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September 28, 2005

Commons-side Economics

Orthodox economics is myopic when it comes to seeing the commons. Supply-side delusion needs to be replaced by commons-side economics.

Economics is a construct of the human mind. It’s a useful way of looking at the world, but shouldn’t be confused with reality. The map — especially the main­stream map — is much smaller than the territory.

Common wealth, as we’ve seen, is immensely valuable. Common illth — the shadow side of private wealth — is likewise vast. But while mainstream economists acknowledge the existence of common wealth and illth, they don’t bother to measure them or include them in their models. They assume the commons side of the ledger is trivial, or ignore it because dollar signs are hard to attach. This is tantamount to professional malpractice.

Consider a business analogy here. The first thing any aspiring business per­son learns is double-entry accounting. The day you open shop, or probably long be­fore, you hire an accountant to set up your books. Whatever business you’re in, the same things are on your balance sheet: assets, liabilities and owner’s equity. Ditto for your income statement: income, expenses and profit.

There’s a reason for double-entry accounting: it gives a good picture of reality. If your accountant recorded only sales revenue and not expenses, he’d give a very distorted picture of your situation, and you’d fire him for being half-brained.

Strange as it seems, mainstream economists are like that half-brained accountant. They count America’s sales (a.k.a. GDP), but not our expenses (the negative ex­ternalities of those sales). They keep track of private income and wealth, but not common wealth or illth. As a result, they miss at least half the story.

It’s time for a new breed of economists to keep a fuller set of books and tell a larger economic story. These economists would look at the health of the commons (the balance sheet) and the trade between the commons and the market (the income statements). They’d address such questions as: if the market does this or that, what are the effects on the commons? Who pays for illth — damagers or damagees? How might that be reversed? How can scarce common resources — eco­systems, time, peace of mind — be conserved, and their ‘rents’ captured and recycled? Ultimately, their job would be to make the economic case for the primacy, if not the divinity, of the com­mons

Mainstream economists have little interest in this work. They’ll no doubt complain that commons-side economists can’t be as quantitatively precise as they are. This is true, but so what? Right now, mainstream economists value the commons at zero. This is quantitatively precise, but quite wrong. Any imprecise numbers derived by commons-side economists would be a big step forward.

Commons-side economics can also serve as an antidote to supply-side economics, which has dominated public policy since the 1980s. The premise of supply-side economics is that, by reducing taxes on the suppliers of capital, production will be stimulated, GDP will rise and income will trickle down to non-owners of capital. Some supply-siders also argue that the growth stimulated by supply-side tax cuts will add to, rather than detract from, government revenue. George Bush the elder once called this “voodoo economics.” A more up-to-date appellation would be “faith-based economics.” Nevertheless, the doctrine prevails.

Supply-siders’ basic assumption is: what’s good for the owners of capital is good for everyone. They presume private capital is scarce and/or indolent and must therefore be lured into action with ever-greater privileges and rewards. They further assume that most, if not all, wealth comes from profit-maximizing, and therefore any spending by government, or any money paid to commoners for anything other than their labor, is not only money misspent, but a drag on the bounty-giving of profit-seekers.

Commons-side economists, by contrast, would see the commons not just as a needed boundary on the market, but as a supply-side of a different sort. Their premise would be: what’s good for everyone, including future generations, is good for the owners of capital. They’d understand the wealth that lies in the commons and describe the many ways that investing in the commons enriches more humans more efficiently than does relying on corporations.

Why is this new branch of economics important? John Maynard Keynes put it best: “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else.”