"Jeffrey Sachs - "Making room for prosperity" 
By Jeffrey Sachs, June 16 2008, in FT Economists' Forum www.ft.com/wolfforum (Copyright notice )
Martin Wolf, Financial Times chief economics commentator, last week reviewed a new book by Professor Jeffrey Sachs, Common Wealth:
Economics for a Crowded Planet, which, Wolf wrote, tackles the biggest question for the 21st century:
"Is it possible for the vast mass of humanity to enjoy the living standards of today's high-income countries?" Below is the response from Prof Sachs.
The biggest question in economics is whether there is room enough on the planet for 7bn-10bn human beings, tens of millions of other species, and economic convergence between rich and poor. The tendencies for convergence are powerful. Rapid economic growth in China and India reflects the powerful capacity of poorer countries to close technology gaps.
The results are impressive: income-doubling periods of seven to 10 years. The results are also harrowing:
profound threats to Earth itself and therefore to continued economic development and even survival of vast numbers of people and vast parts of the biosphere.
Martin calls me both optimistic and pessimistic at the same time. My point is that either the positive trajectory or negative trajectory is plausible. Physical resource limits alone will not do us in or end economic convergence. On the other hand, the market economy by itself will not solve a world-threatening crisis of sustainable development.
The market system fails to solve four fundamental classes of problems:
ecosystem functions (by writing natural resources out of the baseline growth analysis); population; extreme poverty (because of the dynamics of poverty traps); and technological pathways needed for sustainability (the assumption that if a technology is vitally needed, it will be found by market forces).
These are solvable problems. They require collective action as they are fundamentally in the character of public goods. Yet for the same reason they are not solved.
Part of the barrier is the ideology of market economics, which often denies these problems and therefore is short on producing practical solutions. The biosphere does not come packaged according to the assumptions of neoclassical economics. What we call externalities are the norms, not the exception. In ecosystems, the elements are in constant flux (including our species).
That makes a lie of the underlying assumptions of "private" property. A farmer that encloses his farm or puts on chemical pesticides has pervasive effects on a whole ecosystem. None of this mattered when Earth was still populated by 1bn of us, or perhaps even 2bn or 3bn. Yet in the past 250 years, the population has risen nearly 10-fold and the human population is still rising by about 75m a year.
Furthermore, ecosystems are under profound threat: we count as income what is in fact pervasive depletion of natural capital. Maybe we can overcome these constraints but with technologies that do not yet exist or that exist but are still very costly.
My optimism is indeed that our technological prowess can be good enough to address the harrowing challenges and that physical resource availability (energy, land, water, biodiversity) can suffice with the invention and diffusion of resource-saving technologies. I put great stock in renewable energies, especially solar power, but also safe nuclear power.
My pessimism is that there is nothing automatic (in market terms) about the development and application of such solutions. They require a new kind of economic analysis, vastly greater public awareness and consensus, and global co-operation on a scale not yet achieved.
We can end poverty with existing technologies for less than 1 per cent of rich-world income (see also "Energy Technology Perspectives 2008", a study by the International Energy Agency), yet we think it is much more important to argue about that proposition than to try it, while in the meantime about 10m children die each year of poverty.
My point, in the end, is that our traditional debate - should we be optimistic or pessimistic? - is not really the right framing of the question. The right issue is how to achieve the achievable sustainable development trajectory through an appropriate mix of public sector and private sector investment, backed up by a mix of public and private institutions at all scales. Good answers, I believe, will require a far more serious approach than our profession currently gives to these problems.
Jeffrey D. Sachs is the director of The Earth Institute, Quetelet professor of sustainable development, and professor of health policy and management at Columbia University
We have reproduced this article for scientific reference reasons only . Copyright The Financial Times 10 June 2008
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Prof Jeffrey Sachs, is the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University. He is also Special Advisor to United Nations Secretary-General Ban Ki-moon. From 2002 to 2006, he was Director of the UN Millennium Project and Special Advisor to United Nations Secretary-General Kofi Annan on the Millennium Development Goals, the internationally agreed goals to reduce extreme poverty, disease, and hunger by the year 2015. Sachs is also President and Co-Founder of Millennium Promise Alliance, a nonprofit organization aimed at ending extreme global poverty.