SUSTAINABLE DEVELOPMENT Free Market Economics and the Engineering Profession by Roy F. Weston, P.E., D.E.E. Roy F. Weston, Inc. 1 Weston Way West Chester, PA 19380 ©Roy F. Weston, Inc. August 1993 (Edited 17 August 1994) INTRODUCTION Engineers are the practitioners that integrate science, technology, resources, and economics to create things that never were. In achieving development, engineers overcome constraints to meet requirements. If "any change in conditions, materials, products, uses, services, structures, facilities, systems, or activities associated with human endeavors" is defined as development, engineers are involved in development more than any other profession. The significance of engineers and engineering in development is further apparent when it must be recognized that high rates of population growth, population concentration, exhaustion of mineral resources, overharvesting of life systems, soil degradation, deterioration of environmental quality, industrial diseases, urban congestion, and weapons of destruction are all, directly or indirectly, the outcome of engineering activities. Since engineers willingly accept credit for the phenomenal improvements in human productivity, health and sanitation, comforts and conveniences, and the miracles of transportation and communication, engineers must accept their share of blame for the negative elements of development. The basic issue is not assessment of blame. It is answering the question, "Why?". Why has development provided so much bad while accomplishing so much good? Engineers have a moral and professional obligation to the society they serve to find the answer. If humanity is to continue to be a part of a sustainable world, all resources, including human resources, must be used effectively and efficiently in a balanced environment. That is, a sustainable world will require maximization of natural economics effectiveness and efficiency and balance among resources accessibility, community requirements and community capacity to meet their requirements. Engineers must be the initiator, the driver, for meeting the effectiveness, balance and efficiency goals. We must hold ourselves accountable for our outcomes. There is no doubt that culture, ignorance, technological deficiencies, greed, and subservience have contributed to some of the above stated problems. On the other hand, engineers strive to maximize free market economic efficiency for their sponsors. They use prevailing institutional rules and regulations, performance standards, and market prices to determine the most economical solution. If the practices for measuring success or establishing prices are flawed, the engineering outcome will be flawed. Unfortunately, there is significant evidence that the world's free market economic system is flawed. It provides an environment that makes it easy for engineers to contribute to the problem. The shortcomings, deficiencies or flaws associated with our current economic system have been discussed by Herman Daly and John Cobb[0] in their book For the Common Good; by Frances Cairncross[1] in her book Costing the Earth; and in articles by Nicholas Georgescu-Roegen[2], Garret Hardin[3], Robert Repetto[4], and numerous others. Life System factors in natural economics are discussed by Wolfgang Sterrer[5]. The free market economic system is the most powerful of the human systems. The system is self-interest oriented. It is based on individual preference, getting the most for the least, and interpersonal relationships. The system environment, when most effective, is competitive, demands effective and efficient performance, and offers alternatives. It permits individual failure but also provides the opportunity to create individual wealth. It provides the financial system equivalent of survival of the fittest. The system is so complex, involves so many vested interests and is so powerful that, from a practical perspective, it is slow to change and gives the appearance of total self-regulation. The system is based on the philosophical concept that endeavors in individual self-interest will accrue to benefit the community common good. It is probable that the system has been so successful and is so powerful because of its many similarities to Mother Nature's natural economics system. Human development sustainability will come from increasing the similarities with Mother Nature's "rules of the game." Engineers, in their own best interest, should examine the free market economic system to determine how it contributes to flawed decisions, on their part, and how it could be altered to make it more perfect. Engineers should try to understand and change those elements of the system that can help them avoid creating unsatisfactory outcomes from their endeavors. ECONOMIC EFFICIENCY The basic elements influencing economic efficiency involve: ¡accounting concepts, principles, and standards for determining value or wealth, and for measuring the success of performance, and ¡factors influencing price and the relationships among cost, price, and value. These basic elements are interrelated and interdependent. Each element can be applied to an individual person, an organization, a government, or a community of such units. Humans choose to use their systems of governance for formalizing and enforcing the rules they create. Since these rules are of human origin, they can be and are changed. Therein lies the opportunity to influence and obtain needed