All posts by Carmen Lawrence

Caps Review Part 6: ETS design flaws and pitfalls

This is the sixth part in a series about the Caps and Targets Review being conducted by the Australian Government’s independent Climate Change Authority (CCA) this year. Part 1 summarized the global climate crisis, Part 2 explained the importance of the review and how CCA should approach it, Part 3 outlined the role Australia should play in climate action, Part 4 debunked the economic justifications for inaction, and Part 5 makes my central recommendations on emissions caps. This part makes recommendations on the design of the carbon price mechanism.

The collapse of overseas carbon markets is a clear warning of the pitfalls of emissions trading schemes.[1] Given the Australian government has chosen to proceed with a carbon price that will become an ETS, it is essential that the Australian ETS does not fail like the EU ETS, NZ ETS, or Kyoto offset mechanisms.

Treasury projections show present Australian climate policies will not drive a phaseout of fossil-fuelled electricity generation in Australia, nor even an absolute reduction in domestic emissions, for many decades. Domestic emissions would actually rise until the 2030s then fall back to today’s level by 2050, and fossil fuels would still provide 60% of Australia’s electricity in 2035.[2] These outcomes are completely unacceptable.

International emissions trading

Australia’s present plans and agreements for international linking and offsets raise huge concerns:

  • It is difficult to determine whether international offsets represent real emissions cuts (eg. currently the most common type of Certified Emissions Reduction (CER) comes from Asian companies who produce gratuitous pollution so they can be paid to stop[3]). This criticism is based not on an irrational distrust of foreigners, but on a realistic skepticism about the difficulties of carbon accounting in developing countries with no absolute emissions caps, less regulation, and in some cases a less accountable government. (Linking to a scheme with an absolute emissions cap like the EU ETS is comparatively credible but still has the other problems outlined below.)
  • International linking and offsets hinder domestic decarbonization at a time when all countries need to decarbonize as quickly as possible.
  • International linking allows distinct emissions trading schemes to contaminate each other with their flaws (eg. the EU ETS has already achieved its 2020 emissions target eight years ahead of schedule[4], thus no longer provides any incentive to cut emissions, and so far Poland has vetoed all attempts to fix the scheme[5]). Difficulties may also arise from linking schemes with different accounting rules.
  • Australia’s carbon price would be largely determined by policy decisions made in other countries. Australia would likely be flooded by cheap international permits, causing the Australian carbon price to crash like its international counterparts. This is especially a concern considering the present rock-bottom carbon prices in the EU ETS and other international carbon markets. According to CCA modeling cited by the Australian Financial Review, the Australian carbon price could fall to $10/tonne in 2015.[6]
  • International offsets are unfair because they shift the burden of cutting emissions from Australia to other countries which are often poorer and less carbon-intensive. Although it is important for Australia to finance climate action in other countries, it should be supplementary to domestic action, not as an offset for domestic emissions.
  • The Australian public and other countries expect Australia to cut its own emissions.

The 50% “limit” on international offsets is meaningless because it allows companies to pollute up to twice the level of the Australian emissions cap.[7] Even the more recently added 12.5% limit on CERs (a step in the right direction) still allows companies to emit in excess of the cap by a very significant amount. It is unclear whether there will be any limit on importation of European permits.

South Korea and California will allow zero international permits in their emissions trading schemes.[8] Australia should do the same. The Australian government should not proceed with its intention to link to the EU ETS, Kyoto offset mechanisms, or any other international emissions trading scheme or offset mechanism.

Domestic emissions trading

There are also reasons for concern about the effectiveness of domestic emissions trading (particularly the intention to allow unlimited offsets from the domestic Carbon Farming Initiative).

Not all tonnes of CO2e are equivalent. A given amount of CO2e abated today in one way (eg. closing a coal mine) and the same amount of CO2e abated today in another way (eg. preserving a forest), although they may look the same on paper in the short term, may not be equally important in the long term. This is because different types and sources of greenhouse gases result from different economic processes and play different roles in the climate system. Although all emissions are important, it is of particular importance and urgency to phase out fossil fuel CO2 emissions because they are the largest and longest-lived cause of anthropogenic global warming (as opposed to land carbon or other greenhouse gases). If the world fails to phase out fossil fuels in a reasonable timeframe, all other efforts to mitigate climate change will matter little.

Policymakers must understand the basic facts of the carbon cycle. On human timescales carbon easily moves between the atmosphere, ocean, and land. It is only over geological timescales that these “surface reservoirs” exchange carbon with deeper, larger reservoirs. The most important thing humans are doing is mining and burning fossil carbon that has been buried for millions of years, thus emitting carbon at a pace many orders of magnitude greater than the rate of the processes which remove carbon from surface reservoirs. While storing more carbon in the land is a necessary part of climate action, it is far from sufficient and not nearly as urgent as eliminating fossil fuel emissions. Even if forest cover was returned to preindustrial levels, the carbon cycle would still be overwhelmed by fossil fuel emissions. A proportion of the fossil carbon will stay aboveground for millennia, and the land is a climate feedback so cannot store carbon permanently. Finally, from a practical perspective, land carbon is harder to measure.

Short-lived climate pollutants like methane, soot, ozone, and hydrofluorocarbons are more powerful at trapping heat than CO2 but do not linger in the atmosphere for as long. While it is very important to cut emissions of short-lived climate pollutants to prevent rapid near-term warming, this also should not be considered a substitute for phasing out fossil fuel CO2 emissions to limit long-term warming.

Other factors affecting the relative significance of different types of abatement which may not be accounted for by the carbon market (or by cost-benefit analysis) include: whether it locks in or prevents lock-in of fossil fuel infrastructure, whether it changes relative technology prices, whether the emissions reductions are permanent, and whether the emissions reductions will continue beyond the start year; in broad terms, its long-term contribution to systemic decarbonization of the economy.

The Productivity Commission, which is often referred to on whether climate policies are cost-effective, is not a credible source. It has published an inaccurate estimate of the cost of emissions cuts from solar PV[9], which it continues to cite[10] despite it having quietly debunked by the Productivity Commission itself.[11] Neither analysis accounted for technology price reductions.

An ETS is supposed to ensure emissions cuts occur where it is cheapest, but I am concerned the carbon market is unlikely to deem the most important places to cut emissions as the cheapest. If it does not, it will instead prevent the most urgently needed transition, away from fossil fuels (in which case it would merely limit the cost for the fossil fuel industry). This is especially a concern considering the free permits handed out to large polluters, which in at least some cases are making them more profitable.[12] [13] [14]

An alternative approach might be to compartmentalize the ETS by sector and/or greenhouse gas to ensure action on all fronts. Instead of a single catch-all commodity called “carbon” that equates many different things, there could be several commodities (eg. “fossil carbon”, “land carbon”, “chlorofluorocarbon”, etc), each with its own separate emissions caps and market. Companies would be allowed to exchange apples for apples, but not apples for oranges. Greatest priority (strongest cap, highest floor price) would be given to cutting the commodity with the most important role in climate change: fossil carbon. This compartmentalized emissions trading would allow each type of emissions to be reduced at the lowest credible cost.

Miscellaneous issues

Australia has delayed application of the latest science on the relative heat-trapping potential of greenhouse gases until 2017-18.[xv] It should be applied immediately so that present policy is based on the best available information.

Present measurement and accounting of fugitive emissions of methane from unconventional gas extraction is inadequate. Full measurement and accounting of these emissions should be mandated. There is evidence to suggest gas-fired electricity generation may actually be worse than coal-fired generation on a 20-year timescale when fugitive emissions are taken into account.[xvi]

The floor price should be reinstated (preferably at a higher level than the original $15/tonne) to help prevent the carbon price from crashing. The ceiling price should be removed because it limits the penalty for pollution.

Current rules allow liable companies to bank present carbon permits to use in the future, and borrow future permits to use in the present. This is unwise as it creates uncertainty in Australia’s emissions trajectory, and could result in a surplus of permits.

Emissions are counted on a facility-by-facility basis rather than company-by-company. I am concerned companies could avoid paying the carbon price by setting up a large number of small facilities each with small emissions.

It is often argued climate policy requires a choice between market mechanisms and regulatory ones, but that is a false dichotomy. A mix of markets and regulations are needed; indeed the carbon price already has both market-based and regulatory aspects. I am advocating a greater regulatory aspect to ensure the market aspect delivers an effective outcome. It would be unwise to leave too many greenhouse gas decisions to markets, because a market failure is driving the problem in the first place. On that basis, a climate policy is more likely to be effective the more limited its market aspects and the more restrictive its regulatory aspects. If markets are badly designed by governments then they will make the wrong investment decisions.

In the final part, I will argue for and suggest some complementary measures.

[1] ‘U.N. offsets crash to 15 cents ahead of EU ban vote’, Point Carbon, 12 December 2012, viewed 21 February 2013,

[2] Commonwealth of Australia, Strong Growth, Low Pollution: Modelling a carbon price, 2011, viewed 12 November 2012,, Charts 5.2, 5.19.

