visser_logo_small.gif (1783 bytes)Job Creating Policies and the Environment:
Non-market values in labor economies

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Section headings:

dot.gif (101 bytes) 1. Labour economics and the environment dot.gif (101 bytes) 4. The ethical dimension of work in a sustainable development
dot.gif (101 bytes) 2. Value changes in the labour market dot.gif (101 bytes) 5. Conclusion
dot.gif (101 bytes) 3. Value changes in the goods and services market 6. References


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3. Value changes in the goods and services market

The change in values on the labour market can also be observed on the market for goods and services However, the value debate has not found an adequate expression in the actual functioning of the economy. A coalition of economic and technologically oriented special interest groups still dominates the market. The initial ecological movement expressing concern about the intrinsic value of nature has expressed a critical view of the traditional institutional setting of the economy. So far it has reached the opposite, namely a reinforcement of established coalitions which seek to protect the environment in the economic and technological logic (Lascoumes, 1994). This postponement of the value debate may have originated in the fall of the Berlin wall in 1989, symbolizing the victory of the market over any attempt to regulate the economy through a centrally planned system. This moral victory at the end of the cold war period showed that the market is the dominating economic system which allocates resources in the most efficient way. Therefore the market has gained definitively its place, but should also be put in its place.

Consequently, the market cannot be seen as the only possible policy response to the environment. Moreover, as we have also experienced a world-wide recession after 1989, with unemployment rising sharply, public awareness of environment protection suddenly ranked behind economic growth targets. This blinkered view does not understand the market as a social construction bound to institutions and social values. If the environment is seen as external to the economic sphere, it is only understood as a market failure. This interpretation raises important normative problems. In the following, we recall the principal ones:

  1. Growth targets best served by competitive markets have to be subordinated to sustainable development, which goes far beyond the economic dimension as it also includes social perceptions of equity, which is also a characteristic aspect of the labour market. The discussion introduced by A. Sen between ends and means (Sen, 1992) clearly designates economic goods and services as a mean in order to come close to the objective of self-realisation on the labour market. This objective not only changes the place of work within the society but also the relation between the economy and the State, which sets up regulations for pollution, for safety requirements and the whole institutional setting of the economy. The number and the degree of regulations are clearly dictated by values defined outside of the market place.

  2. In order to correct market failures, the State can implement an incentive policy in accordance with the market. Incentives instead of command and control instruments are the policy recommendations proceeding from a theoretical debate going back to Pigou (1918). However, since the applied instruments so far were designed for repair rather than prevention, environmental protection has not taken place according to the theoretical policy recommendations. Intervention from outside of the market is therefore value-laden. The call for environmental protection through State intervention can only be understood on normative grounds.

  3. Another normative dimension of the market approach to the environment is related to the "polluter-pays" principle. Value judgments intervene when it comes to settle a dispute and how to identify the polluter. In some cases the polluter cannot be found - scientific evidence between the event and its causes is not always at hand - in other cases the polluter depends on the reciprocal nature of the exploitation of an environmental good. The latter case can be illustrated by the AGREV research project (Agriculture, Environment, Vittel; Le Moigne, Orillard, 1994). The starting point of this research is the problem raised by increasing levels of nitrate in mineral water Where does the nitrate come from? Are the farmers around the water source the polluters? What about the fact that the farmers may have been there before the mineral water company, and that other nitrate sources may exist? Who has the right to use the environment? These questions cannot be answered on purely scientific grounds. Collective preferences must be revealed, and the priority between, say, farmers and the mineral water company, must be settled on a normative basis either through a political decision-making process or by a legal ruling. The judge has to evaluate the different spill over effects. In settling the case in favor of one or the other party, he affects the relative price between farm products and mineral water and hence influences long term substitution effects both on the supply and on the consumption side of the markets concerned.  One possibility to find an outcome to such conflicts is to attribute property rights to the environment. Reference to this line of reasoning can be found in the English enclosure Act (e.g. Polanyi, 1944) which legally transformed land, in 1801, from a free into an economic good.

  4. The change of non-market values also rises the question of how we can determine values outside of the market. Should the environment have value only because of its economic use, or does it have an intrinsic value? Should then the non-use of the environment in an economic process be rewarded - and at which price? The same question can be asked in labour economics: Should labour only be a factor of production or should it also be rewarded without being productive?

  5. Finally, ethical aspects are found in the distributional effects between individuals and generations Environmental protection raises new costs which cannot be distributed according to neutral criteria. The current state of the theory of welfare (Feldman, 1983) teaches us that value judgments are needed in order to know which individuals should bear these new costs.

4. The ethical dimension of work in a sustainable development

The market economy clearly expresses ethics (Novak, 1982). However, its interpretation sharply depends on conflicting strategies. From an economic point of view, efficiency is best served by markets. The optimal allocation of resources is reached under perfect competition in the long run.