change. ACCOUNTING PRACTICES Practical experience has demonstrated that altering the rules for accounting and for measuring performance, in individual manufacturing units or multi-unit companies, have beneficially changed outcomes. For instance, in the early days and as practiced by some today, environmental pollution control related costs were charged to overhead accounts. These accounting systems pooled such costs and made no effort to determine who was contributing to such costs and, of course, made no effort to reallocate those costs proportional to contribution. Costs were accepted as general overhead and spread by some arbitrary formula. Thus, deficiencies in the accounting and performance measurement systems made it possible for individuals or units to be unaccountable for their performance. A "commons" type of situation existed. Pollution contributors could, without commensurate penalty, reduce their own costs at the expense of an increase in pooled costs. Generally, pooled costs increased. Consequently, companies have altered their systems so that those who contribute to pollution control costs are allocated costs in proportion to their contribution. Appropriate determination and allocation of costs have reduced environmental protection costs significantly in numerous instances. In another type of circumstance, accounting practices do not require recording future costs. The future costs of cleaning up disposal sites currently deemed unacceptable because of past disposal practices are not consistently reported. Only the more sophisticated companies use "clean technologies" today to avoid the future costs associated with "dirty technologies" after regulations are tightened. There is ample evidence that collecting information and keeping accounts, so that performance can be known and performers can be held accountable, influences outcomes. The U.S. Environmental Protection Agency (EPA) is currently cooperating with industry in evaluating and formalizing this approach to help keep United States industry more competitive. The engineering profession should support this effort. Daly and Cobb, Reppetto and others have shown that the system of accounts for nations can give misleading information and a false sense of well-being. This is because most nations, including the United States, do not require consistency between the accounting they use in their public and private sectors. When the accounting systems are similar, measures such as Gross National Product and National Income are lower than conventionally reported. While there is no proof that the use of different measures for establishing governmental policy will change performance, logic and business experience would indicate that more realistic information and performance measures will assist in attaining more realistic outcomes. The United Nations and a number of individual countries have changed accounting and performance evaluating procedures to include natural capital in the system of accounts. It appears that nations should be held to the same accounting principles applied to their private sectors. It is axiomatic that a natural economics should have one set of accounting concepts, principles, and standards that would apply to all human endeavors, public or private. If accounting practices and performance measures for the private sector are best for protecting the interest of the investing public, why should they not be in the best interest of the tax paying public? There should be but one set of concepts, principles, and standards for protecting the common good. This would make both the perceived wealth of the nation and its current income more realistic. It could initiate more reliable information on return on public investment. The engineering profession should work with other professions to establish the merits of changing the United States national accounting system. FACTORS INFLUENCING PRICE Engineering designs are influenced by commodity and product pricing more than any other element. Philosophically, theoretically, and practically, the free market economic system is more efficient when cost, price, and value are appropriately equivalent. Since sustainable development will require maximization of economic effectiveness and efficiency, an effort must be made to equalize these three factors. To accomplish this, three things must happen: ¡Voluntary exchanges in a competitive market must establish a price such that all participants consider it to their advantage to engage in transactions (i.e., all participants gain). ¡Producer participants maximize their profit and the consumer participants maximize their satisfaction. ¡Nonparticipants in the transactions neither gain nor lose as a result of the transactions. The present economic system does not and cannot satisfy these criteria. The primary reasons are that, system: ¡Theory and practice excludes some elements that influence the outcome. ¡Theory presumes coverage of some factors that in practice must be treated as externalities. ¡Theory is based on hypotheses that are inconsistent with the real world. ¡Real world practices are inconsistent with the earlier stated three objectives. Theory and Practice Exclusions The free market economic system is a subset of a global natural economic system. The natural economics system is self-organizing and self-regulating. The natural system is governed by the Laws of Mother Nature. Those laws are self- enforcing. They govern the