Externalities are the bane of socially responsible investors. We remain most concerned with things that traditional economics tells us don’t matter because they don’t have a price. Or perhaps, they don’t have a price because they don’t matter. Like water. Either way, steady state economics, which maintains that the price for unlimited growth is one that we cannot afford to pay, presents a framework in which social responsibility thrives.
“Growth advocates, steady staters maintain, are operating under a number of wrongheaded assumptions, the first of which holds that the earth’s ecosphere functions only to serve the human economy. The economy, steady staters argue, is an open system inside the earth’s closed system. It cannot expand indefinitely without using up the earth’s finite resources.
Those who fail to factor 'natural capital' risks and costs into their valuation models are likely to join the endangered species of the capital markets in a steady-state world. On the flip side, those in the investment and financial community who buy into the inevitability of the steady state say it is opening up a whole new approach to value. “
Click here to read Rock Steady by Susan Arterian Chang in the current issue of Investment Professional, complete with a quote from your favourite blogger (No, not Julie Powell!). It’s an excellent overview of steady state economics, oriented towards investment policy and practice.
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