When even great economists miss on sustainable business

Having been asked to teach an economics of sustainability course, I’d been catching up on any progress of the economics field. In particular, I was curious about whether it had caught wind yet of the emergence and deep significance of sustainable business.

Several years ago, I realized that environmental economics, which is conventional economics applied to analyzing environmental problems, had a useful, underappreciated but ultimately narrow lens. It missed a lot. Its younger, more radical cousin, ecological economics, was better at seeing aspects of sustainability, such as that externalities — the costs unaddressed by markets and imposed on third parties — are actually prevalent in the economy and worth more consideration than a section on pages 6 to 8 of a textbook (that too many forget about when they reach careerhood). But it, too, was narrow; particularly too much attacking of “environmentally illiterate neoclassical economists” and a similar lack of any space for even the idea of sustainable business.

Why should a sustainable business audience care about any of this?

I assume you are not much interested in my catch-up on the field’s progress (readers, please tell me if I am wrong). However, there are reasons you may want to know about the field’s general views on sustainability. Those with some economics courses or MBAs might remember claims about economics as helpful in “understanding how the world (or markets or economy) works"; as being “at the root of,” or “helping make better” “business decisions.”

In addition, while looking for any introductory or intermediate-level mentions of sustainable business, I was startled to read an article on an issue flitting at the cutting edge of sustainable business, and by one of the giants of the economics field. However, the views were completely opposite to my emerging ones!

The giant was Paul Krugman, a Nobel laureate and New York Times columnist, who has in other articles strongly called for addressing global warming. An environmental illiterate he is not.

The article was Krugman’s critique of Howard Schultz, the Starbucks CEO, in “Brewing up confusion.” The direct issue Krugman criticizes Schultz for is the latter’s actions concerning the paralysis of the political system on the debt issue. But the implicit bigger picture issue here is a business taking a pro-sustainability stand on a public policy topic — which is pretty radical. (Going further, it is even more so when that stand is not clearly in the company’s economic interest. But that, including the possible motivations for it, is a topic for another day.) As Schultz is therefore out on at least two limbs, I’m offering support to the entire branch.

Next page: “Not nearly as nonpartisan as it pretends to be”