It is hardly an exaggeration to say that economics has moved to the centre of public concern, and that economic performance, economic growth, expansion etc, have replaced religion and is the obsession of all modern societies. In our media and government, there are few words as final and conclusive as the word “uneconomic” and if an activity is branded as such its very right to exist is questioned. Anything that is found to be an impediment to economic growth is shameful and if people cling to it they are seen as saboteurs and fools. Call something unethical, a threat to world peace or dangerous but as long as it hasn’t been shown to be “uneconomic” you have not addressed its right to exist, grow and prosper.
But what does the study of economics really mean when it says something is uneconomic? The answer is
simple enough; something is uneconomic when it fails to earn an adequate profit in terms of money. Society or a group within a society may decide to hang on to an activity or asset for non-economic reasons (e.g. social, moral, political) but this does not alter its uneconomic character. Therefore, the judgement of economics is extremely fragmented in that out of a large number of aspects in which to make a decision about something, economics applies only one i.e. whether a thing yields a profit to those that undertake it. Make no mistake; economics does not consider whether an activity yields a profit to society as a whole but only to those that undertake it. Even government owned institutions are given a financial target and they are expected to pursue this target without regard to any damage it might be inflicting on other parts of the economy. The narrow thinking of economic judgement gives vastly more weight to short rather than long term and excludes “negative externalities” (except where privately
owned). This means that an activity can be deemed economic although it plays havoc with the environment and that any competing activity that protects the environment (at a cost) will be uneconomic.
Furthermore, because economics deals with goods and services from the point of view of the “market” (where buyer meets willing seller), the buyer is essentially a bargain hunter. The bargain hunter is not concerned with the origin of the goods or the conditions under which they have been produced; his sole concern is to obtain the best value for his money. In a sense, the market is the institutionalisation of non-responsibility; neither the buyer nor the seller is responsible for anything but themselves.
Consider all this in the light of renewable energy. Most of our electricity comes from coal fired power stations. Open cut coal mining destroys vast tracks of priceless, non-replaceable habitat but this destruction is free for the miners, there are no negative externalities considered that would push
up the cost of this coal. Therefore it remains cheap compared to renewable energy methods such as wind or solar which both have virtually zero negative externalities but higher initial costs. On top of this are the generous government subsidies for the coal industry (especially related to transporting product to market).
Economics deals with a virtual limitless array of goods and services being supplied to an equally limitless array of people. It would be impossible to develop any economic theory in these circumstances unless one was prepared to disregard a vast array of qualitative distinctions and this is what makes economics folly.read Small is Beautiful by Schumacher