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Part I
Towards a socio-economic
theory of the
environmental issue
Issues related to the economy and the environment, be they local, national or international in scope, seem to be increasingly hard to separate, such that it has become difficult today to discuss the environment without referring to the economy. Even the World Trade Organization, established in 1995, set up a task force responsible for examining the relationship that exists between trade and the environment. This increasingly closer interrelation, however, is not simply a reflection of the quasisimultaneous way that the crises arose in the environmental and economic fields in the mid-1970s. The dramatic rise in environmental concerns, in fact, coincided with the beginnings of the economic crisis, but the former seems to have originated in what led to the very success of the 30 glorious years of post-war prosperity, rather than in the ensuing crisis. The industrial economic system coupled with mass consumption which underlay the prosperity of the 30 glorious years was, moreover, criticized by the environmentalist movements because of its consequences for the environment. However, it is difficult to assert that the economic crisis was the direct or remote result of ecological malfunctioning provoked by the post-war consumerist industrial system. It is nevertheless true that the persistence and extent of the ecological crisis suggest that, in the medium term, a sustainable solution to the economic crisis will have to take the environmental issue into account (Lipietz, 2002).
This viewpoint contradicts the argument that all that is needed in order for a new period of prosperity to arise is a return to a past economic order, which involves restoring its key configuration. On the contrary, what is called for is a closer examination of the heterodox approaches that are likely to offer more flexible interpretations of the economic dynamic. In this respect, the regulation approach is certainly relevant since its theoretical framework makes it possible to consider a multitude of economic configurations and leaves a great deal of room for social innovation (Bélanger and Lévesque, 1991; Boyer and Saillard, 2002). However, this approach has remained disconnected from the environmental issue. Apart from a few isolated studies which will be described here, the regulation theory has hardly addressed the environmental issue, overlooking both its actors and its interdependent links with the production system and the consumerist culture (Kubeczko, Schandl and Stockhammer, 2000).
Yet, more and more economists have examined these issues over the last two decades. A solid body of work in neoclassical environmental economics already exists, and more heterodox approaches such as ecological economics and the institutional approach are emerging (Froger, 1997). These writings certainly constitute significant progress from an ecological viewpoint. However, a closer examination shows that they could be greatly enriched by the analytical perspective of the regulationist approach. Therefore, convinced of its explanatory potential and the relevance of its key concepts, our aim is to establish a connection between the regulation approach and political ecology in the hope of developing a socioeconomic perspective of the environmental issue.
In Part I of the book, we first present the main approaches to environmental economics while describing the criticisms they have been subject to. Second, we explore the potential of regulationist studies for explaining the social dynamics inherent in the ecological modernization of economic institutions. Lastly, we suggest an innovative linkage with Touraine's actionalist sociology, drawing on the writings of the Quebec regulation school, which will allow us to outline the principal contours of a new economic sociology of the environment.
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1 Contemporary approaches
to environmental economics
Since its beginnings, economic thought has fostered an instrumental approach to nature, viewing the environment as a resource to be exploited (Barry, 2007a, pp. 214–219). Inherited from classical liberal political economy, this instrumentalization was a prerequisite to the emergence of industrial capitalism. Such conceptions of the environment and the earth, indeed, played a major role in the transition from the feudal to the industrial capitalist order, and the commodification of the environment has to this day remained one of the key characteristics of the modern socio-economic order (ibid.). Thus, economics established itself as an autonomous sphere, independent not only with regard to social and political matters, but also with regard to the environment, which it disaggregated into “natural resources,” and whose principles and regulatory dynamics it could disregard.
