IAN McAULEY. Reclaiming the ideas of economics: Society, Economy and Environment

Policymakers and journalists generally talk about “society”, “the economy” and “the environment” as if they are separate entities, implying a tradeoff of objectives. Such a classification leads to poor policy and promotes unnecessary division.

At the Pacific Islands Forum in August this year, there was a rift between the Australian position on climate change and that of the Pacific island nations. Tuvalu Prime Minister Enele Sopoaga articulated the conflict when he said to Scott Morrison “You are concerned about saving your economy in Australia … I am concerned about saving my people in Tuvalu”.

To most journalists reporting on the Forum Morrison’s stance was about a trade-off between “environmental” and “economic” objectives. Reactions from advocates and interest groups lined up along a spectrum based on where they stood in relation to that assumed tradeoff.

Sopoaga’s few words, however, reflect a completely different way of thinking. He wasn’t thinking about a trade-off: if (when) sea levels rise as a result of climate change, his nation is wrecked. Whether that wreckage is called “economic” or “environmental” is only a semantic point: the system that sustains human life on Tuvalu and other low-lying Pacific islands would become damaged beyond repair. That’s a system in which natural and human-made elements – plants, roads, fisheries, fresh water supplies, sea shores – interact in ways that are practically inseparable.

And so it is on a global scale, particularly in relation to climate change resulting from human activity, which involves complex feedback loops between human and natural sub-systems. As far as human welfare is concerned, there is no “economic” system which stands alongside an “environmental” system. There is one interactively complex system which sustains life, and whether we call ourselves “economists” or “environmentalists” our aim should be to use resources in a sustainable way.

That’s not the only false tradeoff that leads to muddled thinking. Another, equally meaningless, is an idea that government policies need to be “balanced” between “social” and “economic” objectives.

But what is the point of any policy that does not contribute to human well-being? There is a story, possibly apocryphal, from the Vietnam War, about an American senior officer who said “we had to destroy the village in order to save it”.  It is no less absurd for a politician to say “we had to cut social programs in order to meet our economic objectives”.

In the ongoing arguments about management of the Murray-Darling basin, we often hear journalists and politicians talking about a three-way tradeoff in the allocation of water between “environmental”, social”, and “economic” uses as if they are somehow separable.  (The language of the plan itself is a little more disciplined.)

When issues are framed in terms of such tradeoffs, particularly when  “the environment” is pitched against “the economy”, “the environment” will inevitably lose. A tragic example was in the 2019 election where Morrison and his media supporters deliberately established a tradeoff between action on climate change on one hand and “jobs and growth” on the other. Gone was any possibility of a campaign about a transformed energy sector providing economic opportunities.

This separation is formalised in what is known as “triple bottom line” reporting. It is formalised also in the way public policy is classified: for example government spending is often classified as being “social” or “economic”, as if there can be economic programs that are separate from social outcomes. Portfolio responsibilities are subject to such divisions: Treasury, Finance and Transport departments are “economic”, Health and Education are “social”, Environment is as its name suggests. Policy development becomes a set of bargains between these agencies, with little opportunity for finding integrative or “win-win” outcomes: in fact the Commonwealth’s public-sector management framework actually discourages inter-agency cooperation.

At a broader and international level the society-economy-environment division is manifest in  time-honoured but increasingly dysfunctional groupings of political parties as Social-Democrat/Socialist/Labor (Society), Christian Democrat/Conservative/Republican (Economy) Green (Environment) parties, even when many people are demanding a different way of considering issues.

Logically this way of thinking is what philosophers call a “category error”. If someone were to say “at the Victoria markets you can buy food, vegetables and lettuce”, the category error would be obvious: each should be nested within a higher order. That example is trivial, but for an example with more serious implications consider the way journalists talk about Britain and Europe – using categorisation to reinforce the idea of separation. From the outset pro-Brexiteers deliberately referred to “Britain and Europe”: now almost everyone has slipped into that usage.

The philosopher Karl Polanyi, writing in 1944 (The Great Transformation), commented that in times past markets had generally been contained within societies and subject to social norms. His prophecy, which seems to have been fulfilled, was that there would come to be a “great transformation”, in which this order would be reversed: societies would become subject to the rules of the market.