[3] E Rosenthal & AW Lehren, ‘Profits on carbon credits drive output of a harmful gas’, New York Times, 9 August 2012, viewed 21 February 2013,

[4] F Harvey, ‘Doha climate talks: EU weakened over new emissions targets’, Guardian, 23 November 2012, viewed 21 February 2013,

[5] G Parkinson, ‘The triumph of Tony Abbott’s carbon alter-ego’, Renew Economy, 29 August 2012, viewed 21 February 2013,

[6] G Winestock & M Priest, ‘EU carbon price a hard act to follow’, Australian Financial Review, 18 February 2013, viewed 21 February 2013,

[7] T Edis, ‘How Labor can improve the carbon pricing scheme’, Climate Spectator, 13 August 2012, viewed 21 February 2013,

[8] A Morton, ‘Australia lags on carbon tax rules’, Age, 26 July 2012, viewed 21 November 2013,

[9] Productivity Commission, Carbon Emission Policies in Key Economies, Research Report, 2011, viewed 14 September 2012,

[10] G Parkinson, ‘Why you are paying $10/hr to run your neighbour’s air-con’, Renew Economy, 18 October 2012, viewed 21 February 2013,

[11] Productivity Commission, Carbon Emission Policies in Key Economies: Responses to Feedback on Certain Estimates for Australia, Supplement to Research Report, 2011, viewed 14 September 2012,

[12] S Cullen, ‘Coal-fired stations “$1b better off under carbon tax”’, ABC News, 6 September 2012, viewed 21 November 2012,

[13] S Lauder & S Lane, ‘Consumers “paying twice” as carbon emitters compensated’, ABC News, 20 February 2013, viewed 21 February 2013,

[14] T Edis, ‘How polluters can cream the carbon scheme’, Climate Spectator, 5 September 2012, viewed 21 February 2013,

[xv] G Combet, Australia ready to join Kyoto second commitment period, Australian Government Department of Climate Change and Energy Efficiency, 9 November 2012, viewed 21 February 2013,

[xvi] RW Howarth, Santoro, R & Ingraffea, A, ‘Methane and the greenhouse-gas footprint of natural gas from shale formations’, Climate Change, 2011, viewed 14 September 2012, et al  2011.pdf

Indigenous Heritage: Case Studies in Western Australia

One of the common tactics used by both corporations and governments to gain the consent of Indigenous people to the destruction of their heritage is to “divide and conquer”, as the Fortescue Mining Group has done to the Yindjibarndi people of Roebourne and the W.A government has done in the Kimberley. 

In 2003, a united group of 10 Yindjibarndi elders put a Native Title claim on behalf of their people for a large area of their traditional Karijini land in the Pilbara. Some five years later, the Fortescue Metals Group (FMG) lodged applications for mining leases in the middle of the claim and began negotiations through the representative body, the Yindjibarndi Aboriginal Corporation (YAC), who rejected the initial offer of compensation from the company.

Under Native Title law miners cannot commence mining unless they reach agreement with traditional owners or have negotiated in “good faith”.  When the negotiations broke down in this case, FMG requested arbitration from the Native Title Tribunal which, as it almost always does, ruled in the miner’s favour. Further appeals from the YAC followed but, before their completion, the State Government issued licences for the company to proceed and the company re-started negotiations with – and funded – a breakaway local group. They also provided funds for legal advice to the group to enable them to apply to remove some of the original native title claimants from the claim, since the law requires that the company should negotiate with all the claimants. Community division and distress of the elders unable to protect their country has been the result.

The company has also sought to evade even those few ministerial conditions originally placed on the project and the W.A. government eventually allowed FMG’s request to delete Aboriginal heritage conditions on its mining leases relating to the need to avoid burial sites and consult with local people about heritage sites. The YAC have also been prevented from entering the area in question in breach of the mining lease, which requires that use of and access to the land by the Yindjibarndi people should not be restricted except for safety reasons.

Like many other groups, the Yinjibarndi people have been asked to trade off their heritage for economic benefits and employment; while they would undoubtedly welcome improvement in their living conditions and life chances for their children, many of them are very uneasy about the fact that this may mean the destruction of important heritage sites and the destruction of their capacity to exercise their responsibilities to care for the land and make sure that the language and the culture are passed on. Mr Woodley, chair of the YAC has said, “We are deeply angered that fundamental human rights standards spelled out in United Nations covenants are being blatantly violated in this state. The Minister’s decision steals from our people what is at the centre of our world, the cultural heritage that lies at the heart of our identity, our confidence, our right to exist as Yindjibarndi.”

Given this sort of experience – and there are many such stories – it’s not surprising that a survey of traditional Aboriginal owners which asked what they wanted to do with their land found that less than 13 per cent listed economic development as a first priority, while more than one-third highlighted access, residence, land and sea management and cultural heritage (Balsamo and Calma 2007).[1] As researcher Jon Altman points out[2], “there is considerable empirical evidence that Indigenous people rarely benefit equitably when major extractive activities occur on their customary land—indeed it is far more common for such activities to impact negatively on the livelihoods and cultures of Indigenous communities” (p 3).

While many hoped that this would not be the case for the proposed Woodside gas hub at James Price Point in the Kimberley, the signs are not good. Anyone fortunate enough to have visited the area will agree that the West Kimberley, listed by the Australian Heritage Council in 2010, is an extraordinary place by any measure. It has a fascinating and unique wildlife, a magnificent coastline, spectacular gorges and waterfalls, ancient and ongoing Indigenous culture and a distinctive pastoral and pearling heritage. Not only is it recognised as one of the most ecologically diverse parts of the world, but scientists discover new species almost every time they visit. Some have argued that it deserves UNESCO World Heritage Status as a “site of outstanding cultural and natural importance to the common heritage of humanity.”

The whole area is marked by many overlapping stories, principally those of the Aboriginal people who have occupied the land for over 40,000 years. This is the traditional and spiritual home to 13 traditional owner groups who speak more than 30 different Indigenous languages, some unique to the region. It is home, too, to their ancestors and the many creation beings held by Traditional Owners to have shaped and occupied the ranges and plains, rivers and waterholes, seas and islands.  Powerful creation beings such as the Wanjina are seen in many different forms; in the rock art, river systems, tidal movements, stone arrangements, geographic formations, animal and plant species and in the stars and planets.

What has come to be known as the “Dreaming” or “Dreamtime” is for Aboriginal people the Law, transmitted through traditional narratives, images, song and dance, weaving together the elements of their social world – their entitlements, responsibilities and obligations. As one Bardi women said, “they are living stories; they are the spirit of us”[3]. The many Wanjina paintings of large eyed, mouthless, anthropomorphic beings with halo like rings encircling heads and the elegant human-like painted images (the Gwion/Gwion) have attracted a lot of international interest. They form what is considered one of the longest lasting and most complex rock art sequences anywhere on the planet. However, to the aboriginal people, this is not art in the western aesthetic sense but places where creation beings have placed themselves in rock.

There is no doubt the Kimberley will be permanently altered by plans to exploit oil and gas off the coast and to establish a gas hub at James Price Point. And that will almost certainly not be the end of the story; a great many mining projects await the green light for development. What is in contemplation is not a small footprint but a very large and complex piece of infrastructure, which will almost certainly expand over time; witness the LNG complex to the south, on the Burrup rock art precinct, which is now an industrial estate. And the company, Woodside, has explicitly sought approval to destroy Indigenous sites in order to build the pipes they need to bring the gas onshore.

Despite the fact that some of the local aboriginal people, represented by the Kimberley Land Council, initially approved the proposal, even they are now threatening to withdraw that approval if a proper social and cultural impact assessment is not undertaken,[4] citing evidence that “aspects of the project would cause “significant disturbance” to indigenous heritage values.” Other local Goolarabooloo people have steadfastly opposed the development because it will destroy important sites crucial to aboriginal law and culture. Just this weekend, evidence emerged[5] that, at the request of Woodside, the West Australian government withdrew letters from the Department of Indigenous Affairs to Woodside, advising that their proposed work site at James Price Point overlapped with significant sites integral to Aboriginal men’s song cycles. Apart from the potential impropriety of this action, the message is clear; aboriginal heritage can be sacrificed without public knowledge and without penalty.

In a recent interview, 43 year-old South Australian aboriginal man, Aaron Stuart, who has worked for many years to try to reduce suicide amongst his people, attributed the high rates of suicide in some indigenous communities to people “grieving from loss of culture and identity”[6]. There is some indirect evidence to back him up: looking at the benefits of maintaining contact with country, Garnett and Sithole (2007) found that time spent on traditional lands engaged in traditional activities appeared to reduce excess morbidity and mortality.[7] It seems clear that unless we re-weight the balance between economic activity and heritage and culture, priceless human assets will be lost forever and the wellbeing of Indigenous Australians – and of all of us – further compromised by the pressure to develop at any price.

This is part 3 in a series: Part 1 can be found hereand Part 2 here.

[2] Altman, J. (2009) Contestations over Development, In Altman, J & Martin, D. (Eds) Power, Culture, Economy: Indigenous Australians and Mining. CAEPR (ANU) Research Monograph 30.