services relating to solar energy, atmospheric protection of life systems, the daily cycle, the seasons, gravity, the tides, the climate, and the hydrologic system. Also, they cover the characteristics and performance of the Earth's life system. The life system is self-organizing and self-regulating. It has changed the environment on Earth from one that was hostile to one that was conducive to human habitation. The system has adapted to the kinds and quantities of solar energy reaching Earth. The system moderates the climate and weather, decarbonizes and reoxygenates the atmosphere, provides scavenging and recycling services, and provides the diversity of species balance needed to keep the system functioning. The life system is self-regulated by life through an evolved system of individuals, species, and communities and an operating philosophy that uses the individual as the system driver and demands a high level of individual accountability. It permits and adapts to failure and rewards success. On the basis of solar energy conversion to standing biomass, the system has invested about ten years of productivity to maintain operation of the system and to sustain life on Earth. It has evolved processes and systems needed to maximize efficiency in the use of energy and to scavenge and retain essential nonrenewable resources accessible to its economy. On average, the life system retains the equivalent of only about 0.05% of the annual quantity of solar energy reaching the surface of the Earth to create biomass and residuals. However, it uses the 0.05% very efficiently. Humans are a part of the life system. They make up about 0.02% of the standing biomass. Obviously, the system has developed the means to sustain life on Earth. Humans are faced with the challenge of emulating the economic system of the Earth's life system. None of the services or investments mentioned above are included in the free market economic system. Present knowledge and present trends indicate that these could be serious exclusions. They should be and are being handled as global issues. The engineering profession should be providing advice and counsel. Externalities, Public Property Free market economic theory presumes that the self-interest endeavors of individuals will aggregate to enhance the common good. Practice has demonstrated that this is not true in all cases. The system (i.e., the market) cannot deal with the commons and externalities. The Commons (i.e., Public Property) The commons includes property that can be used by one person without excluding its use by others. The commons include property such as the air we breath, the rivers we use, the oceans, highways, parks, information, and other unpriced materials and services. The economic system does not have the means for equalizing cost, price, and value for the commons. The system must rely on governmental intervention. The overharvesting of the oceans, air pollution, water pollution, congested highways, overused parks, and half truths in the use of information all indicate that more efficient ways of using these resources are needed. Engineers can contribute towards more efficient solutions. Externalities An externality occurs when an economic activity of one individual affects the welfare of another without being mediated through the market (i.e., without being priced). This is the third and, currently, the most important characteristic of an efficient economic system. Externalities can be positive or negative. Most are negative. That is, in the negative case, the cost to the third party has not been included in the price of the first party's product or service. Obviously, this gives the first party an undue financial advantage. The lower price can influence demand and/or efficiency in the use of the product or service. Pollution of air, water, and land, and occupational harm to individuals are typical examples of externalities. Typically, inequities created by such actions are moderated through governmental intervention. The Community puts a price on the externality through command control or other type of regulation. A partial list of methods that have been tried to equalize cost is shown on Table 1. Efforts are being made to develop market concepts for handling pollution externalities. This is moving in the right direction as long as the concept of neither gain nor loss to nonparticipants prevails. However, pollution cannot be the only consideration. The scarcity and long-term recovery value of the pollutants themselves, also, must be considered. Natural economics will aid in developing practical concepts. Engineers should endeavor to contribute towards identifying, moderating, and handling the externalities that interfere with engineering decisions for the common good. Theory Hypothesis Adam Smith is considered the father of the philosophical basis for the present economic system. He was a human behaviorist and thought of economics in terms of human behavior. Economists then developed theory on the basis of the Laws of Mechanics. Prominent economists have challenged this approach. Some have proposed thermodynamics as a theoretical basis. Humans do not behave in accordance with either of these theories. A natural economics model based on how life behaves is the most likely model of the future. Eventually, the most logical model will be developed and will prevail. Such a model will recognize that the Earth's resources are limited and finite. The