1. 2111 2005 Economy drivers, uncertainty and surprises by Arild Vatn Department of International Environment and Development Studies, Norwegian University of Life Sciences At the EEA workshop “Research foresight for Environment and Sustainability – workshop on mega-trends and surprises”, Copenhagen, May 14-15, 2007.

2. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 2 Standard economic drivers DPSIR: driving forces, pressures, states, impacts, responses  Population growth  Tastes/preferences/needs (a given)  Technology (a driver, a problem or a solution)  Economic growth (a driver, a problem or a solution)  The way we organize our economy – the institutional structure –The match between the problems we face and the way we can respond

3. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 3 Ecosystems limitations and economic development Time Carrying capacity Load=PIT

4. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 4 A mega trend I  Economic growth – about 2,5 % per year – the average for the 20th century  Implies a doubling of the economy every 30 years  Why growth –Increase well-being –Eradicate poverty –Make us rich enough to protect the environment –To stabilize the economic system – growth as a lubricant in a situation where e.g., the bottom line is a core allocative instrument

5. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 5 Growth and happiness

6. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 6 A mega trend I  Economic growth – about 2,5 % per year – the average for the 20th century  Implies a doubling of the economy every 30 years  Why growth –Increase well-being –Eradicate poverty –Make us rich enough to protect the environment –To stabilize the economic system – growth as a lubricant in a situation where e.g., the bottom line is a core allocative instrument

7. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 7 A mega trend II  We regulate environmental problems by reacting when problems appear and mainly when relationships are proven  Creates tremendous time lags in a rapidly growing economy. Strong interests develop that are linked to status quo – climate change as the exemplar case  Our system does not have the capacity to develop and treat early warnings. It lacks the necessary sensitivity and flexibility  Lacking strong incentives to produce the right technologies (e.g., ‘eco-innovation’ to create a less harmful man-nature interactions)

8. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 8 The fundamental driver  A fundamental driver: The mismatch between the ecological system and our institutions – economic and political  In the case of the economic system: A complex, multidimensional natural system meets an economic system based on one-dimensionality + the rule that harm must be proven  This mismatch creates an information problem –We face (at least) three irreducible value dimensions Utility/satisfaction of needs Ethical issues Sustaining natural and social systems resilience –Time lags

9. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 9 Ecosystems limitations and economic development Time Carrying capacity Load=PIT

10. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 10 Institutions and motivation  Motivations are institutions dependent: –Competition vs. cooperation –Whether it is the individual interest or the interest of the group that is focused –Tastes/preferences are also influenced by our institutions Preferences  demand  structure of production Institutions  interests/preferences  demand  structure of production Institutions  structure of production  interests/preferences  demand  We are starting to learn more about this through experiments in economics and social psychology  Here lies a hope!!

11. NORWEGIAN UNIVERSITY OF LIFE SCIENCES www.umb.no Sustainability – the need for institutional change 11 Conclusion  DPSIR: Looks at drivers as exogenous (?)  What drives the drivers?  What if drivers are endogenous and cumulative?  An expanding economy: We are deemed to be surprised. We need institutional capacity/resilience –To reduce the amount of surprises –To be able to treat those that appear –To (gradually) reduce the dependency on growth (rich countries)  Research needs: How to build this capacity