[3] Australian Heritage Council’s final assessment of the national heritage values of the West Kimberley

[4] Prior, F (2012) Aboriginal blow to gas hub deal, The West Australian, September 5

[5] Lloyd, G. (2012) Gas giant silences advice on songlines, Weekend Australian ,8 Sept.

[6] Horowitz, K (2011) Stolen Lives: Crusader saving lives by promoting identity, February 17.

[7] Garnett, S. & Sithole, B (2007) Sustainable Northern Landscapes and the Nexus with Indigenous Health: Healthy Country, Healthy People, Land and Water Australia, Australian Government, 2007.

The State of Indigenous Inheritance

The progressive, cumulative destruction of Indigenous cultural resources as a result of the cumulative impact of individual development was highlighted in the 2011 recent State of the Environment (SOE) report[1], largely ignored by the mainstream media. In the chapter on heritage, two main threats to Indigenous heritage were identified: the disruption of knowledge and culture and the disturbance and destruction of sites due to urban expansion and resource extraction. 

Part of the problem, as outlined in the report, is that the nature and extent of Indigenous cultural heritage is unknown to most Australians, with the result that we do not really know what is being destroyed.  In fact, surveys and assessments of Indigenous heritage are often funded and undertaken only in response to specific threats from development projects.  Record – then destroy. The SOE report also points out that conflicts about the destruction of Indigenous heritage by industry remain common and that “one of the main threats to indigenous heritage places is conscious destruction through government approved development.” [2] Even when decision makers are aware of potential heritage impacts, they frequently choose to authorise destruction, bit by bit; economic considerations are given priority over heritage protection and the cumulative impact of development is not properly assessed.

Aboriginal heritage may be described as having two main dimensions: the first,  evidence of Aboriginal communities from earlier times, including burial sites, middens, rock and cave paintings and scatters of stone tools, some as old as 50,0000 years , others more recent; the second encompassing the places or landscapes that are of spiritual significance to living Aboriginal people. Such areas are often associated with the actions of mythological beings during the creative period of the Dreaming, moving over the land and shaping the form it now takes and the laws and ceremonies that guide people’s lives. Both aspects of Indigenous heritage are under threat.

It is clear that Australia’s Indigenous people view their world as an interconnected whole: they make no intrinsic distinction between the lands, waters, the plants and animals and the culturally significant sites and objects linked to the traditional knowledge, which  lie at the heart of Indigenous culture and identity handed down through the generations[3]. Such traditional knowledge can only be kept alive through use and application in the country to which it is tied. Protecting land and places and promoting cultural practices (especially languages and creative expression) are both crucial for the maintenance of traditional knowledge. Where such use and application are disrupted, as is often the case with resource extractive industries, cultural heritage in the broadest sense is under threat.

This is particularly evident in Western Australia where the mining boom (despite hiccoughs in recent weeks) is still at full tilt, with both state and federal governments enthusiastically barracking industry players.  Resource extraction industries inevitably place pressure on heritage places, since the activities of the mining and oil and gas industries and the taking of timber from native forests usually require the removal or degradation of features which form an important part of Indigenous heritage and of our heritage more generally – landscapes, habitats, rock art, ancient story lines, geological formations. In the rush to feed and fire the steel mills of China we barely stop to consider the loss that this represents.

What little research there is has shown that “mining and other forms of industrial development can result in profound and often irreversible damage to the cultural heritage of indigenous peoples”[4]. It is fear of such damage that sometimes drives opposition to development by indigenous people, especially since heritage laws have generally proved ineffective in protecting their heritage.  And, in many cases, the promised economic benefits have not materialised.

Some 60% of mining activity in Australia actually abuts or is located on aboriginal land. Commonly, an application is made by a developer or mining company to undertake some activity which may harm Indigenous heritage and the responsible agency will then require that an Indigenous heritage assessment be undertaken by the applicant before a permit is issued. Most of Australia’s Indigenous heritage laws allow Ministers, or other statutory bodies, to authorise the destruction of sites. While consultation with relevant Indigenous groups is generally required, it seldom results in the applications being refused and, as a result, such decisions are a continuing source of conflict between Indigenous communities and government agencies and resource companies.

To compound the problem, there are limited public data on how many and to whom permits or consents are issued authorising harm or destruction of Indigenous sites. The authors of the SOE report indicated that they could find no long-term studies that have systematically assessed the cumulative impact on Indigenous heritage of these decisions to approve destruction; but what evidence there is indicates a perilous situation.  Given the rapid expansion of the resource extractive industries and in the absence of comprehensive strategies to reconcile competing economic and heritage values, this deterioration is likely to accelerate.

This is part 2 in a series: Part 1 can be found here.

[1]Australian State of the Environment Committee (2011) Australia: State of the Environment Report. Independent report to the Australian Government Minister for Sustainability, Environment, Water, Population and Communities,

[2] Australia: State of the Environment Report (2011),  p 735.

[3] [3] Damien Bell (2011) “Whose Heritage?”  Essay commissioned by the Australian Heritage Commission,

[4] O’Faircheallaigh, C. (2008). Negotiating Cultural Heritage? Aboriginal-Mining Company Agreements in Australia, Development and Change, 39 (1), 25-51.


Development at any price? The case of Australia’s Indigenous heritage

This is the first of a series of three posts addressing issues surrounding Australia’s indigenous heritage. The content is based on the 2012  John West Oration to the Launceston Historical Society given by the author.

Part 1:  Why should we protect our heritage?

In the broadest sense our heritage is what we inherit; it’s what we value of that inheritance and what we decide to keep and protect for future generations. Heritage is both global enough encompass our shock at the destruction of the Buddhas of Bamiyan in Afghanistan and as local as our own sepia tinted family photographs.  Everything which our predecessors have bequeathed, both tangible and intangible, may be called heritage – landscapes, structures, objects, traditions, stories and language.

This inheritance shapes and expresses who we are; it gives meaning and depth to our lives, whether we are aware of it or not. Each of us has both a unique as well as a shared heritage; and some of that heritage will be directly experienced, understood and incorporated into our sense of ourselves (like my Irish ancestry); some of it only dimly apprehended, requiring a respectful recognition and willingness to learn – like Australia’s Indigenous heritage to most Australians.

It is no accident that one of the first targets of those engaged in genocide is the obliteration of heritage – and through that, identity. The destruction of important civic buildings and places of worship is often part of so-called “ethnic cleansing” in violent conflicts. The victors systematically seek to remove the traces of the vanquished community in order to establish control over them. As Milan Kundera (1981) put it in “The Book of Laughter and Forgetting”: ‘the first step in liquidating a people is to erase its memory. Destroy its books, its culture, its history’ (p 159).

In Australia, those who took the aboriginal children to try to turn them into domestic servants and farm labourers explicitly prohibited the children from speaking their own languages and taking part in cultural practices. The Bringing them Home Report[1] documented these effects in considerable detail, finding that principal effect of the removal policies was the severe erosion of cultural links. This was, of course, the aim of these policies. It was said at the time that the children were to be “prevented from acquiring the habits and customs of the Aborigines” (South Australian Protector of Aborigines in 1909). Clearly, the intended outcome of the removals was to prevent Indigenous children from developing Indigenous cultural identity as part of their sense of themselves. As the Bringing Them Home Report made clear, while Indigenous cultures were not destroyed by these policies, and continue to exist, many were profoundly changed.

But the destruction of heritage need not necessarily be the result of such traumatic and cataclysmic events. We are constantly making judgments about what is worth protecting and passing on – as well as about what we would prefer to forget. Not all of these judgments are carefully considered – or even conscious – and many are hotly contested. In struggles to preserve our heritage, economic goals, in particular, generally take precedence over what is really precious to us. Circumstances, of course, may also conspire to erase the traces of our past – we feel for the people of Christchurch.

Whether we are aware of it or not, we are connected to and influenced by our social and physical environments, our cultural landscape. Most people have strong emotional bonds to particular places and the communities in them. There is a now a great deal of evidence too that our well-being depends in large measure on our relationship with our environment, broadly conceived – the relationships we have with the people around us and the natural and built environment we inhabit[2]; if this cultural environment is destroyed or degraded or if people are prevented from enjoying it, their health and well-being are compromised.

For example, research in Western Australia has shown that the happiest and healthiest Indigenous Australians, with low arrest rates and good educational attainment, are those who have been able to retain a strong attachment to their culture and have a strong aboriginal identity.[3]  Conversely, the psychologically adverse consequences of destruction of people’s familiar environment have been well documented. For example, interviews with people living in the Hunter Valley of New South Wales found that “the transformation of the environment from mining and power station activities was associated with significant expressions of distress linked to negative changes to interviewees’ sense of place, well-being, and control” (p 47)[4], a phenomenon philosopher Glen Albrecht[5] has described as “solastalgia”, a loss of a sense of place.

Even though we may only dimly apprehend the deeper human loss which ensues from the destruction of our heritage, the effects are, nonetheless real and lasting. This alone is reason enough to take heritage protection very seriously.