theory must recognize the significance of limits and balance. It must continue to recognize that micro decisions and actions individually insignificant, collectively determine the outcome. It will recognize that money cannot substitute for all things. That means it will recognize that some things are irreplaceable. Price must reflect these facts. Technology and business practice, also, can influence price. Free market economic systems are oriented towards short rather than long-term. They will permit price increase in times of relatively large potential supply and temporary scarcity. However, the markets, also, will permit exhaustion of resources. It is believed that this is so because the concept of infinite substitutability of money encourages such a practice. Other creatures will exhaust their resource supply. Humans and their systems have shown no evidence, to date, of behaving differently. In many instances, price is based on a margin of profit to attain a competitive return on investment. As long as such a return is acceptable, the activity will continue. Technology has made it possible to lower costs in the face of increasing scarcity. Thus, humans can continue to attain a satisfactory return on investment and lower or hold price in the face of scarcity. Some people presume that money can substitute for anything of economic value. They presume that technology can solve all substitution problems. These presumptions do not recognize the limited and finite availability of the Earth's resources and the limits and balance characteristics of Mother Nature's economy. Prudent technologists will not gamble on unknown outcomes. They will require strong scientific evidence of a high probability of success. They will take only calculated risks, not ignorant gambles. Today, we are gambling. Engineers should work with economists in identifying and correcting theoretical concepts contradicting real world conditions. Real World Practices Real world practices are inconsistent with attaining the ideal objective of equalizing cost, price, and value. The markets are not truly free. Government intercedes in more ways than through command/control costing of environmental externalities. It rightfully establishes the rules of the game and the systems for monitoring and enforcing adherence to those rules. However, other government policies and practices influence the system and industrial competitiveness. These include policies and practices relative to elements such as: political objectives (e.g., cheap energy, accelerating growth, trade, and immigration), taxation, subsidization, welfare, inflation, discount rates, education, and debt. All these elements can and do impact on economic efficiency. The engineering profession should be interested in any and all factors that impact on economic efficiency. Particularly, the profession should be interested in those factors that influence the prices they use in daily decision making that would interfere with sustainable development. The profession should do what it can to influence others to create self-regulating systems to appropriately price such factors. Our federal government has had a political objective to ensure cheap energy. The price of energy (i.e., the monetary cheapness of energy) influences the American way of life more than any other factor. It influences our productivity, our competitiveness, and where and how we live. This has influenced the way in which we use energy. On an output per capita basis, we are competitive. On an output per unit of energy basis, we are not competitive. Our manufacturing operations use almost 50% more energy per dollar of "purchasing power parity" production than the average of our major national competitors. Our average annual consumption of fossil fuels per capita is 1.76, 2.58, and 2.98 times that of Germany, Japan, and France, respectively. Our citizens pay only about a third as much as the French citizen pays for gasoline. Our cheap fuel economy has contributed to our romance with the automobile, urban sprawl lifestyle and our demand for low energy-efficient conveniences and comforts. Overall, the United States with about 5% of the Earth's population uses about 25% of the Earth's energy. On a per capita basis, we use 63 times as much energy as we need, in food energy, to sustain ourselves. The rest of the world does not look kindly on our behavior. As Asia expands its economy, pressures will increase for us to become more efficient. These facts confront the United States engineering profession with both a moral and a practical problem. The Earth has a limited and finite supply of fossil fuel. Fossil fuel makes up almost 90% of the United States energy input. The moral problems are that we are using more than our reasonable share of limited fossil fuel supplies and in doing so we are contributing significantly towards global air pollution problems. The practical aspect is two-fold. We are destroying hydrocarbons by combustion, at a high rate. This process transfers carbon to the atmosphere in a form such that it is inaccessible to the human economy for further use. This is serious because hydrocarbons are the most effective source of carbon for industrial processing. Carbon is the most versatile of all elements for substitution. Therefore, its availability is highly important to current populations and the options of future generations. In addition, by continuing the use of low cost fossil fuels, we are