Very early on, many economists noted the problematic nature of this disembodied view, which made economics blind to the limitations of the carrying capacity of ecosystems. In 1865, Jevons expressed concern about the potential scarcity of coal, which at the time was Great Britain's main energy resource and one of the key factors of its economic prosperity (Costanza et al., 1997, p. 36). A little while later, Pigou developed the concept of externality by maintaining that the market was incapable of reflecting certain costs and benefits that remained “external” to the market system. He proposed correcting these truncated costs through the introduction of taxes which would reflect the real costs of goods to the consumer, so as to establish price signals that would foster behaviours not detrimental to the environment (Pigou, 1920; Barde and Gerelli, 1977, pp. 23–24; Swaney, 1988, p. 346; Costanza et al., 1997, pp. 39–42). Thirty years later, Kapp argued that, far from being exceptional, these externalities were inherent to market dynamics. Kapp replaced the concept of externalities by that of social costs, illustrating the fact that environmental externalities are not so much cases of market-failure as cases of the failure of the market system as a means of managing the relationship with the environment1 (Kapp, 1950; Barde and Gerelli, 1977, p. 25; Swaney, 1988, pp. 345–346; Spash and Villena, 1999, p. 10).
Classical economists also became interested in the relationship between the environment and the economy at the macro-economic level. In the late 18th century, Malthus demonstrated that economic growth could be slowed down by the scarcity of natural resources and Ricardo developed his theory of rent, based on the relative limitations of natural resources (Barde and Gerelli, 1977, pp. 16–17). A few decades later, Mill developed interesting thoughts on the steady-state economy considered by Smith and Malthus, thoughts which, like the Malthusian hypothesis, have been taken up again by some environmental economists in the contemporary era (ibid., pp. 17–19).
However, notwithstanding these early writings from which it stemmed, environmental economics really only took off in the 1980s, when the environment became a major public concern and political issue (Jacobs, 1994, p. 67; Froger, 1997, p. 148). On the whole, this new subdiscipline seeks to restore the link between the economy and the environment in order to develop an ecologically sustainable economic system. But its proposals differ substantially according to whether they are formulated by neoclassical theorists or by more heterodox economists.
1 Orthodox approaches to environmental economics
1.1 The property rights school
At one extreme of the orthodoxy, the property rights school suggests that environmental degradation results from an inadequate structure in environment-related property rights.2 Inspired by Hardin's famous article, The Tragedy of the Commons (1968), the economists adhering to this school advocate the idea of privatizing the environment, which would allow for the emergence of self-regulatory market dynamics leading to an optimal level of pollution (Swaney, 1988, p. 346). These economists base their views on Coase, among others, for whom environmental externalities can be effectively allocated through bargaining between their producer and their “consumers,” provided that information on the externalities is available, transaction costs are nil, and property rights are correctly assigned (Coase, 1988; Swaney, 1988, p. 346). Contrary to Pigou, Coase suggests that the existence of externalities does not necessarily require state intervention, as long as the social costs can be negotiated between the agents (Coase, 1988; Daly, 1993, pp. 171–172).
This simple proposal which, in principle, requires one single act of intervention from the state – privatization – nevertheless poses considerable practical problems inherent in the particular nature of environmental “goods,” which are difficult to appropriate and exchange (Jacobs, 1994, p. 74). Moreover, the transaction costs inherent in environmental externalities undermine claims about the efficiency of an environmental market, and it is difficult to support the theory of an optimum when there are as many optimal solutions as there are initial property rights allocation scenarios (Harribey, 1997, pp. 58–59). Lastly, the hypothesis of a regulating negotiation process between the actors falters when it comes up against the real accessibility of information which is often incomplete, uncertain, or overly technical, and chooses to overlook the asymmetry of power that exists between fragmented, isolated and even future “consumers,” and highly organized producers. This school of thought, therefore, has important shortcomings. However, according to Jacobs, it has had little influence outside academic circles (Jacobs, 1994, p. 68).
