Abstract

This article strives to reconstruct, and deconstruct, the economic theories that have brought us to the brink of an uninhabitable earth: Adam Smith’s vision of a mercantile economy--sustained by unlimited natural resources--in which individual market participants contribute (unknowingly and unintentionally) to a “virtuous circle” of socially beneficent exchanges (i); the centuries-long veneration of and reliance on free, unsupervised, and unregulated markets (epitomized by Hayek’s work) for the optimal allocation of resources (ii); the related notion of deferring to “efficient markets” as the ultimate arbiter of economic value, given the well known difficulties of outperforming market returns (iii); and the economic theory of regulation, which sees regulators as effectively “captured” by regulated industries--and the political process as incapable of rationalizing any better regime (iv). A fifth and final part surveys the landscape of possible “solutions” to the problems of climate change (v). To the extent that economic analysis might mitigate some of the damage it itself has wrought, prudential considerations counsel recourse to the “second-best” approaches of behavioral economics and social psychology. In an age when rational arguments carry little weight, recourse to various forms of essentially non- rational influence may be the only alternative.

Keywords

Capitalism, capitalist economic theory, free markets, Adam Smith, climate change