neglecting the development of renewable energy technologies. We are permitting world competitors to get ahead of us in developing such technologies. This is serious because fossil fuel sources are limited and finite. It is an assured fact that humans will need renewable energy some time in the future. We stand to lose business opportunities if we delay development of renewable energy technologies. Thus, human behavior and the economic system may permit depletion of readily available carbon sources to the detriment of both current and future generations. As carbon is returned to the atmosphere at rates hundreds of thousands of times greater than it was removed, current populations are gambling with their own and their progeny's future. The risk is great because scientific evidence indicates probable adverse impact but, as yet, cannot predict the magnitude of the impact on the Earth's climate or biosphere. The biosphere can adapt to change, but it is unlikely that it can adapt to the current rate of change without adverse impact on the environment as humans want it. While the carbon returned to the atmosphere, technically speaking, will continue to be available, it will not be practically accessible to the human economy. Technological and energy requirements will make it inaccessible for energy use within the human time frame. Thus, we are gambling. We are gambling because the system will permit the use of fossil fuels for energy conversion purposes until the energy cost to attain fossil fuels equals the energy value that can be converted from those fuels. A backup system to provide carbon from agricultural sources will, in all probability require more energy carbon input than the quantity of energy carbon produced. Also, agricultural sources raise the specter of limitations due to loss of nutrients from the soil. On the basis of average solar energy transfer efficiencies by plants, there is not enough land area in the United States to meet current energy requirements. Human behavior and the system is gambling that enough energy from non-fossil fuel sources will be available, in the future, to access the remaining hydrocarbon sources. At this time, there is no technological assurance that renewable sources of energy can meet probable future energy requirements of an ever expanding population. Education and training offer the means for the populations of the world to enhance their capacity to meet their needs and achieve their aspirations. It is the most effective way to change attitudes and behavior so that people will endeavor to achieve the essential balance and attain the natural economics efficiency required for sustainable development. Engineers should be strong in their support of education and job training. For moral, market and technological reasons, the United States engineering profession should be advocating policies to encourage the development and use of fossil fuel conservation and renewable energy conversion technologies. European countries are controlling gasoline prices to control their energy consumption. Fossil fuel pricing is the horrible example of flaws in the free market economic system. Subsidies and technology together have made it possible to keep free market economic system costs and prices low. At the same time, natural economics system current and future costs are high. Such resources are irreplaceable. Their replacement costs are infinite. Together these are indicators of serious future problems. Therefore, it is believed that the engineering profession should seriously contemplate the probable impact of a less than 500 year fossil fuel supply on human welfare. In the meantime, the engineering profession should examine the impact of international control of energy prices on the global economy. It is possible that international control of energy prices at the well head or mine can be managed, over time, such that both the rate and magnitude of price change can be absorbed by the different national economies and the global economy without adverse impact. I believe that world prices could be managed and, concurrently, technologies could be implemented to the economic advantage of all concerned. Politically, we continue to emphasize overall economic growth to enhance our standard of living and quality of life. This suggests sustaining economic growth. Obviously, sustainable growth is an oxymoron. Thus, political objectives must be moderated to ensure balance among the accessibility of energy, matter, space, time and life resources, natural economic efficiency in the production and use of resources and the capacity of the community to produce and to trade to make up for deficiencies in the accessibility of resources. Appropriate policies relative to multiple future uses of in- use resources, minimization of resources wastage, internal population growth, immigration and trade are needed to ensure sustainability. Theoretically, markets, such as the commodity, stock, and exchange markets, should and do contribute to the economic efficiency of the system. Practically, there is more and more evidence that these markets are being used to transfer or gain wealth without creating equivalent wealth for the system. Also, there is evidence of cartel activity to control prices. Abuses must be corrected to ensure maximization of economic efficiency for the common good. The form of taxation can influence the vigor of the economy through the psychology of rewards and penalties. For