Free-Market Ecology

An outline of an environment-first economic system that is not centrally planned.

Introduction

While writing my novel "The Undeserving Future," I wanted to explore a world ruled by a government fanatically interested in implementing permanent ecological sustainability. By permanent ecological sustainability, I mean to create a society that could exist on Earth without destroying the planet for hundreds of thousands of years. Unlike many radical ecologists, they did not want to eliminate technological progress and return to a hunter-gather existence. I did not believe, as Yuval Harari does, that agriculture was our biggest mistake. I started this project because I thought that market advocates had run out of ideas about how to face climate change and our planet's limits to growth and that I needed to present new ideas to these problems.

The fundamental redesign of capitalism asks how you would have anything resembling a market economy in limited environments. It’s an alternative to the carefully centrally planned economies on the International Space Station or aboard a nuclear submarine. In these economies, administrators plan all production and consumption because running out of food, fuel, air or water can have catastrophic consequences and can happen suddenly without price signals and there are no alternatives that can replace these when they run out. Free-market ecology provides an alternative for these spaces, which maps to roughly the same production and consumption as a planned economy in these trivial cases, but more importantly, it will scale to allow a decentralized market economy on a future Mars colony or a giant spaceship in deep space, or even, at a much larger scale, on a near future severely resource-limited planet Earth.

What does environment-first mean?

Environment-first means that there can be no compromises regarding the environment. We have to be able to live here on Earth forever. We cannot destroy this planet ever. All human values are subservient to our environmental responsibilities to the Earth. This belief does not mean we must eliminate humans, but we must accept the limitation that we only have one Earth, and we should be able to live on it forever in balance with nature. The choice is not contingent on the technology we have available. Indeed, technology will help us use resources more efficiently, but it will not give us a new earth. Even if unbelievably technologically advanced aliens landed and gave us faster-than-light travel and free energy technology, we would overpopulate and destroy every habitable planet in the galaxy within 10,000 years using our current economic model. If other intelligent beings are in the galaxy, this expansion strategy will inevitably bring us into conflict with them. But I digress. Even if we were to destroy all technology and revert to a hunter-gatherer state, we would eventually forget the mistakes of the past. In 20,000 years, we’d return to where we started with the same problems and an even more resource-depleted and polluted environment.

The Design of The Free-Market Ecology System

The design of an economic system that could sustain a vibrant creative technological economy that will remain sustainable underwater, on Mars, or in deep space for the most extended possible length of time where humans cannot live without technology, and will sustain humans on Earth indefinitely is composed of three parts. The role of the state, the dual role of the consumer/laborer, and the role of the ecological capitalist are the three parts. There remain inequalities where the best and most capable rise to the top in this system, but they do so ultimately by optimizing ecological sustainability. In this way, the system directs their greed and ambition at improving the ability for humans to live on Earth in a technologically advancing world indefinitely.

The State's Role

Annual Resource Allocations

The heaviest task of the state is determining the maximum sustainable extraction of Earth's resources. This determination applies to everything that is easily depletable. This determination will include crude oil extracted via various methods, soil nitrogen, minerals, ecologically sensitive land area use, livestock, and fish. For anything that people can't use an unlimited amount of for hundreds of thousands and never run out, the government must specify a maximum upper limit for a given period regarding its consumption. Sunlight, since it is inexhaustible, would probably be free. Any manufactured resources recycled from the earlier economy the system would also consider free to encourage the reuse of existing infrastructure.

Provenance

The state would track annual resource extraction limits through all use and production. For example, an oil driller would pull a gallon of crude oil from the ground. When he would sell the oil to a refiner, the oil would go off his balance sheet. The oil driller's balance sheet would have an absolute maximum cap, after which he could not extract anymore. The system would incentivize the oil driller to transfer the oil to others to allow him to pump more oil. He could charge a markup on the quantity of extracted oil, where he would keep some of the oil for his consumption by inflating the amount of oil he transferred to the refiner by a transparent percentage. The oil refinery would pass the oil extracted onto the gas station. The gas station would pass it on to the consumer, who would burn it in an engine. They would have a maximum amount of carbon dioxide they could release into the air daily. They could consume no more oil if they hit the cap because their balance sheet would have a maximum limit, and the amount they were allowed to burn daily would have maximum daily limits. The government's job would be to keep track of all this on a blockchain. The blockchain would track who controlled what natural resource and how much at any given time. This grand undertaking requires substantial technological integration, but it is not impossible.