[1] Bringing them Home: Report of the National Inquiry into the Separation of Aboriginal and Torres Strait Islander Children from Their Families, April 1997

[2] Lewicka, M. (2011) Place attachment: How far have we come in the last 40 years? Journal of Environmental Psychology, 31, 207-230.

[3] West Australian Aboriginal Child Health Survey, Kalinga Research Network Report, 2004.

[4] Connor, L., Albrecht, G., Higginbotham, N., Freeman, S., Smith, W. (2004) ‘Environmental change and Human health in Upper Hunter communities of New South Wales, Australia’, EcoHealth, 1, 47-58.

[5] Albrecht, G., Sartore, G., Connor, L., Higginbotham, N., Freeman, S., Kelly, B., Stain, H., Tonna, A. and Pollard, G. (2007) “Solastalgia: The distress caused by environmental change”. Proceedings of the RANZCP Social and Cultural Psychiatry Creating Futures Conference, Australasian Psychiatry, 15 (Supplement): S95-8.

Reducing Electricity Use in Households (and Businesses)

Well before the recent fuss about increases in energy prices, the reduction of electricity use by households and businesses had already been identified as an important national policy goal, with benefits for the climate, the electricity supply sector, business costs and household budgets. However, despite increasing costs to both users and producers and warnings about the impacts of climate change, consumption of electricity continues to rise and is predicted to continue rising over the coming decades. This increased demand, and the need to shift away from fossil fuel sources, is driving costly investment in the electricity generation and distribution networks, further increasing the cost of power. These higher electricity prices, in turn, are causing heightened community sensitivity to price, and problems for some household budgets, particularly those of low income earners (although as a proportion of household budgets, power costs are not rising). While the probable effects on prices of the introduction of a price on carbon are being wildly exaggerated by the tabloid press and political opportunists (and the compensation overlooked), it is clear that helping households and businesses cut their electricity consumption would assist in reducing the impact of rising prices. And by all accounts, there is plenty of room to move without compromising current standards of convenience and comfort.

Since price increases alone do not appear to be moderating demand (people are apparently unaware that their use is increasing and believe they are already doing enough[1]), other approaches to curtail household energy use are needed. To date, most of the attempts to reduce energy use have taken the form of mass media campaigns based on the assumption that information about how to reduce use and persuasive advertising will motivate the necessary behaviour change. However, systematic evaluation of such campaigns indicates that they are largely ineffective; and even when people become more aware and concerned about a particular problem, and express the intention to change, they do not necessarily act – the well-documented “attitude-behaviour” gap (Staats et al., 1996).

Evidence is accumulating that interventions based on social influence can result in similar effects on consumer behaviour to those achieved by large changes in relative prices (Bertrand, et al., 2010), but without the negative consumer reaction. Among the most promising and least costly of these interventions are those which employ comparative normative information (Cialdini et al., 2006).

An extensive literature in psychology shows that we are influenced by other people’s actions and opinions, even when we think we are not. People are very sensitive to information which suggests that they are different from the majority in any way. This information may cause them to feel uncomfortable and can motivate them to change their behaviour in order to align more with what others are doing. People have been shown to be influenced by information about what other people approve or disapprove of (injunctive norms); e.g., that littering is bad. They are also influenced by their perception of what others typically do in certain situations (descriptive norms); e.g., putting rubbish in the bin.

Numerous studies attest to the power of social norms in influencing environmental behaviour, including energy conservation. For example, Schultz (1999) found that normative feedback increased recycling rates in his participants, especially among those who were informed that others in the community recycled at higher rates. Similarly in a Swedish study of what influenced the intention to choose “green” energy (Ek & Soderholm, 2008), householders were presented with two scenarios of others’ behaviour – viz. others contribute little (8%) or others contribute a lot (75%). People were more likely to choose “green” energy when they believed that it was the majority decision.

Some energy reduction programs have specifically sought to harness the effects of descriptive social norms to decrease energy consumption. Typically, people are provided with data about their own behaviour relative to the average of members of their community as a whole or of a more narrowly defined group, such as near neighbours; for example, how much energy they use compared with the average, comparable household (the effect is stronger when the comparison is made to people who are similar and/or with whom identification is strong; Alick et al., 1995). To illustrate, an experimental field study by Nolan et al. (2006), in which householders were provided with energy tips and one of four appeals to reduce energy use, found that providing people with normative information about others’ energy use (“the majority of your neighbours conserve energy”) was significantly more effective in achieving reductions than appeals based on protecting the environment, benefitting society or saving money.

Further development of this approach has resulted in an extensive – and relatively low-cost – roll out of programs which provide feedback to customers about their electricity and gas use compared with their peers. One such program, conducted for an electricity utility in California, took the form of a randomized controlled field experiment. Fifty thousand households were assigned to the control group and 35,000 to the treatment group, which received “home energy reports” on a periodic basis. The reports contained energy efficiency advice with tips based on the household’s energy use pattern, housing and demographic characteristics; bar charts comparing the household’s recent and 12 month electricity use with that of average of comparable neighbours and “energy efficient” neighbours (the lowest 20%) as well as injunctive messages (emoticons) depending on whether households were above or below these groups; and charts comparing the household’s use in the current month with the same month from the previous year. The result was a significant drop in electricity consumption of the treatment households relative to the controls of 2.35%, a result confirmed in two independent analyses (Allcott, 2009; Ayers et al. 2009). Overall, 80% of households decreased their use and the highest energy users reduced their energy consumption the most – 7% more than high energy users in the control group. While the magnitude of change may be lower than that achieved in some smaller scale – and typically more expensive – interventions, it was still strong, and growing, after three years of the households receiving the reports.

To date, there has been no systematic assessment of the effects on electricity consumption of feedback about the level of energy savings people achieve over time compared with similar households. Such information may encourage greater emulation than data on averages which simply convey current use and say nothing directly about other people’s success in cutting energy use. There is some evidence that in group settings, such as workplaces and offices, the greatest savings are made when employees compare their energy savings with that of other groups, adding a competitive edge to energy savings. Siero et al. (1996) for example, found that workers in a metallurgical factory were more likely to turn off computers at night, turn off lights not in use, report compressed air leakages, and disconnect electrical appliances when their success in making cuts was compared with that of other similar factories. Similarly, in an office setting, Staats et al. (2000) were able to decrease natural gas use by providing graphic feedback to office workers on their performance relative to other offices. As the authors commented, a remarkable feature of these results was that “behavioural change took place with hardly any change in attitudes or intentions” (p. 235). Although they did not measure actual energy use, Gockeritz et al. (2010) found that the more people believed others were making efforts to conserve energy, the more likely they were to report intending to conserve energy themselves.

Several possible pathways have been suggested to explain why information about others’ energy use may affect electricity demand.  It may be that some people gain satisfaction from being seen as more thrifty than their neighbours, from seeing themselves as playing a part in the public good or to avoid censure for failing to conserve. Research within behavioural economics on “conditional cooperation” shows that people are more likely to contribute to public goods when they are informed that others are doing their bit. It is also likely that such feedback increases people’s attention to and knowledge about the amount of energy they are actually consuming. It seems that normative feedback is particularly powerful in conditions of uncertainty, when people are more likely to attend and respond to information about what others are doing. Providing feedback about others’ behaviour may be particularly significant when people have imperfect information and are searching for clues about the right way to act. Electricity is a case in point – it is invisible – and most people have a relatively limited understanding of how much energy they are using or how to save energy. They usually make decisions about comfort and convenience, about which “energy services” such as heating, cooling, lighting, cleanliness and entertainment to use, not about electricity use per se. As Backhaus and Heiskanen (2009) observed, “because we rarely make a conscious decision to use energy, it is also difficult to make conscious decisions to save it” (p. 3).  Knowing what others are doing provides some guidance for these decisions. Providing people with evidence of what others have done may also make it harder for them to construe themselves as exceptional; harder to justify their own inaction

Although much has been made of the need to reduce household electricity use, affordable interventions such as those described above, have not been trialled or evaluated in Australia, despite the potentially substantial savings to both household budgets and the business bottom line. Not to mention the effects on Co2 emissions.


Alicke, M. D., Klotz, M. L., Breitenbecher, D. L., Yurak, T. J., & Vrendenburg, D. S. (1995). Personal contact individuation and the better-than-average effect. Journal of Personality and Social Psychology, 68, 804–825.

Allcott, S. (2009) Social norms and energy conservation. Report of the Centre for Energy and Environmental Policy Research, MIT & Sloan School of Management.

Ayres, I., Raseman, S., & Shih, A. (2009). Evidence from two large field experiments that peer comparison feedback can reduce residential energy usage. NBER Working Paper Series.

Backhaus, J. & Heiskanen, E (2009). Rating expert advice on how to change energy behaviour. Research Note 2, Changing Behaviour Project, European Commission,

Bertrand, M., Dean K., Mullainathan, S., Shar, E. & Zinman. J. (2010). What is Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment.  Quarterly Journal of Economics. 125(1), pp. 263-305

Cialdini, R. B., Demaine, L., Sagarin, B. J., Barrett, D. W., Rhoads, K. L., & Winter, P. L. (2006). Managing social norms for persuasive impact. Social Influence, 1, 3-15

Ek, K. & Soderholm, P. (2008). Norms and economic motivation in the Swedish green electricity market. Ecological Economics, 68, 169-182.

