economics be obtained by appropriate “policy reforms and societal change” (R Costanza et al. 2016, p. 355), by leadership and government (Coscieme et al. 2019)? To be sure, such change and reform are needed. Eventually, there will be “complex layerings” of “policies” (sec. 11, Concluding Remarks). Although, some general policies, surely, are already obvious and include, for instance: Help people grow; Preserve ecologies; Don’t burn the world; Don’t weaponize production. However, a main focus of my paper is more elementary. It is to bring out that, for the economics part of the problem, the needed “paradigm shift” (Spash 2019) will be based in a new understanding of economic events. Not unlike in medical science, even with the best of policies, we need to understand how the “economic body” functions. It turns out that economies have their own “internal” norms and criteria. The new theory, then, is not obtained through speculative modeling. I expect that limitations of that older approach will become increasingly self-evident, as progress is made in the new theory. In any case, the possibility of fruitful dialogue will partly depend on us having a shared understanding of the new view. Note also that, as you will see, the new theory does not exclude but is distinct from microeconomics. 2.2 Origins and searchings It was Bernard Lonergan (1904-1984) who, in the 1940’s, made the initial breakthrough. Unlike current mainstream models (as observed by (Spash and Smith 2019)), Lonergan’s theory does not separate itself from the “potentialities of … nature” ((Lonergan 1998, pp. 11, 57, 205, 232, 233) and the “standard of living” (sec.5). Most of Lonergan’s writings in economics are in volume 21 of the Collected Works of Bernard Lonergan (Lonergan 1998). Some details on why the manuscripts were unavailable for so long are provided in the Editor’s Introduction. See also (Shute 2010a, pp. 13-14). Lonergan’s writings on economics are densely written, need unpacking and invite
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