Dead people have some of the best ideas. Unfortunately, since they aren’t around to tweet, blog, or pop-up on CNN, we sometimes lose track of great thinkers even when their ideas have staying power. And so it is with E.F. Schumacher, author of Small Is Beautiful: Economics as if People Mattered, a classic first published in 1973. Schumacher, who died in 1977, would be 103 today. #SmallIsBeautiful turns up nothing on Twitter.
On the surface, Small Is Beautiful shows its age. At one point Schumacher proclaims, “Women, on the whole, do not need an ‘outside’ job, and the large-scale employment of women in offices or factories would be considered a sign of serious economic failure.” And while Schumacher stresses that we must think of fossil fuels as “capital” that can be exhausted, not infinite resources, he is less concerned about their environmental dangers even as he warns of the threat from the “satanic mills” of nuclear power. Climate change, clearly, was not on his mind.
But dig deeper and you find myriad concepts fundamental to economic and environmental activism today. There is a reason that Bill McKibben, writing an introduction to Small Is Beautiful in 2010, noted “This book could not be more relevant. It was written in 1973, but it was written for our time.” Indeed, the core ideas found in Small Is Beautiful transcend the era in which Schumacher wrote and the specific policies for which he advocated. Here are three of them.
1. Traditional economics fails to measure the true costs of production.
Schumacher recognized the relationship between our economy and the health of our planet. He saw the shortcomings of economic calculations: “they are based on a definition of cost which excludes all ‘free goods,’ that is to say, the entire God-given environment, except for those parts of it that have been privately appropriated. This means that an activity can be economic although it plays hell with the environment, and that a competing activity, if at some cost it protects and conserves the environment, will be uneconomic.”
The need to recognize the true cost of environmental damage, in short, is why it is critical that we “put a price on carbon” through a carbon tax or, better, with cap-and-dividend.
2. Underlying values matter. “More” isn’t the answer.
Schumacher observed that the traditional economist “is used to measuring the ‘standard of living’ by the amount of annual consumption, assuming all the time that a man who consumes more is ‘better off.’” Schumacher offered an alternative: Buddhist economics. Here the aim is “to obtain the maximum of well-being with the minimum of consumption.”
Work, in the Buddhist view that Schumacher prescribed, has three functions: allowing us to develop as individuals, relating to others in a common task, and providing the goods and services we need for a meaningful life. Stepping back to look at the big picture with these goals in mind, Schumacher questioned the effect of modernization and development. Technological development, in Schumacher’s view, needs direction, “a direction that shall lead it back to the real needs of man, and that also means: to the actual size of man. Man is small, and, therefore, small is beautiful.”
And Schumacher went beyond traditional economics asking “Is land merely a means of production or is it something more, something more that is an end in itself? And when I say ‘land,’ I include the creatures upon it.”
3. New technologies are not always better technologies.
Synthesizing the first two points, Schumacher recognized that newer technologies are not always better. He did not advocate a static society but rather noted, “It is a question of finding the right path of development….” Given the importance he saw in work he noted, focusing on less economically developed societies, “the primary consideration cannot be to maximize output per man; it must be to maximize work opportunities for the unemployed and under-employed.” Context matters, in Schumacher’s view; considering production of basic goods (food, clothing, and shelter) in India, he warned that “the greatest danger is that people should automatically assume that only the 1963 model is relevant and not the 1903 model; because the 1963 way of doing things is inaccessible to the poor and it presupposes great wealth.”
What do Schumacher’s seemingly radical ideas—focused more on economic development than on the environment—have to do with Pure Cap-and-Dividend, a market-based policy that might make Adam Smith or even Milton Friedman proud? Well, consider, for a moment, the potential effects of putting an enforceable cap on carbon emissions instead of continuing to subsidize all forms of cheap energy as we currently do with both fossil fuels (indirectly by ignoring pollution impacts) and renewable energy (directly, with grants, tax breaks, and other subsidies).
Sure, many new “clean tech” products would benefit from a carbon cap. It would give us an added push toward technological changes such as electric vehicles and renewable energy. But a carbon cap would also provide an economic incentive for many existing low carbon solutions, some of which are downright old fashioned. Carpooling, biking, harnessing passive solar, using a push mower—these could all be thought of as “intermediate technologies” that would gain an advantage under Pure Cap-and-Dividend. Exactly how things would play out is impossible to predict but, in general, energy-intensive activities would be relatively more expensive while labor-intensive activities (both physical and mental) would be more affordable. Would we be more thoughtful about our cities, towns, and buildings as the cost of designing them well dropped relative to the cost of constructing them? At some point, might the leaf blower lose its “economic” advantage over the rake?
Today, the errors of economics tip the balance in favor of materialism over humanism. By correcting one major flaw in our economic system (the failure to recognize the costs of excessive greenhouse gas emissions), the adoption of Pure Cap-and-Trade would be a push back in the other direction, a move toward maximizing well-being while minimizing consumption. A move toward “economics as if people mattered.”