Successive land conversions from unsustainable managed forests, to agricultural lands, to industrial lands, to land occupied by financial and speculative institutions result, as we have established from prior articles in this series, from the quest for immediate profit with minimal risk (e.g. agriculture, because of its quicker returns, is less risky than sustainable logging [hence, unsustainable logging, if logging is engaged in at all]; in turn, industry, because of its still quicker returns, is less risky than agriculture). Short-term gain for the individual therefore results in long-term loss for society. Obviously, then, the quest for immediate, individual gain must somehow be curtailed if collective long-term cost to society is to be prevented. How is this to be done?
Mainstream economists counsel that the gain enjoyed by the individual be taxed according to the cost he or she inflicts upon society. However, as we have already established in the article immediately prior to this one, there are insuperable difficulties imposed by the field of computational mathematics and computational physics called nonlinear dynamics on the realization of the proposal by the economists. Fortunately, there is an alternative: Since the goal is to prevent or to render reversible a collectively incurred problem (in this case, environmental degradation from land conversions by profit-seeking individuals), why not begin with the desired collective condition within which individual action is to transpire.
Such a prescription is precisely what nonlinear dynamics would render: for it is precisely the lesson of nonlinear dynamics that the whole is greater than the sum of the parts (Barrow 1991: 125) because long term prediction of system behavior cannot be built up from repeated short-term predictions (Stewart 1995: 122); nor can global prediction be compounded from particular, local predictions (Barrow 1991: 194-195). Accordingly, organizing principles must proceed from the whole to the parts if viable collective conditions are to be attained and maintained. Applied to the operation of economies, this implies macroeconomic interventions rather than microeconomic interventions (such as taxing individual profits to discourage pursuit of such profit without regard to collective cost).
One such macroeconomic intervention is the tradable permit to deplete or pollute (which
permits, may be applied at the regional, national, or even international levels),. The
scheme would work as follows (Daly 1996: 52-57): Government first creates a fixed number of permits permitting a level of resource conversion compatible with the environment's capacity to absorb pollution and to regenerate or maintain structures such as trees. They would then be distributed to citizens on the basis of equity, not ability to pay, and only subsequent to such distribution would they be permitted of purchase and sale (hence, tradable) in the marketplace in respect of individual circumstances and market efficiency. It is because ecological sustainability and social equity are established as boundary conditions before the market in the trading of the permits is allowed to operate that tradable permits to deplete or pollute cannot be considered as the market solution to environmental problems (as many mainstream economists mistakenly arrogate).
The quantitative limit on resource conversion represented by the fixed number of
permits to deplete or pollute will, of course, make resources more expensive. This is to be welcomed because it is precisely the undervaluation of resources by not taking account of the consequences of their conversion that has caused the degradation of the environment through profligate resource conversion.
A concern that may be raised in regard to the increased cost of resources brought
about by the resource use permits is the equitability of distribution of that cost. Because the increased cost effected by the permits is effectively a consumption tax, the permits are inevitably regressive in nature and therefore affect the poor more harshly than the rich. This can be remedied by a negative income tax operating as subsidies to low incomes and progressive income taxes on higher incomes. Funding for the negative income tax can and should, eventually, preponderantly derive from taxing the collectively imposed scarcity premium represented by the permits themselves (Daly 1996: 15, 90). This limiting of income differential constitutes another macroeconomic intervention, one designed to check the cumulative nature of market competition.