Göckeritz, S., Schultz, P., Rendón, T., Cialdini, R., Goldstein, N., & Griskevicius, V. (2009). Descriptive normative beliefs and conservation behavior: The moderating roles of personal involvement and injunctive normative beliefs. European Journal of Social Psychology,40, 514 – 523.

Nolan, J., Schultz, P. W., Cialdini, R. B., Griskevicius, V., & Goldstein, N. (2008). Normative social influence is underdetected. Personality and Social Psychology Bulletin, 34, 913-923.

Schultz, P. (1999) Changing behaviour with normative feedback interventions: A field experiment on curbside recycling. Basic and Applied Psychology, 21 (1), 25-36.

Siero, F., Bakker, A., Dekker, G & Van Den Burg, M (1996). Changing organizational energy consumption behaviour through comparative feedback, Journal of Environmental Psychology, 16, 235-246.

Staats, H.J., Wit, A.P., & Midden, C.Y.H. (1996). Communicating the greenhouse effect to the public: Evaluation of a mass media campaign from a social dilemma perspective, Journal of Environmental Management, 45, 189-203.

Staats, H., Van Leeuwen, E., & Wit, A.P. (2000). A longitudinal study of informational interventions to save energy in an office building. Journal of Applied Behavioral Analysis, 33, 101-104.

[1] Market research studies reported in The Prime Minister’s Task Force on Energy Efficiency, 2010, p 101.

What rising inequality and materialism does to us

The emphasis on growth as the pre-eminent social goal has seen rises in inequality within societies. In developed economies, the degree of income inequality has been shown to be associated with a wide variety of health and social problems, including reduced trust and civic engagement, which may themselves reduce overall well-being.  One of the consequences of the tendency for people to assess their position relative to others – rather than in absolute terms – is that high levels of inequality in wealth and income are likely to produce greater levels of unhappiness. More people see themselves as losing out, even when they are well off. While there is continuing debate about the exact nature of the relationship, a recent study (Verme, 2011) which investigated a very large global sample found that income inequality has “a negative and significant effect on life satisfaction” and that the result “persists across different income groups and across different types of countries” (p 111). Wilkinson and Pickett (2010) argue that such ill effects of income inequality are not the result of income differences per se but rather are a consequence of social stratification and the associated “social evaluative stress” people experience.

The initial epidemiological research, both within and between nations, found a strong relationship between income inequality and life expectancy: the greater the gap in income between the rich and the poor in a given society, the lower the life expectancy and the greater the incidence of illness for everyone. For example, in his study of national income inequality among eleven industrialised countries, Wilkinson (1992) reported a correlation of -0.81 between indices of inequality and life expectancy after controlling for gross national product per capita.

Changes in inequality over time are also important. Contrast the experiences of Britain and Japan; in 1970 they had similar income distribution and life expectancy but since then have diverged significantly. Japan now has the highest life expectancy in the world and the most egalitarian distribution of any country on record. Conversely, in Britain income distribution widened following the Thatcher experiment in the mid 80s and mortality among men and women between 15-44 years actually increased. In reviewing the international literature on health and income inequalities, Wilkinson argued that “life expectancy in different countries is dramatically improved when income differences are smaller and societies are more socially cohesive” and that “social, rather than material, factors are now the limiting component in the quality of life in developed societies”.

After more than a decade of research on the effects of inequality, Wilkinson (1996) concluded – and he is far from alone in this – that “a wide range of problems associated with relative deprivation…. are all strongly related to one factor—societal measures of income distribution” (p 1). We know now that data from a range of countries show that “the societal scale of income inequality is related to morbidity and mortality, obesity, teenage birth rates, mental illness, homicide, low trust, low social capital, hostility, and racism.” Wilkinson and Pickett’s (2005, 2010) latest work shows that poor educational performance among school children, the proportion of the population imprisoned, deaths from drug overdoses and low social mobility can be safely added to this list. The international research is consistent in showing that “greater income inequality is associated with a higher prevalence of ill health and social problems in a society as a whole” and everyone is affected. One of these effects has been the collapse in intergenerational mobility; children born into disadvantage in the most unequal societies now have reduced prospects of improving their circumstances than their parents and grandparents did.

It is worth noting that, to date, the relationship between these outcomes and income inequality (as opposed to low socio-economic status) within Australia has been little studied. However in international comparisons Australia is ranked among the most unequal nations, with a larger catalogue of social ills compared to more equal societies– higher levels of illegal drug use and mental illness, lower levels of trust, poorer child wellbeing, more obesity and childhood obesity, higher levels of imprisonment, lower social mobility and lower scores on a composite index of health and social problems. Australia also appears as one of the few societies overall where subjective well being has actually declined over recent decades (Inglehart et al., 2008).

Researchers generally agree that inequality amongst Australians is increasing. In fact since 1979, income inequality in Australia has been increasing at faster rate than in comparable developed countries such as France, Germany, Italy, the U.K. and the U.S. Although we are collectively wealthier than we have ever been, we are also a less equal society than we have ever been.

The conclusion that inequality is socially destructive is not novel; close observers of the human condition have often pointed to the apparent association between inequality and impoverished social relations. It is important to understand that the established relationships between income inequality and health and social problems are not trivial: there are ten-fold differences in homicide rates; six-fold differences in teenage birth rates, sixfold differences in the prevalence of obesity, fourfold differences in how much people feel they can trust each other, five- or ten-fold differences in imprisonment rates and three years difference in the average length of life. Many of these social problems, which are related to income inequality, are about human perceptions and behaviour; income inequality has psychosocial effects, probably as a result of chronic stress and the unpleasant experience of relatively low social status, rather than the absolute level of income (Wilkinson & Pickett, 2010).


As we have seen, beyond a certain point, the premise that more consumption and greater wealth improve well being does not stand scrutiny. On the contrary, there is strong evidence that at individual level, the more material goals matter to people, the more unhappy they are likely to be. Research here and in other wealthy countries shows that even when people obtain more money and material goods, they do not become more satisfied with their lives or more psychologically healthy.

At some level, people seem to understand this. Surveys in already wealthy countries indicate that many people believe we need a better balance between the pursuit of material goals and the quality of people’s lives. The majority endorse the view that a growing economy – and the acquisition of more “stuff”- is not all that matters in improving wellbeing. Many people appear to feel uneasy about the fact that children today are growing up in winner takes all economy where they are encouraged to see the main purpose in life as getting whatever they can for themselves. In popular culture, selfishness and materialism are no longer seen as moral problems, but as cardinal goals in life. “More for me”, as one TV advertisement boasts.

The influence of consumerism is pervasive and buttressed by an enormous industry whose sole purpose is to drive consumption. The result is that many people have come to evaluate their lives and accomplishments not by looking to their relationships or community, but to what they possess and what they can buy. They come to act as if they believe that the consumption of things will confer real satisfaction and guarantee a full life. Such ideas are often associated with a world view in which the worth and success of others is also judged not by their wisdom or kindness or community contribution, but in terms of whether they possess the right clothes, the right car, or more generally, the right “stuff”. At the same time, judgments about what is enough are not absolute, but relative to others; people judge their own worth by measuring their wealth and possessions against that of others – and since there is always someone with more, this is a recipe for dissatisfaction.

In fact, research shows that merely aspiring to have greater wealth or more material possessions is likely to be associated with increased personal unhappiness. Kasser (2002), amongst others, has shown that people who “strongly value the pursuit of wealth and possessions report lower psychological well-being than those who are less concerned with such aims” (p 5). Using a variety of instruments, his research has shown that those with strong materialistic values and desires report more symptoms of anxiety, report less vitality and feelings of self actualization, are at greater risk of depression, are more narcissistic and experience more bodily discomfort (aches and pains) than those who are less materialistic. They watch more TV, take more alcohol and drugs and have more impoverished personal relationships. 

Australian investigations have generally confirmed these findings. In one study, people who endorsed materialistic values were less satisfied with their lives than those who reported lower levels of materialism (Ryan & Dziurawiec, 2000). Another set of studies by Saunders and his colleagues found that people who score high on materialism were less satisfied with their lives, more likely to suffer from depression and anger, more conformist and less likely to be interested in or protective of the environment. The researchers also found that the same people also to judge their success or failure in terms of their material possessions.

There are many explanations of why materialism can be so toxic: the desire to have more and more goods drives us into more frantic pace of life; people have to work harder and longer to purchase, maintain, replace, insure and constantly manage goods.  This expends the energy necessary for living a fully satisfying life. Economies focused on consumption foster conditions that heighten psychological insecurities: they fuel themselves. Parents work more and more hours outside the home, to acquire the buying power to obtain more goods that they have been taught that they and their children “need”. Attention to children, intimate time with partners and friends, and other satisfactions that cannot be bought are pushed to the periphery.

