Multifunctionalism, the economic challenges (I think)

16 Jul 2014 Comments 0

 

Image from d3js.org. No real link to the content of this post, this is just the other stuff I'm busy with and I think the complexity carries through. And it's pretty.

A huge challenge to wastewater biorefineries, in my view, and I guess to biotech in general, and certainly to my personal unconventional approach to business, has been the 'different worldviews' of the different actors. Trying to get scientists, business people and engineers in one room is hard. Trying to get biotech entrepreneurs and wastewater professionals talking about resource recovery should be easier. It is, frustratingly, even harder. At long last, I think I might be able to tease apart why. From there, I hope to find some implementable solutions to bridge this gap.

 

These thoughts come after a presentation by Nicolas Befort at the RRB 2014 conference held in Valladolid, Spain. His talk was titled "Biorefineries and the Bioeconomy in search of business models". I'm in email communication with him, but at this stage my thoughts are a mess, so I won't try to articulate them yet. He is also French, so most of the publications I found were too. But, this is one article I found that I think is intriguing enough to summarise here. Comments welcome.

 

Pre-amble

One thing Nicolas said in the email thread that is worth copying is his idea of the challenge:

"To me, people from biotech and wastewater biorefinery developed business models and ways of thinking... the value-chains that are completely different, and so, they don't think of the products in the same way. In biotech industry (or especially in this technological trajectory in biorefinery), it is mostly for the production of low value product, that could not be efficient from an economic point of view (because you need to have huge plants to have economy of scale on plant fractionation but you need for this a huge market, plus the problem of heating...). But from a micro point of view (or from the point of view of creating economic activities), the articulation of them both to create a productive heritage could be a good idea."

 

These sentiments were echoed in a very good conclusion from poster 38 at the RRB conference, on Seaweed Biorefineries, by Paulien Harmsen et al, from Wageningen, that can be applied to biorefineries in general:

Many initiatives of seaweed valorisation focus on fermentation of the whole seaweed to low-value energy carriers such as biogas or ethanol. It will be more sustainable to produce high value-added products from seaweeds and use residual fractions for conversion to biogas or other energy-carriers.

 

So with this setting a bit of the context, here's some notable excerpts from an article related to this:

 

Non-Trade Concerns in Agricultural and Environmental Economics: How J.R. Commons and Karl Polanyi can help us?

authors: Denis Barthelemy, Martino Nieddu

prodinra.inra.fr/ft?id=9EE5DF8A-1666-4037-82FF-DB6956D8A867

 

Introduction

Some of conflict around agriculture in the Word Trade Organisation is focused on Non Trade Concerns (NTCs). In the first section of this paper, we present how the OECD connects these NTCs to the notion of multifunctionality and tries to promote its own “positive” approach. In the second section, we use J.R. Commons’s conception to propose a specific interpretation of the OECD’s position. This position implicitly constitutes a particular institutionalist practise aimed to reduce the multifunctionality of agriculture, while proposing recourse to the market as an “organising social order”. But, in a Commonsian view, trade and non trade outputs result from the same institutional process, and therefore may not be analytically separated. In the third section, we use Polanyi’s framework to suggest that NTCs cannot be considered as “non economic” items, but belong to “substantive economy” where they take place with their own regulation, resource-allocation decisions, and non market price system and in opposition and complementarity to market economy.

 

From agricultural market liberalisation to multifunctionality

 

Multifunctionality means to produce several outputs at the same time.

 

Thereby economists recognized that economic policies may include legitimate domestic objectives such as preserving family farms and rural landscapes or ensuring food safety, food security, and animal welfare. These concerns reflect a fear that free market expansion and globalization may undermine the provision of valued non-market amenities and cultural traditions associated with agriculture.

 

An implicit institutional constructivism

 

The OECD-recommended method attempts to make agriculture the least multifunctional possible. Furthermore, we must point out that this method needs to use an underground institutionalist method (Barthelemy and Nieddu 2004). In this, we may recognise Commons’s point of view, according to which markets are instituted. It allows us to criticize both sides of the position held by OECD and economic mainstream in this field.