instance, income taxes penalize productive individual effort. The penalty is exacerbated when the tax rate is increased with increase in income. Money that could be invested to create employment is sidetracked to government. An alternative to the income tax is consumption taxation with surtax for luxurious and/or wasteful consumption. Psychologically and practically, such taxes can be incentives instead of disincentives to productive individuals. In addition, it provides an incentive to everyone to spend frugally. A part of such a policy can be a wastage tax. A wastage tax can be a surtax that is a sophisticated application of the polluters pay concept. Pollution is evidence that too much is being wasted to the environment. That which is wasted to the environment will be lost to the human economy indefinitely. Therefore, the wastage tax can provide incentive to both conserve resources and to minimize pollution. The merits of changing sources of revenue for the common good should be investigated. Subsidies can be beneficial. However, government has been guilty of retaining subsidies far past their term of usefulness. Vested interests sustain such practices. "Sunset rules" could be applied to stop unneeded subsidies. Subsidization through government enterprises can be corrected by privatization. Political realities make it very difficult for governmental intervention to be highly efficient. Welfare and universal health care create a commons-type of problem. Typically, each has a history of cost escalation. Each requires rationing to control costs. As such, each is divisive because it evokes strong differences in emotional reaction that impairs logical decision making. Transfer payments from the government to individuals have become about 14% of the Gross National Product. The nation's internal common good and its external competitiveness requires deliberate and wise debate concerning societal policy on these matters. The concept of sustainable development cannot compete in an economy that places strong reliance on discount rates and inflation. The future is discounted too heavily. For instance, American Indian religious beliefs required protection of seven generations into the future (say, 140 years). Using a discount plus inflation rate of 10%, a $1,000,000 need 140 years hence would be worth only $1.60 today. Future value must be approached differently for natural resources. A replacement value concept is plausible. The concept of debt and the practice of going into debt may become one of the most powerful factors constraining the achievement of sustainable development. Private debt presumes that both the creditor and debtor will gain by the transaction. However, the creditor will have used resources beyond his/her need to accumulate wealth to loan. The debtor will be under pressure to use resources beyond his/her needs to pay off the debt plus interest. Thus, the concept and use of debt stresses natural capital systems. The use of public debt creates a commons type situation. It will be difficult to control and may lead to tragic consequences. When used for investing in needed facilities and systems, it has the same impact as private debt. It will increase current consumption of resources. When used to finance current governmental operating costs, it is an indicator of living beyond available means. In this case, debt is very difficult to control and aggravates a bad situation. The cost of public debt to the lower 50% of the tax payers is so small that there is no economic incentive for them to be concerned. They pay only 6% of the income tax revenue. Debt affects prices by accelerating demand for resources currently. Also, it creates artificial demand for resources into the future. It is a concept to be used sparingly. Engineers should support national debt control. The above discussions have been for the purpose of identifying factors that can influence human systems economic efficiency and the common good and actions that may improve or correct system deficiencies. Although the free market system has deficiencies, it has the characteristics of self-organization and self-regulation needed to maximize the natural economics effectiveness and efficiency required by sustainable development. It has the philosophical and moral basics to contribute towards sustainable development implementation. Engineers should support efforts to overcome the system's deficiencies. Engineers must ensure that they do their part in: ¡Maximizing natural economics'[6] effectiveness and efficiency through: - Conceiving development as an integral and compatible part of the Earth's systems. - Emulating the economics of nature in the production and use of resources. - Removing barriers to human goodwill, cooperation and capacity enhancement. ¡Attaining necessary balance among: - Resources[7] accessibility. - Requirements of communities. - Capacity of communities to meet their requirements. ¡Implementing sound Principles in establishing goals, strategies, tactics and the plans needed to meet the effectiveness, efficiency and balance requirements of subject communities. The deficiencies mentioned above and the possible means for correcting those deficiencies should be examined by engineers, economists and accountants for the purpose of evaluating the impact of the deficiencies and the means by which the system may be advantageously altered to more perfectly serve humankind. The effectiveness of the