Individualized Daily Resource Rations

The state must also allocate individualized daily rations for each citizen, such as how much carbon they can release into the atmosphere. In a highly integrated system, the system would track the nitrogen content of plants they eat and the nitrogen through the biological waste they contribute back to further fertilize crops. Dealing with biological waste is distasteful, but King's book "Farmers of 40 Centuries" claimed this was one of the keys to farmers in Asia being able to farm the same land for 4000 years. The resource rations for different extracted elements would be set individually for each person based on a reasonable and sustainable amount. This rationing does not mean that all people will have equal consumption. Ecological capitalists who successfully increase ecological efficiency can mark up the resources in the products they resell to consumers to have a resource profit and consume those resources obtained from the markup. 

Individualized Resource Ownership Balance Sheets

The government will also be in charge of keeping track of each person's balance sheet. For example, the government will put the resources contained in clothing on a person's balance sheet if a person receives clothing.   If they can completely recycle the clothing by giving it to a recycler, the system will take that resource off their balance sheet. If they throw it out, it's still on their balance sheet and will limit their consumption permanently. This mechanism also disincentivizes hoarding and owning things in general. If you only rent something, it's on your balance sheet while you use it and then goes off when you give it back.

Grants of Resources for Basic Science, Biodiversity, and Other Government Functions.

The government will give out grants for scientists to explore basic science matters as voted on by those ecological capitalists who are members of committees in various fields. These capitalists will have free access to the fruits of these basic scientific discoveries. More on ecological capitalists later. The government will give prizes to scientists who reach their research milestones. Similarly, those doing environmental restoration, such as care for endangered species, will receive prizes when population levels of those species rise to certain predefined targets.

The Consumer’s Role

The consumer, having a limited amount of resources that they can consume over a certain amount of time and only a certain amount of resources they are allowed to own, will be intensely concerned with the resource efficiency of all the goods they buy and consume. They will also be highly concerned with ensuring that every object they consume is recyclable or has high enough demand that they can resell the item. They will naturally switch to products offered in the market with the same value for fewer resources consumed. They will prefer to rent or borrow rather than own. They will be thinking about the entire product lifecycle of products they come into possession of and will rarely throw anything in the trash or obtain ownership of products that are not 100% recyclable.

The Worker’s Role

The worker allocates their labor to whatever ecological capitalists or organizations they wish to work for. Their employer will compensate them for their labor with currency operating similarly to our current system. Every product involving human labor will have a cost in currency. However, even with an unlimited amount of currency, the resources contained in that product cannot exceed the daily ration for a consumer. Thus, products machines produced without human effort will be free in currency terms. This economic structure provides a universal basic income for fully automated production processes. If a human effort is involved, the person purchasing must exchange currency at a market-negotiated price for that product. Thus, no one will likely starve in a highly automated world, but those who want to utilize the labor of others will have to contribute their labor.

The Ecological Capitalist’s Role

Through some political process or savings of daily resource rations, ecological capitalists pool resources they can deploy to make new capital. This capital will be used by the ecological capitalist to more efficiently produce goods or the same amount of goods with fewer resources. Capitalists can mark up the resources and labor they pass to the consumers and keep them as profit and profit for the investors they pooled capital from. Consumers will switch to their products if they provide more value or use fewer resources than existing products. Thus, the economic system uses greed to advance the goal of creating as much value as possible out of as few natural resources as possible.

The Economic Dynamics

Defeating Jevons Paradox

Jevons Paradox was the observation in the 19th century that the more efficiently a producer uses a resource, the more economic demand there would be for that resource. For example, the faster it is to get around with a car, the more people will drive. Thus, building larger highways creates even more traffic. With individual resource rations in Free-Market Ecology, people will not consume more because there is more. Instead, as ecologically efficiency increases the same amount of resources will increase the number of wants they can satisfy. Capitalists aim to use resources more efficiently. Consumers switch to those products and consume the same amount but use the resources not consumed with the new more efficient process for other needs.

A Place for Excellence and Distributed Creativity

This system provides a much-needed alternative to communism and capitalism in that it preserves the motivation and benefit to the society of great entrepreneurs and creative engineers while being able to be operated in a resource-constrained environment. They top producers get to keep a part of their benefit to society and may become immensely rich. Their work will also benefit people with low incomes, who will always have something because of their guaranteed daily resource allocations.

Problems with Central Planning and State Capitalism

Centrally planned and state-controlled economies in North Korea and Cuba have the problem that they are cornucopian in the end.  Marx was not concerned with environmental preservation.  There is always a glorious future ahead that depends on more resources becoming available through development.  Besides, these Marxist economies had poor ecological records, especially the Soviet Union. 

