In view of the state of our planet, it is now undisputed that our way of doing business and therefore also – as the other side of the coin – economic theory must be changed comprehensively and quickly.
In the approximately four decades of the unrestricted triumph of the neoclassical mainstream, not only has the global gross national product multiplied; the threats to our human civilization have also increased exponentially, so that we are facing the abyss today – that is why great caution is required with regard to the old recipes, which still promise us many things, including that we will be ‘one step ahead tomorrow’.
At the beginning of the 1970s, clever and truly innovative researchers, who warned of “The Limits to Growth” with many good arguments, were laughed at or even silenced as completely incompetent because they had no idea of the economy. At that time, a course correction would have been easy and - from today’s perspective - would have required hardly any noteworthy changes in behavior and only brought about slower increases in prosperity - it would only have required the renunciation of unrestricted striving for profit, accepting the collateral damages to the environment. Instead, in the following decades, the economy was ‘really put on the gas’ - half of the man-made CO2 has been emitted since then.
In 2007, the Stern Report, despite the already significantly worsened environmental situation, estimated the necessary effort to contain climate change to a harmless extent to only a few percent of the world’s gross national product. The report’s proposals and warnings have been followed by many words and statements of intent in the political arena, even agreements, but too few and too half-hearted deeds.
Today, because of all this negligence, we are faced with the impending climate catastrophe, which can no longer be avoided and with some probability goes far beyond the targeted 1.5 to 2 degrees of warming, if we do not act very quickly and very decisively. (The situation is much more critical than usually communicated, because a 'probable' warming of 2.7 degrees at 700 ppm CO2 involves a 10% probability of 6 degrees or more, as shown by Weitzman’s diagram – this would turn Earth into a hostile planet).
Today’s situation demands much more from us than just a few percentage points of 'prosperity', but ‘everything'.
‘Everything’ about a willingness to radically rethink, drastic changes in behavior and global cooperation. ‘Everything’ in commitment and effort. Only then can we overcome the many crises that are coming upon us: climate crisis, pollution, extinction of species, financial crises, democracy crisis, geopolitical tensions and wars. All are connected, which sounds like hopelessness, but offers the chance to defuse all crises together through the right steps.
Avoiding this catastrophe necessitates alternative, sustainable routes in all areas, and foremost in our economy.
This needs also a different economics – not sticking to the neoclassical beliefs. Growth is not the solution, but an important reason for the piled up problems; protecting our livelihoods must be the top priority. To this end, the planetary boundaries - both in terms of available resources and in terms of the absorption capacity of ecosystems for our waste - must also be given their proper place in economic theory. What has long become standard in many other sciences - namely, that our environment, society and economy are complex dynamic systems with many feedback loops and nonlinearities, in which a balance is not automatically established, but on the contrary, tipping points can occur, the transgression of which leads to fundamental instabilities - this must also become the basis for economics.
There are suitable approaches for this - but these must be further developed and detailed, which means that appropriate funding is required: money and personnel must be invested here and not in perfecting an unsuitable theoretical building with too weak a foundation.
The Friede-Gard-Preis for Sustainable Economics will hopefully give impetus to this and help to bring about a reorientation to economics and economic research.