 

To take a basic example, jointness between hog production and negative environmental externalities did not economically exist before social damage was politically and judicially recognized.

 

Market value can only appear after the market is instituted as the reasonable solution, given the context and time, to carry out the allocation of resources and goods among individual participants: “Commons viewed the choice of an appropriate institutional structure as the product of ‘inescapable’ societal value choices” (Schweikhardt 1988: 410).

 

The OECD and mainstream neo-classical economists arguments look quite paradoxical in as much as they irreducibly oppose individual and public purposes, market and public goods, and promote the former when at the same time their propositions require collective action.

 

The OECD and mainstream economic position … separates the values of a single process in order to create separate markets as much as possible; but this operation demands collective choices, the criteria of which cannot solely be reduced to market efficiency.

 

Coming back to the heart of the problem, how does one take into consideration the multiple functions of one single activity?

 

Agricultural multifunctionality is a good example in this field. It lets us see that there are two aspects, firstly that commodities and non trade outputs are associated, and secondly that they usually move in opposite direction, e.g., intensification of agricultural process associated with reduction of environment quality. The OECD and economist mainstream tries to avoid the debate by reducing the non trade outputs’ weight and disconnecting the relationship by erecting an absolute opposition between private and public goods. Through the Reasonable Value notion, Commons demonstrates that marketable outputs and public goods result from the same institutional process, and therefore may not be so completely opposed. Nevertheless, how does one take into account that both aspects are opposed and complementary at the same time? It is Polanyi’s approach which provides us with a way of confronting market rationality and non trade interest.

 

Trade and NTCs economic relationships in a synchronical approach

In “The Great Transformation” Polanyi uses analytical structure of a “double movement”. “It can be personified as the action of two organizing principles in society...The one was the principle of economic liberalism, aiming at the establishment of a self-regulating market”, and leading to “laisser-faire and free trade”; “the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization”, associated with “protective legislation, restrictive association, and others instruments of intervention” (Polanyi [1944] 1990, 138).

 

The Multifunctionality debate arises in circumstances where the intensification of agricultural process under market rationality meets the need to protect the environment, heritage value and food security. The latter concerns are part of what Polanyi calls “the principle of social protection aiming at the conservation of man and nature”, and the former are clearly connected with “economic liberalism”. Polanyi’s analytical structure is fitting to our subject.

 

How can both aspects be dealt with? Each of them is a valid “general purpose” in itself, according to Commons. Thereby they are in conflict without any “upper general purpose” to conciliate them.

 

However, Polanyi suggests another way. In opposition to the economic principle of formal rationality, “a sequence of acts of economizing” (Polanyi 1957, 378), he creates the “substantive economy” concept, where economy is defined as “the instituted process or culturally patterned arrangements by which a given human group provisions itself as a going concern. The focus is on the provisioning of social reproduction and on the instrumentality of economic activity vis-a?-vis the life process” (Stanfield 1989, 269). Formal economy allows only one kind of behaviour: maximise individual interest. In his substantive view of economic process, Polanyi introduces other economic ways of proceeding, such that each human being taking part in economic activity may have several behaviours. This suggests synchronical analysis in which the double movement market/protection has to be viewed not as sequential but rather as simultaneous. Each class or group takes interest in the market (the trading class of course, but working or peasant classes also in virtue of labour division and of separation of production and consumption) as well as in protection (tradesmen have families and need their future to be protected).

 

The synchronical approach recognizes for the same people at the same moment in time that they are involved both in market relationships and in protective non market economic relationships. European agricultural multifunctionality policy provides us with a good example.

 

Conclusion

Agricultural multifunctionality debate is of great interest because it echoes outside the realm of agriculture, in other fields of economic activities.

 

Synchronic analytical perspective means we have to deal with the market and non market economy together. This in turn implies two price regulation systems which react upon each other. In a sense we could speak of the mutual embeddedness of the market economy and the protective economy (for the latter we prefer the term “heritage economy”, Barthe?lemy, Nieddu and Vivien 2005).

This can be attained only when we cease to accept the prevailing one-sided conception of economic production which omits the effect every production exerts on the state of the world.

 

 

 

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