The Search for a New Economic System Continues

Much work has been done in South Africa and indeed everywhere in the world to close both the intellectual and the policy gap in the understanding of the interface between the economic and environmental systems. How far has this search progressed? Some will argue very far. They will quote the increasing importance of carbon trading and the introduction of international treaties such as the convention on biological diversity and the Kyoto protocol as important milestones and a watershed. The notion of clean technology has also begun to penetrate the marketing arena under green labelling or branding and as such has considerable fmancial value for a firm.


INTRODUCTION
Much work has been done in South Africa and indeed everywhere in the world to close both the intellectual and the policy gap in the understanding of the interface between the economic and environmental systems. How far has this search progressed? Some will argue very far. They will quote the increasing importance of carbon trading and the introduction of international treaties such as the convention on biological diversity and the Kyoto protocol as important milestones and a watershed. The notion of clean technology has also begun to penetrate the marketing arena under green labelling or branding and as such has considerable fmancial value for a firm.
Without detracting from these successes, actually in an effort to support and intensify the current research and policy trend, this editorial adopts a rather different view, asking the question: has economic theory changed symbiotically to the change in world philosophy that took place during the last number of years? Unfortunately the answer to this question is negative.
In addressing these issues, the origins of modem economics are briefly examined. Thereafter, the change in current philosophy and by contrast, the stagnation of economic theory are discussed and a brief look at the ongoing research trends concludes.

THE ORIGINS OF RATIONAL SELF-INTEREST
The 1700s witnessed a change in the general philosophy or world-view of the time. The incumbent philosophy accentuated the importance of the human ability to reason, of individual freedom and the fulfilment that man had to derive from life itself. This new philosophy was personified by Jean Jacques Rousseau (1712-1778) and neither the dwindling influence of the Roman Catholic Church nor the fledgling Reformation movement at that stage could change or halt this surge in humanism (Schumpeter, 1954: 107-15 Today the evidence or result of the battle between man and nature that Schumacher has referred to, is all around us and highlighted in all the articles in this volume. But why the perpetuation of this system that is threatening the existence of humanity?

FROM RATIONAL SELF-INTEREST TO A SEARCH FOR A NEW DESIGN
Smith introduced a new and modernistic economic system during a time when the global world-view or philosophy changed. Not unlike the era during which Smith lived and wrote, post-modernism is currently replacing modernism. The differences between these two opposing world-views are summarised in Table  l. The impact of this change from modernism to post-modernism is visible over a wide front, as is shown in Table 2 with regard to corporate management systems.
From Table 2 it is clear that the management style of the 21$1 century did not just amend the 20 th century management style -it is a completely new design. The problem, however, in economics is that a post-modem replacement (or new design) for the Smithsonian system is still to be found. This search for a postmodern economic system resembles the search for a unified theory of gravity as illustrated in A Brief History of Time by Hawking (1988). Modem-day economics, still taught in almost all universities of repute, is based on the microeconomic premise that the collective outcome of rational individual decisions in pursuit of self-interest for the maximisation of either producer or consumer surplus will lead to optimal resource allocation and efficiency. This premise, however, relies heavily on a large number of assumptions. Failure to uphold them will inevitably lead to failure on a larger scale -and to negative environmental externalities. From a macroeconomic perspective, the natural environment is treated equally neatly under the ceteris paribus clause, as if the stock and quality of natural resources do not change. Frequent attempts have been made to rectify some of the problems intrinsic in the system; for example the work by Pigou (1932) with regard to environmental taxes and by Coase (1960) with regard to property rights and externalities. A large number of similar attempts to address the deficiencies in the Smithsonian system across a wide variety of fields are also currently in progress. These attempts may be compared to sincere efforts to improve the efficiency of the internal combustion engine of a motorcar by, among others, improvements in its catalytic converter, but it still remains an internal combustion engine running on fossil fuel. It therefore does not reflect a new engine design, just an improved internal combustion engine.

WHERE ARE THE ANSWERS?
The search for a new design of the economic system will invariably, first and foremost, lead to a discussion regarding sustainable development. The concept of sustainable development is hard to comprehend and allows very different interpretations varying from the classical Brundtland definition of sustainable development (development that will not compromise future development) to sustainable returns to shareholders. It should be clear following from the vastly different defmitions of sustainable development that the debate is also often nuanced by different political and institutional agendas. More often than not, these agendas reflect the power of vested interests, historic inequalities or biases, dogmatism and inability or unwillingness to change. The net effect is a general perpetuation of the old system with some isolated changes visible on the fringes. As yet, sustainable development, irrespective of the definition used, remains a dream, a vision, and does not represent a departure from the theoretic principles upon which current economics are built. Consider again the analogy with the combustion engine. These attempts, though praiseworthy and supported morally and practically, do not resemble (and were never intended to be) a new economic theory.
The problem is that, without a new economic theory, the old problems and systems will persist. While the search goes on, only the quality of the catalytic converter improves, but the design remains unchanged, to re-use the earlier analogy. The search for a new economic theory that can replace the Smithsonian system therefore continues.

LIVING WITH THE SEARCH
While the search for an economic system and theory continues, every possible effort should be made to reduce the ecological footprint of the current generation. To this end, this volume contributes by addressing aspects such as whether environmental issues can wait until development has taken place, followed by a search for solutions and a number of case studies. A variety of issues are addressed such as climate change, trade and the environment, water resource as well as land use management. These examples serve to illustrate that even while the search for a redesigned economic theory is underway, notable progress can be made towards improvement in quality of life, alleviation of poverty and the proper and appropriate use of natural resources.

J NBlignaut
Professor of Economics, University of Pretoria