Peter Söderbaum*
School of Business, Society and Engineering, Mälardalen University, Västerås, Sweden
*Corresponding author: Peter Söderbaum, School of Business, Society and Engineering, Mälardalen University, Västerås, Sweden
Submission:June 09, 2021Published: December 03, 2021
ISSN:2770-6648Volume3 Issue1
Over the years a mainstream of ideas about economics, management and accounting has been established. These ideas include specific ways of understanding economics, human beings, organizations, market transactions, accounting and the framing of policy issues. This conceptual framework has been successful to some extent within the scope of its own ideas about development and progress. But ideas about progress may change over time and new challenges call for new thinking. Sustainable development in the sense of the UN 17 Sustainable Development Goals (SDGs) sanctioned since 2015 represents such a challenge. Ecological Economics is here proposed as a response to the new challenge. Ecological Economics can actually be defined as “economics for sustainable development”. Alternative or complementary ideas about economics, individuals, organizations, market transactions, accounting and the framing of policy issues are formulated in the hope of contributing constructively to a sustainable society.
Mainstream management and accounting
It seems reasonable to argue that there is a mainstream theory and practice of management and accounting. It is largely based on assumptions made in mainstream neoclassical economics. There is a search for optimal solutions in mathematical terms at various levels from the nation via the organization to the individual. At the level of nations, Gross Domestic Product is estimated and monitored. Cost-Benefit Analysis (CBA) is used to find out the best alternative when deciding about infrastructure investments in roads, airports etc. At the level of the firm, monetary performance is estimated and recorded in accounting practices. At the level of individuals, optimal solutions are understood in terms of maximum income or some average GDP per capita. At all the mentioned levels, the monetary dimension is emphasized. There is often a one-dimensional trading philosophy in the sense that positive and negative non-monetary impacts are given a price in monetary terms to be traded against other impacts. Looking for optimal solutions reflects a closed ethical and ideological standpoint (Table 1). Some problems can be formulated and “solved” in terms of mainstream perspectives and approaches. Even relatively new challenges, such as sustainable development can hopefully be handled to some extent. But we should also open the door for alternative or complementary perspectives and approaches. Mainstream ideas of economics, management and accounting have not been successful, so far, in dealing with climate change, loss of biological diversity, pollution of land and water or health issues, such as the present COVID-19 disease. This suggests that we need to consider alternative approaches.
Ecological economics
In Table 1, right hand side, a kind of ecological or sustainability economics is proposed as alternative to the mainstream. It is based on a definition of economics that departs from the mainstream idea of “optimal allocation of scarce resources”. Instead it is suggested that “economics is multidimensional management of limited resources in a democratic society” Söderbaum [1] Rather than referring to neoclassical Homo Economicus assumptions the individual is regarded as a Political Economic Person (PEP) and potentially responsible human being and actor guided by her “ideological orientation”. An organization is similarly understood as a Political Economic Organization (PEO) and potentially responsible actor guided by its ideological orientation or “mission”. Making assumptions or testing hypothesis about the ideological orientation of all individuals or all organizations is not considered as very meaningful. The ideological orientation of individuals (organizations) is instead something to be investigated in each case. It may vary between situations for each individual (organization) and between individuals (organizations). How do they for example differ in relation to sustainability issues?
Table 1: Basic economics paradigm with related management and accounting approaches.
The idea of trading non-monetary impacts against monetary
ones with monetary aggregation of all impacts using a discount
rate as in Cost-Benefit analysis (CBA) is abandoned. Non-monetary
impacts are presented in their own terms and one-dimensional
aggregation avoided. Instead there is a focus on inertia in its
different forms (commitment, path dependence, irreversibility
etc.). Non-monetary impacts are often specific in terms of inertia.
Constructing a road on agricultural land will cost something in
financial terms but also represents a move in positional terms
from agricultural land to asphalt surface which is irreversible for
practical purposes. Positional thinking in non-monetary terms is
recommended as in the case of a game of chess. Each move means
that some future options are facilitated and others downplayed or
excluded [2].
Decision-making is regarded as a matter of “matching” the
ideological orientation of an actor with the expected impact profile
of each alternative considered. The main idea of analysis is to
illuminate an issue in a many-sided way by reference to relevant
ideological orientations, alternatives of choice, expected impacts.