Materialism is also associated with more anti-social and self-centred behaviour. One of the effects of a materialistic disposition is a greater tendency to treat people as objects to be manipulated and used. Materialistic values conflict with making the world a better place and the desire to contribute to equality, justice and other aspects of civil society. Attitude surveys show that people highly focused on materialistic objectives show little concern for the wider world – they care less about protecting the environment and less about their fellow citizens (Kasser, 2002). 


Accumulating evidence from a variety of disciplines and perspectives points clearly to the conclusion that increasing material wealth does not necessarily improve individual or collective wellbeing. In developed economies, characteristics such as greater income equality, fairly functioning political institutions, and the quality of the environment are more important. High and accelerating levels of economic growth are generating serious problems such as resource insecurity, environmental degradation and social difficulties which contribute to individual discomfort and unhappiness: there is a downside to growth.

One of the reasons policy makers continue to be fixated on increasing GDP as a pre-eminent objective in the face of these effects is that they believe there is no alternative. This represents a failure of the imagination, a refusal to take seriously and develop other possible models which have (somewhat tentatively) been proposed under the heading of steady state or no-growth economics. Even Robert Solow, who won the Nobel prize for economics for his work on growth theory, apparently now describes himself as “agnostic” on whether growth can continue and told Stoll of Harper’s Magazine (March, 2008) that, “There is no reason at all why capitalism could not survive without slow or even no growth. I think it’s perfectly possible that economic growth cannot go on at its current rate forever.. . . . There is nothing intrinsic in the system that says it cannot exist happily in a stationary state”.  John Stuart Mill made a similar argument in 1848: “the increase of wealth is not boundless..and that economists should know that “at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this.”

It is surely time for these ideas to be taken seriously.



Kasser, T. (2002). The high price of materialism. Cambridge, MA: MIT Press.

Kasser, T., & Brown, K. W. (2003). On time, happiness, and ecological footprints. In J. deGraaf (Ed.), Take back your time: Fighting overwork and time poverty in America (pp. 107-112). San Francisco: Berrett-Koehler Publishers.

Saunders, S (2000). A snapshot of five materialism studies in Australia. Journal of Pacific Rim Psychology 1 (1), 14–19.

Stevens, P. (2010). Embedment in the environment: A new paradigm for well-being? The Journal of the Royal Society for the Promotion of Health, 130: 265-269.

Rehdanz, K. & Maddison, D. (2005). Climate and happiness, Ecological Economics, 52(1), 111-125.

Stiglitz, J. (2009). A cool calculus of global warming. Project Syndicate Blog.

Verme, P. (2011). Life satisfaction and income inequality. Review of Income and Wealth, 57: 111–127.

Wilkinson, R.G. (1992). Income distribution and life expectancy. British Medical Journal, 304: 165-168.

Wilkinson, R. (1996). Unhealthy Societies: The Afflictions of Inequality. London: Routledge, p 1.

Wilkinson, R. & Pickett, K. (2005).The problems of relative deprivation: Why some societies do better than others. Social Science & Medicine, 65, 1965-1978.

Wilkinson, R. & Pickett, K. (2010). The Spirit Level: Why Equality Is Better for Everyone. London: Penguin books,

Economic Growth and Human Wellbeing (Part III)

(This post is the final post of a three-part series. See Part 1: Introduction and Part 2: Revisiting Limits to Growth.)

Part 3: The Psychological Down Side of Growth

(a)  Subjective well being/ happiness

Despite attempts to develop a more complex understanding of human progress, policy makers and many economists still habitually conflate economic growth with improved well-being and greater happiness as did 19th century economic theorists. However, it is now clear that there is no necessary relationship between the two.

While it is true that increasing income improves health and wellbeing up to a point, the gains – whether measured at an individual or a societal level – flatten out very quickly (Bok, 2009). As many have shown, at low levels of economic development, when many people live in poverty, even modest economic gains produce significant effects on the quality of life – better food, clothing, shelter, medical care, education and life expectancy. It also improves people’s happiness and sense of wellbeing. In these circumstances, it makes sense for national policy to focus on economic growth. But beyond a certain threshold, and it turns out to be at quite a modest level of income, further growth results in little gain either in well-being or life expectancy. At this point other factors are more significant influences on the quality and length of life.

There is now a substantial literature on “subjective well being” designed to assess what factors affect people’s perceptions of the quality of their lives. The research is based on large scale surveys of national differences in responses to questions about happiness and general satisfaction. The scope of such studies is extensive, ranging from questions about whether and to what extent increases in income result in greater happiness to the effects of marriage on happiness and the impact of crime levels on life satisfaction. Subjective well being (SWB), measured by self-reports, is the indicator most often used. It refers to ‘a broad category of phenomena that includes people’s emotional responses, domain satisfactions, and global judgements of life satisfaction’ (Diener et al., 1999, p. 277). It consists of two elements: an affective one (positive or negative feelings) and a cognitive one, which is how people judge the extent to which their lives meet their expectations.  According to Diener and Seligman (2004) the major dimensions are pleasure, engagement and meaning.

It is no surprise that the two most important predictors of life satisfaction are health status and family situation, and while studies show that there is also a positive correlation between income and happiness, the effect is largely due to the benefits which accrue to low income earners. Put simply, $10,000 buys a lot more “happiness” for someone earning $20,000 than someone earning $200,000 a year. Although per capita income has continued to increase in the developed economies over the last half century or so, happiness has not, the so-called “Easterlin Paradox”.

Some recent research suggests that, at a national level, subjective well being depends less on income and more on people’s perception that they have free choice in their lives rather than being subject to external authority (Welzel et al., 2003). Radcliff (2001), for example, found that people tend to be happier under social democratic welfare regimes, although he is careful not to argue that this is a causal relationship. Ingelhart and Welzel (2005) have also shown that in all the major cultural groups, happiness is linked with people’s sense of freedom. In their most recent international comparisons,  Ingelhart and his colleagues take this a step further, showing that “democratization, economic growth, and growing social tolerance contributed to a rising feeling that people have free choice and control of their lives.” Using an index of the extent to which a given community accepted people of other races, immigrants and homosexuals as neighbours, they showed that people living in more tolerant societies tended to be happier, no matter what their own beliefs. In their review of the relevant literature, Diener and Seligman (2004) concluded that people with the highest reports of well being are not those who live in the wealthiest countries but those who live in nations which have effective political institutions, where human rights are protected, where corruption is low and mutual trust is high. A rational response would seem to be to shift the policy goals toward improving the quality of life rather than “to continue the inflexible pursuit of economic growth as if it were a good in itself” (Inglehart, 1997, pp. 64–65).

In fact, the research indicates that beyond a certain point, relative income is all that matters. Hence, an across the board rise in income will have little effect on happiness. Furthermore, there is also evidence that people readily adapt to their circumstances; while increased income may have a transitory effect on happiness, the effect quickly dissipates.


(b)The effects of environmental degradation on well-being 

 What is often also overlooked in the simple equation of wealth and happiness is that the social and environmental costs of rising consumption may generate health and well-being risks of their own. People exposed to persistent noise, drought and unusual weather are more likely to report feelings of unhappiness – and, in the case of extreme heat in Australia, even to be admitted in increased number to emergency psychiatric care (Nitschke et al., 2003). Sherwood and Huber (2010) have shown that, while it appears to be generally assumed that humans will simply adapt to warmer climates, in reality “even modest global warming could…expose large fractions of the population to unprecedented heat stress, and that with severe warming this would become intolerable” (p 9552).

In recent studies, the state of the environment has been shown to be an important in predictor of national differences in subjective well being. Rehdanz and Maddison (2005), for example, found that for 67 countries tracked  between 1972 and 2000, climate variables were shown to have a highly significant effect on SWB and projections from these trends indicated that countries with very high summer temperatures (like Australia) were the most likely to suffer reductions in wellbeing as a result of climate change. Panel data from 10 European countries were used by Welsch (2006) to analyse the effects of air pollution on SWB. He found that, after controlling for income, differences between countries and changes over time could be predicted by objectively measured air quality.

In one of the few studies to examine the effects of environmental conditions on well being in a developing economy, Smyth and his colleagues (2008) found that people living in Chinese cities with high levels of atmospheric pollution, environmental disasters and traffic congestion reported significantly lower levels of well-being. They later studied the relationship between environmental surroundings and personal well-being across six Chinese cities and found a strong negative association between atmospheric pollution and personal well-being.

The psychologically adverse consequences of destruction of the natural environment have also been documented in Australia (Conner et al., 2004). Interviews with people living in the Hunter Valley of New South Wales found that “the transformation of the environment from mining and power station activities was associated with significant expressions of distress linked to negative changes to interviewees’ sense of place, well-being, and control” (p 47). Pollution can affect well being both through an awareness of the adverse health and ecosystem effects of pollution as well as through the direct health effects. Several researchers (Ferrer-i-Carbonell and Gowdy, 2007; MacKerron and Mourato, 2008) have reported negative correlations between perceptions of pollution and well being.

