About Us | C4CS

Purpose

To explore and explain the advantages over central planning of decentralised knowledge coordinated through the price mechanism, in determining the most sustainable course of development.

Objects and Activities

The Centre for Competitive Sustainability will aim to increase knowledge and awareness of its subject matter through:

Research

Publication

Education,

Gatherings, and

Engagement with media outlets.

Philosophy

Sustainable development and classical-liberal economics are viewed as conflicting by many exponents of both fields of study. We argue that they are two sides of the same coin:

Capital accounting aims to ensure that resources are not depleted. An economy that does not provide for the ongoing provision of the goods and services that people require is unsustainable, whether that is because the necessary resources have been depleted or because a decline in wealth has reduced the means to supply people's requirements. The former is a subset of the latter.

Resource depletion often stems from a "Tragedy of the Commons". The endowment and enforcement of property rights has been shown (e.g. by Elinor Ostrom) to be an effective solution to this problem.

Unsustainable behaviour is often a problem of "externalities" (i.e. costs or benefits that affect parties who did not choose to incur those costs or benefits). Pigovian or Coasean solutions to "internalise" the externalities may be more effective ways than attempted prohibition to correct the unsustainable behaviour.

There are often many alternative options that could be pursued to a greater or lesser extent to address sustainability issues (e.g. climate change). Governments confront Hayekian knowledge problems in "picking winners". The options that offer the greatest welfare at the time can more effectively be discovered in markets within a suitable, technology-neutral institutional framework, than through prescription by an "expert"-led central authority.

Unsustainable behaviour is often seen as a result of market failure. It is assumed that governments should correct the market failures. Too little attention is paid to the likelihood and cost of government failure, and the "public choice" incentives determining the actions of participants in a political market. Intervention may not be the only cure, and the interventionist cure may be worse than the disease.

Bounded rationality afflicts policy-makers and environmentalists as much as Joe Public. We can work within people's bounds through a mechanism that harnesses people's specialities and condenses complex knowledge into comprehensible price signals, more effectively than by hoping that government is run by people whose rationality is not bounded, and who can therefore obtain and process huge amounts of timely and accurate information to continually make the right choices on behalf of everyone.

Market failures are often a function of poor institutional design, often where a simple property-rights framework for voluntary exchange has been skewed in order to promote political objectives. This usually results in unintended consequences and perverse outcomes. A robust political economy approach will work better than attempting to fine-tune the interventions.

The consumer society, and particularly conspicuous consumption, is often seen as unsustainable. Sound monetary policy should produce interest rates that balance the incentives to save or spend. Loose monetary policies (often favoured by dirigiste environmentalists as a way of funding their preferred solutions) skew incentives to discourage saving and encourage spending, thus stimulating exactly the behaviour of which they disapprove.

Loose monetary policy also "encourages business firms to overestimate the present and future availability of investible resources and to malinvest in lengthening the structure of production" (Salerno, A Reformulation of Austrian Business Cycle Theory in Light of the Financial Crisis). The malinvestment is wiped out when the bubble bursts. This is stimulation of the unsustainable exploitation of resources, as well as a practice that is destructive to wealth, employment and the social fabric.

Innovation is the key to wealth-creation and to the increasingly-sustainable provision of people's needs and wants. Innovation is delivered best by a stable market framework that encourages competing attempts at improvement. The innovative efforts can be encouraged to deliver improvements to sustainability through the internalisation of externalities. Governments picking winners pre-judge the outcomes of this market-discovery process and reduce the incentives for private innovation.