Ideally, decision-makers (and other actors) should know what
they are doing in the sense of being well-informed about relevant
ideological orientations, alternatives and impacts. “Democracy”
in the definition of economics stands for the idea that we should
respect different voices or ideological orientations in a democratic
society. This is an ethical/ideologically open position as indicated
in Table 1, right-hand side. Instead of one single optimal solution
(as in the mainstream approach), the idea is to articulate different
ideological orientations that appear relevant among actors and
interested parties and present a ranking of alternatives based on
each ideological orientation articulated and considered. In case of 3
ideological orientations considered and 3 alternatives, there can be
a maximum of 3 different rankings. While the objective function in
the mainstream approach is used in estimating an optimal solution,
the concept of ideological orientation plays a key role in the
ecological economics approach. The idea is to openly demonstrate
the existence of more than one ideological orientation and even
point to conflict or tensions between ideological orientations.
In this way newer concerns and ideological orientations, such as
sustainable development in some sense, will get a chance of being
seriously considered.
Ideology (ideological orientation) is a contested concept
[3]. In the present essay it stands for means-ends relationships.
It is not only about objectives but also means of approaching
such objectives. A politician may refer to her/his ideology when
advocating a specific approach or solution or when turning to us as
citizens in the hope of being understood or elected. As citizens we
react in one way or other, suggesting that we too react according to
something that can be referred to as ideological orientation. Among
economists, Gunnar Myrdal pointed to the fact that “values are
always with us” in economics research and education (1978) and
that there is no value-free or neutral economics. I prefer to refer
to ideological orientation rather than values. In this preference I
am not alone. Joan Robinson at an early stage (1962) pointed to
relationships between mainstream economics and the “ruling
ideology in public affairs. In his study of institutional change another
economist, Douglass North, has defined “ideology” as follows: “By
ideology I mean the subjective perceptions (models, theories)
all people possess to explain the world around them. Whether at
the microlevel of individual relationships or at the macrolevel of
organized ideologies providing integrated explanations of the past
and the present, such as communism or religions, the theories
individuals construct are colored by normative views of how the
world should be organized.” North [4] And Thomas Piketty even
uses “ideology” in the title of his recent book “Capital and Ideology”
[5].
Markets can certainly be understood in neoclassical terms
as relationships between actors who maximize self-interest in
monetary terms. But the sustainability perspective advocated here
means that market actor A, considering her specific ideological
orientation may be concerned about the impacts upon the trading
partner B and impacts upon other actors and society at large. This
is where concepts such as ethics and ideological orientation enter
the scene. Actually, sustainable development specified in some
way can be regarded as an ideological orientation to be compared
with other ideological orientation, such mainstream ideas about
economic growth and monetary profits in business.
Ecological economics of the kind advocated here furthermore
involves an emphasis on non-monetary accounting practices at all
levels from the nation through the organization to the individual [2].
Again, ethics and ideology become important as indicated by the
concept of Corporate Social Responsibility, CSR. Also, the Limited
Liability Doctrines have to be examined. New laws defining new kinds
of organizations should probably be considered. The mainstream
approach to policy issues focuses largely on measures that can be
considered at the state level in relation to firms and consumers. But
policymaking may also start at the level of individuals and social
movements as political actors. In the case of policies to counteract
the spreading of the COVID-19 disease, each political actor can
contribute. Measures by governments are certainly important but
individuals and organizations with their ideological orientation
and missions can also contribute. Mechanistic ideas of consumers
and firms to be affected exclusively through shut-down policies
have a role but are probably not enough. Reference to ethics and
responsibility of political-economic persons as actors in different
roles adds to the picture.
In the ecological economics perspective, there is an emphasis on various non-monetary impacts. Does this mean that monetary concerns disappear in analysis? Monetary and financial concerns can certainly be important and essential as part of analysis depending on the ideological orientation of decision-makers and other actors in power positions. But as part of an ecological economics perspective, monetary or financial calculation should perhaps be best understood as partial analysis. As part of neoclassical Cost-Benefit Analysis, the analyst is an expert in an extreme sense dictating not only the method to be applied but also a market ideology with specific ideas of correct prices to be used. This is a technocracy-oriented approach as opposed to the democracy-oriented ambition in positional analysis and the present study [6-9]. It can be expected that many professional economists and accountants only reluctantly will abandon their established roles as experts. But climate change and other similar threats also need to be taken seriously.
© 2021 Peter Söderbaum. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and build upon your work non-commercially.