Economic activities that diminish the quality of the environment and increase pollution harm the communities that are supposed to benefit. Conversely, contact with the natural environment has been shown to reduce stress, improve children’s behaviour and increase well being. Indeed patients appear to recover faster from surgery when they are able to see plants, flowers and trees. Although we might like to think that the natural environment is a tool at our disposal, that we are entitled, as the Book of Genesis suggests, to exercise “dominion” over “all the earth”, in fact we are part of the natural world and, for better and for worse, inextricably tied to the earth and deeply affected by it. Poets understand this. Politicians should too.



Bok, D. (2009). The Politics of Happiness What Government Can Learn from the New Research on Well-Being. Princeton University Press.

Conner, L., Albrecht, G., Higginbotham, N., Freeman, S. & Smith, W. (2004). Environmental Change and Human Health in Upper Hunter Communities of New South Wales, Australia. EcoHealth 1 (Suppl. 2), 47–58.

Diener, E & Seligman, M. (2004). Beyond Money. Toward an Economy of Well-Being. Psychological Science in the Public Interest, 5 (1), 1-31.

Diener, E., Suh, E., Lucas, E., & Smith, H. (1999). Subjective wellbeing: Three decades of progress. Psychological Bulletin, 25, 276–302.

Easterlin, R. (2001). Income and Happiness: Towards a Unified Theory, Journal of Economics, 111.

Ferrer-i-Carbonell, A.  & Gowdy, J. (2005). “Environmental Awareness and Happiness,” Rensselaer Working Papers in Economics 0503, Rensselaer Polytechnic Institute, Department of Economics.

Inglehart, R. (1997). Modernization and postmodernization: Cultural, economic and political change in 43 societies. Princeton, NJ: Princeton University Press.

 Inglehart, R., Foa, R., Peterson, C. & Welzel, C. (2008). Development, Freedom, and Rising Happiness: A Global Perspective (1981–2007). Perspectives on Psychological Science, 3 (4).

Sherwood, S. & Huber, M. (2010) An adaptability limit to climate change due to heat stress. Proceedings of the National Academy of Science, 107 (21), 9552-9555.

Smyth, R., Nielsen, I., Zhai, Q., Liu, T., Liu, Y, Tang, C.Y., Wang, Z., Wang, Z. & Zhang, J. (2008). Environmental surroundings and personal well-being in urban China, Monash Department of Economics Discussion Paper 32/08.

van Praag, B., & Baarsma, B. (2004). Using Happiness Surveys to Value Intangibles: The Case of Airport Noise (Tinbergen Inst. Discussion Paper No. 04-024/3).

Welsch, Heinz (2006). ‘Environment and happiness: Valuation of air pollution using life satisfaction data.’ Ecological Economics, 58 (4), 801-813.

Economic Growth and Human Wellbeing (Part II)

(This post is the second of a three-part series. See Part 1: Introduction and Part 3: The Psychological Down Side of Growth.)

Part 2: Revisiting Limits to Growth

Whether the focus is on pollution, biodiversity loss, resource depletion or climate change, the underpinning cause is the same: the human consumption that drives economic growth. As the ecologist Jane Lubchenko said in her address as the president of the American Association for the Advancement of Science in 1998, “During the last few decades, humans have emerged as a new force of nature. We are modifying physical, chemical, and biological systems in new ways, at faster rates and over larger spatial scales than ever recorded on earth. Humans have unwittingly embarked upon a grand experiment with our planet. The outcome of this experiment is unknown, but has profound implications for all of life on Earth”.

Our levels of consumption are high and rising and, in the West, we are more affluent – and wasteful – than we have ever been.  Add to that the rising affluence of the middle classes in India and China who are beginning to consume like we are, and it is obvious that climate change is not the only momentous problem we’re facing; there are many serious commentators who believe we are already overshooting the earth’s carrying capacity.  Visit any large city and witness the vast activity of the modern market place, the mobilisation of resources and energy from around the world. Two questions immediately suggest themselves: How can this last? And do we actually benefit from all that consumption?

Dasgupta (2010) has demonstrated that a country’s wealth per capita can decline even while GDP per capita increases and the UN Development Index records improvement. This is because the GDP does not deduct the depreciation of capital (including natural capital) since nature is taken to be a fixed, indestructible factor of production. As Dasgupta points out (p 6), the problem with this assumption is that it is wrong: “nature consists of degradable resources. Agricultural land, forest, watersheds, fisheries, fresh water sources, river estuaries and the atmosphere are capital assets that are self-regenerative, but suffer from depletion and deterioration when they are overused”. 

Consider, too, the world’s fisheries. The global catch rose from 19 million tons a year in 1950 to 80 million tons by 1990, with the result that 70% of the world’s saltwater fish are judged to be overexploited or fully exploited. Some fisheries have collapsed altogether. Similarly, many of the planet’s mineral and energy resources are being used so rapidly that we are fast approaching – and may even have passed – the peak of production, the case of oil being the most often debated (Speth, 2008).

Modern economies evolved on the basis of availability of cheap oil – cheap to extract, cheap to use; oil permeates every corner of our daily lives both as source of energy and a component of manufactured goods. No major industrial society can survive today without oil – food, transport, heating, plastics, cars, drugs, prosthetics, computers, housing. But global oil production is forecast to peak and then begin terminal decline, the “big rollover” where demand will exceed supply. Predictions vary about imminence of problem: some think it is already happening; others put it within the next 10-15 years; others still up to 40 years hence. But all agree that it is a real problem. It means that before oil runs out it will become too expensive to use for many purposes, especially private transport. Of course, it is the least well off in the community who are most vulnerable to such price increases, the same people who are often out of range for reliable public transport. Even if we ignore the global warming imperative to decrease oil use, even the most unvarnished optimists recognise that new fields in prospect will not cover the shortfall if we continue growth as usual. It is estimated that exploration is turning up one new barrel of oil for every six we consume. Just as oil supply is looking uncertain, global demand is rising faster than ever.

Despite optimistic pronouncements  about the dematerialisation of advanced economies, the aggregate volume of material used globally (and in most regions) is also rising quickly and – apparently inexorably; resources like fuels, wood, sand, minerals, biomass are being used at ever increasing rates. Material flow analysis, which tracks the extraction of such resources, shows that in 1980 we extracted and used 40 billion metric tons of such materials. Twenty five year later, the figure had increased by 45% to 58 billion (Schor, 2008). And despite improvements in the efficiency of production, the per capita consumption of such materials has been nearly constant because of the expanded scale of production.

These changes have human impacts too. The World Bank recently highlighted the fact that a third of the world’s population faces water scarcity, that 70% of the world’s fisheries are overexploited, that soil degradation affects a significant proportion of both irrigated and rain fed agricultural lands and that every year at least a million people die prematurely from respiratory illnesses linked to air pollution.

There are strong arguments – including from within profession of economics – that growth indicators like the GDP and the concept of growth itself fail to capture these unfolding environmental and humanitarian challenges. Indeed they mask inequities and fail to register actual declines in well-being, even in the wealthiest of countries

There have been some attempts to move to a more complex set of national accounts.  Work is being undertaken in the EU and within the OECD to construct robust indices to better capture wellbeing: composite indices of elements overlooked in the GDP – the state of environment, social indicators and non-market exchanges. Following international initiatives, Australian researchers (Hamilton & Denniss, 2000) also constructed an alternative index, the “Genuine Progress Indicator” to remedy the deficiencies in the GDP and to measure changes in well being in Australia over the last 45 years. This analysis showed that GDP per person increased from $9 000 to $23 000 or 2.1% per annum over the period 1950-1995 but the GPI rose at a rate of only 1.3% from $9 000 to $16 000.  Of note is that fact that the GPI did not increase at all from late 70s i.e. in the last two decades. In other words, the benefits of economic growth to the society were fully offset by the costs. The principal contributors to this phenomenon were found to be the increasing levels of foreign debt, the costs of underemployment and overwork, the impact of environmental problems, the escalating cost of energy resource depletion and the failure to maintain the national capital stock. Similar results have been obtained in many developed countries.

Economic growth does not appear to be the last word in improving the quality of our lives. On the contrary, it appears to be placing severe stress on our life support systems. As Lester Brown puts it (, we need a Plan B.



Dasgupta, P. (2010) Nature’s role in sustaining economic development, Philosophical Transactions of the Royal Society, 365 (1537), 5-11.

Hamilton, C., & Denniss, R (2000). Tracking Well-Being in Australia: The Genuine Progress Indicator 2000. Discussion Paper no 35, Australia Institute, Canberra.

Lubchenko, J. (1998). Entering the century of the environment, Science, 279, 492.

Schor, J. (2010). Plenitude: The New Economics of True Wealth. Melbourne: Scribe.

Speth, J. (2008). The Bridge at the Edge of the World. New Have: Yale University Press.




Economic Growth and Human Wellbeing (Part I)

Economic Growth and Human Wellbeing in Three Parts

The current debate about our planetary future is infused with fear that we may lose some economic prosperity during the transition to a low-carbon economy. Although those fears are largely misplaced, it is nonetheless important to examine to what extent our wellbeing as a species relies on economic growth. Do we need growth to be happy?