Some people, aware of the way “triple bottom line” thinking restricts our thinking, go for a different classification of these elements – for example a nesting to denote a hierarchy of dependence.  Some others go for partially overlapping venn diagrams.

Those who think in systems terms – particularly those who think in terms of ecological systems – eschew the hard borders of classification because of the interactive complexity of systems. When Sopoaga referred to the coming damage to Tuvalu he was thinking in terms of systems.  As climate change wreaks its damage on the planet it is pointless to think in terms of tradeoffs: the interactions are too complex.

Whatever frame of thinking we adopt – a nested classification or an ecological system-wide frame – it is important to move away from the tradeoff model. It’s a model that not only gets in the way of proposals that allow for benefits all around, but that also invites policy advocates to assign themselves rigidly to one of the three camps. For some – perhaps many – people the society-economy-environment division is manifest in an imagined Labor-Coalition-Green division.

(For a more thorough discussion of the “triple bottom line” see my conference paper In defence of economics – why public policy doesn’t need the triple bottom line.)


This is the fourth of a series of articles in Pearls and Irritations  on reclaiming the ideas of economics. Others so far have been:

General introduction (September 19)

Aspiration (September 26)

Jobs and Growth (October 3)

Ian McAuley  is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy development.


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7 Responses to IAN McAULEY. Reclaiming the ideas of economics: Society, Economy and Environment

  1. Charles Lowe says:

    You know – ScoMo has given us the answer!

    It’s the private market (of all things).

    Sustainable energy sources are displacing fossil fuels because they’re more affordable (and specifically directable). Drought-stricken farmers “deserve” so much funding (NewStart for 4 years out of every 10) that the economic Holy Grail of a “real” Budget Surplus can be “postponed” – not that far from a $90,50 increase in NewStart as advocated by (of all sources) KPMG!

    And ScoMo simply skates over the politics. He just lets reality happen.

    So much for readers of JM’s blog (and any other ‘social’ intellectual).

  2. Stephen Allen says:

    Bi-partisan agreement? Australian Liberals only serve to prevent unity within the polity.

  3. Kien Choong says:

    Great series, I look forward to reading future articles in this series.

  4. Greg Bailey says:

    Excellent article, Ian. I suspect the subtlety–if it is subtle–of what you are saying will go beyond most politicians. Even to speak of economy, society and environment in essentialist terms is difficult, as they are clearly all interdependent, conceptually and pragmatically.

    The notion of trade-off is dangerous because it does not offer an holistic view of what we are confronted with. It is also strongly predicted on sectional interests, when we should be focussing on totalistic entities, where effects on one aspect effect all the others.

  5. michael lacey says:

    Morrison is a representative of a brutal modern-day capitalism, or what some might call neoliberalism. This form of neoliberal capitalism is a particularly savage, cruel, and exploitative regime of oppression in which not only are the social contract, civil liberties and the commons under siege, but also the very notion of the political, if not the planet itself. The dystopian moment facing the the globe, can be summed up in Fred Jameson’s contention “that it is easier to imagine the end of the world than to imagine the end of capitalism.”

    Michael Yates points out throughout this book, capitalism is devoid of any sense of social responsibility and is driven by an unchecked desire to accumulate capital at all costs. As power becomes global and politics remains local, ruling elites no longer make political concessions to workers or any other group that they either exploit or consider disposable.

  6. Geoff Davies says:

    Well said Ian. And I had not thought of triple bottom line in these terms, so it’s a reminder that it’s so easy to take things for granted.

    As it happens I have a new book ‘Economy, Society, Nature’ just out http://betternaturebooks.net.au/my-books/economy-society-nature/

    It’s an intro for students on how to start again from systems and, especially, to include the two main signalling mechanisms from the start – money and social interaction – instead of excluding them at the start. It’s many other things too.

    • Wayne McMillan says:

      Hi Geoff,
      Great to see you have a new book out there, looking forward to reading it. If you are interested CASSE The Centre for a Steady State Economy is holding a forum on Saturday 7 December 2019 at the Sydney Mechanics Institute Pitt St near Town Hall starting at 10 am. Phil Lawn the well known ecological economist will be there as well as Mark Diesendorf et al. We would love to see you there.
      Best Wishes

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