engineering profession in serving the Earth's populations and enhancing the common good is seriously impacted by the deficiencies in the free market economic system. These deficiencies interfere with the effectiveness and efficiency of use and the accessibility of resources to current and future populations. They control the development and use of new technologies. They interfere with maximizing natural economics efficiency for the common good. They have made it necessary for government to provide command/control regulation or other means of governmental intervention to correct obvious deficiencies and to protect the common good. Command/control regulation, by its very nature, cannot be as efficient as the free market system. The engineering profession has an obligation to society to identify free market economic system deficiencies, to work with others to determine effective corrective programs, and then to urge governments to consider appropriate modification of governmental policy for the common good. The engineering profession can make a significant contribution to the common good if it will undertake the task of improving the free market economic system. Identifying and correcting the deficiencies of the system, over time, while retaining the basics of the system, offers a practical way for engineers to enhance their contribution towards sustainable development and to make a valuable contribution towards the common good of the communities they serve. Cooperative efforts of the engineering, accounting and economic professions may be able to determine: ¡those deficiencies in the economic system's success evaluation measures, accounting principles and pricing methodology that create the need for governmental regulatory intervention in engineering outcomes. ¡modifications of the economic system that will: - minimize the adverse impact of current deficiencies. - minimize the perceived need for governmental intervention. - maximize the inherent self-organization and self-regulation advantages of the free market system. - maximize overall economic efficiency for society. Engineers should lead and support such an effort. Engineers should rise to the challenge and become agents of change in the way humans endeavor to improve their lot. Sustainable development must be the human goal. Engineers can make a major contribution towards implementing that goal. Table 1 INSTRUMENTS THAT HAVE BEEN USED TO ATTAIN A MORE CORRECT PRICE 1. Consumption taxes ("consumer pays") 2. Green taxes ("polluter pays") 3. Systems of accounts/measures for evaluating success 4. Command control regulation 5. Regional/international agreements 6. Paying to preserve 7. Taxing to harvest 8. Deposit refunds 9. Tariff 10. Legal/civil penalties 11. New technology 12. Green consumer 13. Green investor 14. Public opinion 15. Willingness to pay 16. Moral persuasion FOOTNOTES 0 Daly, Herman, and Cobb, John B., Jr., For the Common Future, Beacon Press, Boston, Massachusetts, 1989. 1 Cairncross, Frances; Costing the Earth, Harvard Business School Press, Boston, Massachusetts, 1991. 2 Georgescu-Roegen, Nicholas; Energy and Economic Myths, Southern Economic Journal, January 1975. 3 Hardin, Garret, Professor of Biology, University of California, Santa Barbara, CA; The Tragedy of the Commons; Science Magazine, Vol. 162, 13 December 1968. Presented at a meeting of the American Association for the Advancement of Science, Utah State University, June 1968. 4 Repetto, Robert C., et al, Wasting Assets: Natural Resources in the National Income Accounts, Washington, DC, World Resources Institute, 1989. 5 Sterrer, Wolfgang; Human Economics: A Non-Human Perspective, Ecological Economics, April 1993, pp. 183-202. 6 Natural economics: Involves the total system, including both natural and human subsystems. The concept uses all Laws of Mother Nature to provide the most effective and efficient way to achieve a desired outcome. It assesses full costs and benefits including factors excluded from or considered as externalities to the conventional financial- based free market economic system. Theory recognizes the impact of factors such as the limits and finiteness of natural resources, natural limits and balances, micro decisions and actions, interrelationships, interdependencies, self-regulation, human factor, instincts, heredity, variability, foreign to nature, resource irreplaceability, rate of change, prevention versus cure, risk and the need for a multigenerational planning horizon, a community-unit approach, the concept of "common good" and integration with religious, cultural, governance and human economic systems. It is based on reserves, input, output, and losses/wastage. It requires that proposed goals be performance-based and permit options for implementation and that accounting principles and standards provide consistency between the public and private sectors. It measures performance by using parameters such as: achieved standard of living and/or quality of life, human capacity to produce and trade, accessibility of resources for future use, non-human life system well-being and productivity, maximum sustainable yield, natural and made wealth, and "net" domestic income. Also, natural economics is based on the use of natural units of measurement for the quantification of energy, materials, space, life and time. 7 The Earth's resources are limited spatially and are finite quantitatively. They include energy, materials, space, life, and time.