This three-part series of posts over the next few days addresses this issue. See Part 2: Revisiting Limits to Growth and Part 3: The Psychological Down Side of Growth.


Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

Kenneth Boulding, economist (1920-93)



The well being of nations and of their people is almost invariably judged by the rate of economic growth. Such growth is driven by the increasing consumption of goods and services. Accordingly, government policy is often based on the premise that higher growth rates and greater affluence are conducive to happiness – if the GDP is rising, we should all be better off, in every sense. Research here and in other developed countries shows that even when people obtain more money and material goods, they do not necessarily become more satisfied with their lives or more psychologically healthy. Once people are above modest levels of income, gains in personal wealth have little or no incremental benefit in terms of happiness and wellbeing.

In fact, research shows that merely aspiring to have greater wealth or more material possessions is likely to be associated with increased personal unhappiness. People with strong materialistic values and desires report more symptoms of anxiety, are at greater risk of depression, and experience more bodily discomfort than those who are less materialistic. They watch more TV, take more alcohol and drugs and have more impoverished personal relationships. 

Increasing consumption also results in the accelerated depletion of finite resources; in the pollution of air, land and water; in climate change and biodiversity loss; and, beyond a certain point, human discomfort. What is often overlooked in the simple equation of wealth and happiness is that the social and environmental consequences of rising consumption may also generate psychological risks of their own. People exposed to constant change, persistent noise, drought and unusual weather are more likely to report feelings of unhappiness and to experience in higher rates of mental illness. The ramifications of these effects will be discussed.

Part 1: How we live today

How did we come to think in exclusively economic terms (about policy)?

Tony Judt – ABC Radio National 13/01/2011

There are many who agree with the historian, the late Tony Judt, that “Something is profoundly wrong with the way we live today.” In his book, “Ill Fares the Land”, Judt (2010) argued that for the last three decades we have made a virtue out of the pursuit of material goals to such an extent that  “this very pursuit now constitutes whatever remains of our sense of collective purpose”. He suggested that this pursuit is now firmly entrenched in an orthodoxy which judges achievement and public policy in exclusively economic, rather than moral, terms. The result is that when we consider whether to support a particular proposal or initiative, we don’t ask whether it’s good or bad, whether it will help bring about a better society of a better world, but rather, how will it affect the economy, whether it is efficient, whether it will lead to increases in GDP and, if so, how much it will contribute to growth.

Most people do not appear to regard this as a problem; the equation of wellbeing with economic growth is taken as given and the identity of society with the economy as uncontentious. Indeed, they do not see any alternative to this construction; it is simply the way the world works. Almost without exception, politicians, business people, journalists and financial commentators regard the need for economic growth as unarguable. In fact, to raise questions about economic growth is to risk banishment from contemporary political discussion.  But as Judt has pointed out, this avoidance of moral considerations in assessing public policy and the restriction of policy discussions to the narrow economic questions of profit and loss is not an inevitable human tendency but, as he put it “an acquired taste”, and a recent one at that.

Much of what we judge to be “natural” today would probably surprise our grandparents; the focus on growth rather than prosperity or the standard of living accelerated during the neo-liberal dominance in the 1980s, when we saw the emergence of an obsession with wealth creation, an increasing push to privatize public assets and growing disparities between rich and poor, both within and between nations. At the core of this is an uncritical admiration for “the free market”, a naive belief in endless growth and, particularly in the United States, hostility toward government action to modify any of these results.

As a consequence, a nation’s progress is now almost invariably judged by how it implements policies which lead to growth in the scale and scope of market activity; growth is the answer to almost every problem – more economic growth is invariably seen as beneficial. Other national attributes such as the level of equality, the incidence of social problems, the respect for human rights, the health and wellbeing of citizens, the state of the environment and contribution to global citizenship, to name but a few, are not given much weight – or much publicity. This near exclusive focus on growth appears to make people uneasy; as the same time as they are experiencing higher and higher levels of material comfort, 83% of Australians endorse the view that ‘Australian society today is too materialistic, with too much emphasis on money and not enough on the things that really matter’[1].   

However, it remains the case that for many, especially those in a position to influence public policy, the economy and society are identical; if one grows, the other must be improving along with the quality of people’s lives. The market is seen as immutable and inevitable, a mechanical process optimal for arbitrating decisions about what resources are available and who should share in them. We are told that, left alone, markets will produce the most efficient – and just – outcomes. While this confidence may have been shaken a little in the recent financial meltdown, it rebounded remarkably quickly on the foundation of taxpayer funded bailouts of the corporate “victims” of market failure.

There are, of course, people who dissent from this orthodoxy, people who recognise that markets are part of a broader social fabric, human creations which come in a variety of forms, governed by rules and supported by agreed conventions and legislation and which do not always produce optimal outcomes for society. In his very entertaining treatise on capitalism, Cambridge economist Ha-Joon Chang (2010) examines the extravagant claims of the free market fundamentalists and concludes that “the fundamental theoretical and empirical assumptions behind free market economics are highly questionable” (p 252).


A cursory perusal of any day’s media will reveal our continued, collective fixation with tracking changes in economic growth, usually indicated by shifts in Gross Domestic Product (GDP). Regular bulletins on the state of the GDP are issued and events, such as the recent Queensland floods and cyclones, are read through the prism of their effects on growth. The goal of economic growth is clearly the touchstone for judging major public policy decisions and is the most familiar subject of economic commentary in the media.  Economies and firms are judged not just by whether they are growing, but by how fast they grow.  Some have described this as a “secular religion” and the historian J.R. McNeill concluded that “the overarching priority of economic growth was easily the most important idea of the twentieth century” (p 336).

Until fairly recently, little attention was paid to the costs of such a focus; now the consequences of environmental degradation and rising CO2 emissions – together with challenges to economic orthodoxy from within profession – are forcing some reassessment. As Nobel Laureate Joseph Stiglitz (2009) has argued, using the language of orthodox economics, “pollution is a global externality of enormous proportions.” This is similar to the view expressed by Ross Garnaut (2010) in reporting on the economic effects of climate change, that “polluters are not paying the costs of the damage they cause.”  Orrell (2010) puts it more bluntly: “the real credit crunch is not the one involving banks, but the one involving the environment” (p 214).

It is obvious that there are two main omissions from the models and theories of growth in neoclassical economics: the planet and the human families and communities which live within it. These models neglect the fact that the human economy is embedded in the biosphere which consists of living things, the products of living things and the necessary resources and conditions for living things to survive and thrive. When they are considered at all, such resources tend to be viewed as infinite; energy economist Adelman, writing in 1993 said, “minerals are inexhaustible and will never be depleted” (p xi). Often such consideration is simply omitted altogether, so problems are effectively defined out of existence. But recently, Nobel Prize winning economist and New York Times columnist Paul Krugman reminded his readers that[2] “we’re living in a finite world, one in which resource constraints are becoming increasingly binding.”

As eminent UK economist Partha Dasgupta (2010) has acknowledged, “we economists see nature, when we see it at all, as a backdrop from which resources and services can be drawn in isolation. Macroeconomic forecasts routinely exclude natural capital.  Accounting for nature, if it comes into the calculus at all, is usually an afterthought to the real business of “doing economics”. We economists have been so successful in this enterprise that if someone exclaims “economic growth!” no one needs to ask “Growth in what?” – we all know they mean growth in gross domestic product (GDP)” (p 6).

Common sense tells us that there is a difference between the mere monetary transactions captured by the GDP and a genuine addition to a nation’s well being. It is clear, indeed, that increases in GDP do not necessarily indicate any improvement in the quality of life because it has a number of major shortcomings, including a failure to account for how increased output is distributed, the omission of household and voluntary work, the inclusion of expenditures incurred because of pollution, transport and industrial accidents, war, crime and ill health, the failure to account for changes in the value of stock of both built and natural capital or to measure public services (such as parks) not purchased in the market. Fundamentally, it says nothing about the content of the transactions which make up the GDP.  “More” or ”less” of something means nothing, unless we know of “what”.

All this matters because adopting growth as the pre-eminent social and economic goal and using the GDP as its index fixes the direction and content of national policy; if we continue to ignore the shortcomings of both the goal and the measure, policies will head us in the wrong direction, diminishing people’s quality of life and destroying the natural environment on which it depends.



Adelman, M.A. (1993). The Economics of Petroleum Supply, Cambridge, MIT Press.

Chang,  Ha-Joon. (2010). 23 Things They Didn’t Tell You About Capitalism. London: Allen Lane.

Dasgupta, P. (2010) Nature’s role in sustaining economic development, Philosophical Transactions of the Royal Society, 365 (1537), 5-11.

Judt, Tony (2010). Ill Fares the Land, New York Review of Books.

McNeill, J.R. (2000). Something New Under the Sun: An Environmental History of the Twentieth Century World. New York: Norton, p 336.

Orrell, D. (2010). Economyths: Ten Ways That Economics Gets It Wrong. Sydney: Allen & Unwin.

Stiglitz, J. (2009). A cool calculus of global warming. Project Syndicate Blog.