From an individual point of view, the aim is different. In order to maximize profits, the conditions of imperfect competition are often retained as long as possible. In exceptional cases, which can be depicted only in theoretical terms, profit maximizing is a short-term strategy and conditions of imperfect competition are the rule. Therefore, the market contains an unsolved conflict between short and long-term objectives. A firm avoiding competition does not meet the ethical criterion to be at the service of global efficiency. In violating this criterion, it contributes to the waste of resources and moves away from some supreme justice. This justice means that each individual submits their economic activity to a cost-benefit analysis evaluated in non-biased terms, respects their contractual engagements and gets their reward as a counterpart in the form of a profit. Within a market economy, this balance is evaluated by non-distorted prices set in a competitive environment. The large number of participants in market transactions confirms that these prices have an objective basis. Therefore, under such conditions, a firm is constrained to efficiency and hence to serve the general interest. Activities opposed to such a goal are immoral. A merger destroying jobs, price setting beyond the one set under competition, artificial obstacles to entry would be examples of non-ethical behavior. All these examples are taken from observed economic reality which points to cases of market failure. Therefore the market cannot be the only instrument of the collective decision-making process. This argument is reinforced by the fact that ethical considerations lead to other forms of exchange than the ones organized by markets - to wit, the preservation of species.

However, the conflict between short-term profit maximizing and long- term optimal resource allocation can be eased by competition policy both at the domestic and international levels. The maintenance of competition in markets by means of legislation on restrictive trade practices and of free trade policy can be seen as a first step towards an operational environmental protection policy. But this policy response is not enough because it is closely linked to the underlying behavioral assumptions.

The market failure approach is rooted in the philosophical tradition of utilitarianism, which is only one of many currents in our society (Maclntyre, 1966). Why should utilitarianism be the only reference in economics as well as in public action? How to determine what should be sold on the market and what should not? Which criteria should be used to decide whether the environment is a private or a public good? These questions can only be answered by explicitly referring to value judgments. If, for instance, the preservation of biodiversity only makes sense because one may find a commercial use for it in the future, this poses a serious ethical problem indeed.

If ethics is seen as an integrated part of economics, it cannot be isolated. Economics is interlocked with social justice. Although this view is not shared by most mainstream economists, the fact remains, as Samuel C. Weston puts it (Weston, 1994, p. 4) that "Conceptually distinguishing between positive and normative economics does not automatically entail the practical possibility of a purely positive, that is, value-free or ethically neutral economics". However ethics cannot be delegated to philosophers, but has to also be taken seriously by the economic profession itself.

The positive aspect of economics focuses on causal relationships. Using either a purely deductive approach or available information, positive economics seeks to explain such relationships by true/false statements. A true statement does not contain a value judgment and may simply mean that an observation is supposed to be explained by others. As economically relevant information is often of a qualitative nature and historically unique, the falsification of a theory is not possible. Therefore deductive methods are preferred in order to show that the maximum of social welfare is the sum total of individuals behaving rationally.

The normative aspect casts light on value judgments. Economics is shown as it should be. Its objectives are given outside of economics e g. by a political decision-making process. Positive economics concentrate then on the instruments, showing how these objectives can best be achieved, and leaves it to normative economics to discuss the target setting. If each individual is perfectly free to have their own convictions, objectives issued by a democratically legitimate majority are only just, and lead to ethical norms codified in laws and institutional arrangements. In this sense, the market is a social construction, because it depends on a legal setting. The State plays an active part in translating value judgments and social norms into guidelines. Legal and economic regulation go hand in hand. Therefore, it is not possible to rely on market instruments only in order to create jobs and to protect the environment. Changing values about the social perception of labour and the environment must also be taken into account in the evolution towards a new institutional setting.

Institutional reform of the labour market, leaving room for the expression of ethics as well as strict subordination of the goods and services market to the protection for the environment, implies a unique criterion. Like in medicine where any action should be taken in the interest of the patient, such a criterion in economics would submit any actions to the preservation of life. If such an ethical criterion is accepted by the society, labour will not be considered as a simple factor of production any longer, but as a way of a meaningful life.

5. Conclusion

Non-economic values play an increasing part both on the labour and the goods and services markets. On the labour market, the question is how can social and psychological needs be covered best. On the goods and services market, the question is how can the environment be protected best Both questions can only find an answer when the ethical dimension of any economic activity is fully acknowledged. The actual policy response to these questions is highly unsatisfactory. On pursuing higher growth targets, unemployment will not strongly decrease, as long as the actual institutions remain unchanged in expressing the dominant belief in values which are only determined in economic terms. Institutional reforms both on the labour and goods and services markets are needed. Job sharing, flexible reduction of work hours, more democratically legitimated labour agreements and active labour participation schemes are aspects of such a reform of the labour market. Full cost pricing, the subordination of economic strategies to principles of responsibility to further generations as well as the acceptance of a fully integrated ethical dimension are other aspects of such a reform regarding the goods and services market.

B. Bürgenmeier, Geneva 2 May 1995


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