1.2. The neoclassical school
Currently prevailing in environmental economics, the neoclassical approach, or externalities approach, shares with the property rights school the idea that, under certain conditions, market mechanisms lead to an optimal level of pollution (ibid.; Godard, 1998, p. 215). However, the neoclassical approach does not subscribe to the theory of an all-out privatization correlated with the idea of a minimal state. For this Pigouvian-inspired school, environmental degradation is primarily due to the fact that the environment is economically undervalued, which then leads to overuse, which in turn leads to degradation. The neoclassical school challenges J.B. Say's famous quote, which states that: “Natural resources are inexhaustible, because otherwise we would not obtain them for free. They can be neither multiplied, nor exhausted, and are thus not the object of economics” (Say, 18283: our trans.), affirming, on the contrary, that natural resources must be assigned a price precisely because they are limited. Based on its proposals, this school does not claim to reveal a pre-existing market as much as to allow the environmental field to benefit from the regulatory potential of market dynamics by setting up a fictitious or hypothetical market (Jacobs, 1994, p. 68)4; Barde and Gerelli refer to a market simulation (1977, p. 26). The first step, according to these economists, is to break down the environment into environmental goods and services in order to estimate the total cost, and then let regulating market forces operate. It is important here to distinguish between two branches within the neoclassical approach – the radical branch and the applied branch.5
1.2.1. The radical branch of the neoclassical school
For the radical branch, there exists an optimal level of pollution which can be discovered using the supply and demand curves obtained through an environmental commodification exercise (Jacobs, 1994, pp. 71ff.). The supply curve corresponds to the cost of abatement measures, to which can be added the opportunity cost of a project; it is easy to construct. Drawing the demand curve requires using a series of techniques to estimate the total cost of a good, that is, a cost that includes all its social and environmental externalities. Whether they be hedonic or contingent, these techniques mainly seek to reveal consumers’ consent to pay, which then becomes the basis for estimating the total cost of the good.6 Aggregate individual preferences form the demand curve, which when crossed with the supply curve, gives the optimal pollution (or abatement) level.
This approach clearly reflects the ambition of the radical branch, which seeks to apply traditional economic tools as rigorously as possible to environmental problems (Froger, 1997, p. 149). However, this approach leads to many practical and theoretical problems. First, Harribey points out the tautological nature of the radical neoclassical proposition, which strives to implement a neutral and objective market dynamic on the basis of environmental costs, which are, themselves, estimated based precisely on this fictitious dynamic:
The creation ex nihilo of a market to transform the status of natural elements (from non-commodities into commodities) could achieve the expected effect, that is, to set a market price, only if these pseudo-commodities had previously been produced. Since natural elements are not produced, this becomes impossible and any price assigned to them can only be considered fictitious, in every sense of the word.
(Harribey, 1997, p. 63: our trans.)
Moreover, the contingent valuation methods on which the demand curves are constructed encounter technical difficulties and suffer from inconsistencies, such that the scientific value of their final results can be called into question (Jacobs, 1994, pp. 79–80; Faucheux, 1995, p. 65). For example, the values obtained through the use of questionnaires vary greatly according to the information provided (on the environmental situation, the starting “price” and the means of payment) and are greatly influenced by the individual's ability to pay. In addition, the equalization price always differs from the compensation price when, in theory, these two prices should tend toward the same value (Jacobs, 1994, p. 80; Harribey, 1997, p. 65).
But even if we were to assume that the demand curve represents the real cost of environmental goods, Pearce has demonstrated that, over time, a Pareto-type economic optimum leads to a gradual deterioration of the environment, since the monetary penalty only appears once the environment's carrying capacity threshold has been crossed (Pearce, 1976; Harribey, 1997, pp. 60–61; Godard, 1998, p. 216). Conversely, choosing an ecological equilibrium entails choosing a starting situation that is economically sub-optimal (Pearce, 1976; Harribey, 1997, p. 60).
More generally, the neoclassical reasoning requires a commodification exercise without which the economic analysis of the environment would be neither possible nor relevant (Jacobs, 1994). However, the environment is not a commodity that can be produced, exchanged or owned on an individual and exclusive basis, as can regular economic goods.7 It is a typical case of a public good, the value of which cannot be calculated based on individual preferences:
It is elementary economic theory that the value (total benefit) of public good cannot be derived from individual market preference, since no individual will be prepared to buy a good on which others can then ride free [. . .]
[Neoclassical economists] are analyzing what might happen if the environment were a set of commodities and consumers and producers had to make market choices.
(Jacobs, 1994, pp. 74–75)8
This idea that commodification is a necessary step is directly correlated with an u...
