Meadows vs The Sustainable Economy: A Comparison of Environmental Proportions

1) In Meadows Chapter 3 hierarchy is explained as a necessary part of systems that have any hope of functioning well. The best systems out there are made up of many sets of subsystems that care for themselves while also serving the higher system. In Chouinard’s, The Sustainable Economy we are introduced to the idea of Value Chain Indexes and their absolute importance. Hierarchy can be seen in this section when we realize that a company alone can only achieve so much; therefore brands in a specific industry must work together and form friendly and motivating subsystems within the sustainable economy. These subsystems (clothing, electronics, furniture, fast food, etc) help reduce the amount of information the system has to keep track of. In addition, each of these subsystems can be broken down further into brand level, the factory level, and the individual product level. In this example each industry that is using a VCI is not only serving themselves and creating profit, because they are in fact businesses, but also serving the needs of the sustainable economy as a whole.               

2) Sustainable Economy begins with an example of bounded rationality seen in Meadows Chapter 4. Chouinard describes that often the products that are the worst for the environment are the cheapest and/or most accessible; therefore people are more likely to act using bounded rationality and buy those instead of more expensive environmentally friendly ones. This is a problem that I as an environmental graduate student encounter way more often than I would like to admit. For example, if my room needs a little freshening up I'll head to the store to grab a candle. From there I find myself staring at two different candles, one made not in the most environmentally friendly way for $5, and another made so environmentally friendly I did not even know it was possible for $22. My heart says environmentally friendly, but my starving wallet says $5 is plenty. On the other hand Chouinard describes that no standardization, correct pricing, VCI, and too many environmentally friendly labels on products have become misleading. For example, labels such as “natural”, “organic”, and “dermatologist tested” can beat around some environmental regulations. In this case, consumers are using another form of bounded rationality called the invisible foot, wherein people make rational decisions based on the information they have, but that information is not perfect.    

3) As is outlined in Chouinard’s 5 possible outcomes, momentum will build in the sustainable economy as norms begin to shift. For example, as companies begin to use a VCI, more investors will invest in those companies, creating more funds for innovation, driving more profit, and eventually pushing new regulation. This creates a system wherein environmentally friendly companies receive means to compete even more efficiently. An example of this can be seen in the Production Tax Credit given to wind farms that meet specific qualifications. Some in the natural gas world have expressed concern that this gives wind an unfair advantage in the industry by being able to offer cheaper prices. This is most definitely a problem that will need to be addressed in the consumer product world as well. Environmental companies may call new regulations or need for market-wide VCI use leveling the playing field, whereas companies who choose not to partake may see it as unfair market intervention.

Comments

[Sam Krasnobrod]

Referring to section 3 of your post – I hadn't thought about the investor aspect, only the public who sees the benefit in purchasing a product deemed more sustainable after VCI analysis. I suppose this can be viewed in two ways: the first would be that companies already succeeding will continue to fair better, and will receive more investor support; the second will be viewing the VCI as a coercive tactic to force companies to strive for achieving a higher/better rating. With regard to the latter, when companies strive for becoming the best, it can result in a series of market driven policies. VCI's may induce a level of momentum that could lead to wide-spread use of a best-practices model, which would (theoretically) continually get better as investors fund the most successful ventures.