How much, whom to, and why
does the civilization overpay for oil?

6. Conclusions

Free market economy is credited for facilitation of the economic and technological progress by encouraging and stimulating corresponding activities in the population. In this paper we have argued that this is only true for the economic sectors dealing with the novel products of technological progress, but not with the conventional life-supporting goods and services without which human life in the modern civilization is impossible. The fundamental differences between these economic realities, Table 2, are not recognized by the modern economic theory. It was shown that, with current market prices of energy exceeding the cost price of energy production by at least forty times (Section 3), the civilization pays for this shortcoming of economic theory by approximately one tenth of the global gross domestic product. The money is ultimately spent to support some part of adult population (termed here "vacant") who do not participate in the production process of the civilization, Fig. 2.

The humanity is currently facing serious problems of regaining and conserving the stability of the human-friendly environment and climate on all scales. The developed countries are widely criticized for their unwillingness to undertake adequate financial efforts to solve these problems (e.g., Stern, 2006). However, such critiques miss the important issue that under the burden of dramatically overpaying for energy, the economies of developed countries already function on the verge of losing their integrity, see Fig. 1. Until the economic and legal status of energy within the world economy is re-analyzed and changed, the hopes for an active and real participation of developed countries in the global environmental efforts will remain ungrounded.

If energy were legally excluded from the list of free market commodities and sold at cost price, and with the transition of the vacant population to the production sector of the world economy, cf. Fig. 2 and Fig. 4, this would grant the humanity a potentially "green" tenth of global GDP, Fig. 4. This share of GDP could be used for solving the environmental problems with no change in the living standards and without threatening the economic development of the civilization. As a first measure to be taken, the green GDP tenth could be used to urgently stop deforestation in the tropical countries. As was recently shown (Makarieva, Gorshkov, 2007), natural forests are responsible for the persistence of the water cycle on land, as they represent a biotic pump which draws atmospheric moisture from ocean to land and compensates the gravitational river runoff. According to the data of Food and Agricultural Organization of the United Nations (FAO, 2007), approximately one half of annual global deforestation occurs in Brazil (3 × 106 ha/year) and Indonesia (1.9 × 106 ha/year), while gross domestic products of these countries make up about 2% of global GDP, i.e. only one fifth of its potentially "green" slice, Fig. 4.

To cite this document:

Makarieva A.M., Gorshkov V.G., Li B.-L. (2010) Comprehending ecological and economic sustainability: Comparative analysis of stability principles in the biosphere and free market economy. Annals of the New York Academy of Sciences, 1195, E1-E18. Abstract. pdf doi:10.1111/j.1749-6632.2009.05400.x, first published as PNPI Preprint No. 2763.