Even with a world government operating a command economy hammered out of a policy designed around Agenda 2030 or World Economic Forum plans, it would run inefficiently for all the information processing reasons central planning failed.  Giving everything to artificial intelligence would lead to AI safety problems and struggles over who controls whose ends the AI would serve exactly.  There is too much information in the economy, and if human life were no longer the ultimate standard for efficiency, a planner could succeed even by sloppily destroying capital and human capital in "Nazino Island" style disasters, and the system would still reward planners for eliminating environment-consuming people.  Even for environmental extremists, if one is not interested in giving up on technology, at some point, there has to be a system that must create and preserve instead of self-destructing.  That creation should be environmentally sustainable, and my design can build a market system that will optimize for that, as we shall see.

Problems with Free-Market Capitalism

Ecological Problems

A boat that can drag a net across the ocean for fish is excellent in free-market capitalism. The consumer gets cheaper fish. The fisherman gets higher profits, and everyone wins. Except eventually, there are no more fish. Then consumers will shift to eating potatoes, right?

Ignoring Lifecycle Problems

In free-market capitalism, building a single-purpose object with huge maintenance costs, like a gigantic yacht that the owner will eventually scrap, is perfectly ok. Single-use plastic bags are acceptable. Filling landfills with stuff that will never degrade is fine. We can store all our nuclear waste in barrels underground. All these free-market capitalist policies sound fine for next quarter's results, but they don't work for hundreds of thousands of years.

AI Safety Problems

In free-market capitalism, a robot army turning a hill into paper clips or other useless stuff is perfectly ok. The robot army obeyed its prompt to make ten quintillion paperclips and chose the most efficient means. The landowner even had the mineral rights to the mountain, so it's great. It was just a useless mountain, and now the owner can sell a box of paperclips for a penny! This kind of thing does not work for 100s of thousands of years or many people controlling robot armies.

Limited Environment Problems

The only option for submarines or space stations is a centralized planned economy. The only options for Mars or deep space will be a planned economy. That's because selling air at market price will lead to someone running out of air or the whole place running out of air and everyone dying. Thus, each person has their entire consumption rationed and planned out beforehand. This economic system does not create an environment encouraging risk and technological innovation. I haven't heard of any new businesses starting on the ISS or nuclear submarines. Mars and spaceships in deep space will likely operate similarly. Furthermore, there is no way to give up on technology and revert to a hunter-gatherer system in the ISS, a nuclear submarine, deep space, or on Mars. The technological system, the resources available, and humans must all work together to maintain each other, or everyone dies.

Perpetual ecological sustainability problems

Earth's non-renewable natural resources will eventually run out in the current economic paradigm. Yes, kerosene replaced whale oil in the 19th century when whalers almost drove whales to extinction, but that sort of thing is not guaranteed to continue.

The inefficiency of a lengthy web of regulations

Environmental regulations are vast and numerous, difficult to understand, inefficient and time-consuming to comply with, and often do not cover all issues that need addressing. The market system needs to direct behavior to environmentally beneficial actions automatically.

The Transition to Free-Market Ecology

Command Economies

Command economies could implement this system tomorrow if they developed an excellent provenance tracking technology. They could even remain dictatorial but be vastly more efficient at it and do a much better job feeding their people and developing their economies sustainably. They could finally show the capitalist world that they can innovate.  

Free-Market Capitalism

Cryptocurrencies could be used for resource provenance tracking through the various stages of production. The initial step would have natural resource producers track how much oil and other resources they extract. Then refiners would keep track of how downstream industries distributed the products of those natural resources. Ideally, it would track resources to the end consumer. The government could tax the resource use at various rates, punitively taxing higher usage above baseline much like how electric utilities charge for energy.  

More democratically, the system could also be introduced bottom up in smaller, more self-contained communities such as the Amish.  It would let them identify and limit their dependency on the outside world.

Conclusion

Those in the economic camp who believe that centralized planning is the wrong way to approach economic problems have not had many good ideas about addressing climate change and other limits to economic growth.  With this system, I aimed to provide new ideas that could catalyze a new era of economic growth that would lead in a technological and sustainable direction instead of into either ecological doom or inefficient and similarly ecologically doomed totalitarianism or at worst suicidal self-destruction or a war of all against all for the last resources of the planet.  This economic system is not yet complete, but a starting point for economists who do not believe we can survive on this planet indefinitely with our current system and may also be looking to inhabit other worlds that are less hospitable in a way that doesn’t rely on overbearing and inefficient central planning.