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Interview with Prof. Dr. Martin Kolmar

Martin Kolmar is Professor of Economics and Director of the Institute of Business Ethics at the University of St.Gallen. Martin was awarded the Credit Swiss Teaching Award by the student body in June 2021. In this interview, he talks about the relevance of sustainability in economics and shows how he takes up and integrates topics like the climate crisis and sustainability in his teaching.

What role do sustainability issues like climate change play in economics for you?

In terms of the history of ideas, issues like climate change are found in four areas of economics. (1) In market failure theory, which identifies externalities as the main cause for inefficiencies and looks for ways to internalize them. Here, there are major overlaps with the field of public economics. (2) In government failure theory, which identifies the main cause of inefficiencies as misaligned incentives of political actors and looks for possibilities to internalize them. This area has a great deal of overlap with the field of political economy. (3) In growth theory, which searches for the causes of long-term economic development. (4) In environmental economics, which builds on but is more applied than the first three research areas mentioned above. The normative criteria applied to evaluate market- or, more generally, institutional outcomes are usually Utilitarianism and Pareto efficiency, tailored towards intergenerational allocation problems. One can, in principle, integrate normative concepts such as sustainability into these theories. It remained, however, alien to normative economics for a long period of time. The reason is mainly methodological, because phenomena like the collapse of ecosystems were ruled out by assumption in traditional growth theory; the assumptions regarding the structure of the production technology alone ensured sustainability. Nevertheless, economic theory can identify key aspects such as externalities, the role of collective action at the national or international level, or, in recent years, the role of cognitive and affective biases in explaining some of the main causes of the climate- and biodiversity crises. It also proved to be very effective in developing possible solutions like markets for CO2.

Why is it important for you to integrate these topics into teaching?

Historically speaking, pretty much every generation has had to deal with huge challenges, be it natural disasters, diseases, or wars. The climate and biodiversity crises are the central challenges facing our generation and probably the generations to come. And the resulting changes encompass almost every aspect of our lives, whether we act decisively or not: either our lives will change because we want to change them, or they will change because we don’t want to change them. Climate change affects the spreading of diseases, generates migration, changes everyday life in many facets. Our humanistic self-image will be put to the test. There will be political and cultural feedbacks, and our ethical standards will change in this process. We will have to rethink how we want to live, what is important to us.

Therefore, there is no meaningful alternative to dealing with these issues comprehensively in research, teaching, and as a citizen.

How do you implement this this in your own teaching?

I do not offer a course that is fully dedicated to the topic of the climate or biodiversity crisis. Rather, these topics are addressed within my courses and from the perspectives of the lectures’ topics. It is best if I give a few examples.

  • In my assessment lecture “Introduction to Economics,” I look at the crises from the perspective of externalities and market failures. This focus helps students to understand central causes of the problem, so that they can then take an informed approach to potential solutions such as CO2 pricing, etc.
  • In my course “Economy of Happiness,” I look at different theories and ideas about what it means to have a good, flourishing life, and how those ideas influence our perception of the economy. Our actions are an expression of our view of what it means to live a fulfilling, happy life. But how do we know what it is and what it takes to live such a life? How do we know what our interests are, and where do our ideas about them are coming from? And are they correct? The lectures cover a wide range of topics from empirical happiness research and positive psychology to Greek virtue ethics and Buddhism, all supported by empirical research. In the process, one automatically comes to questions regarding our treatment of ourselves, other people and animals, as well as “nature.”
  • In the course “Modern Theories of Justice,” I deal with contemporary theories of justice. This includes topics like population growth and the rights of future generations, or theories on animal and ecosystem ethics. Furthermore, I am covering questions of international justice. This is a key aspect in the context of the climate crisis, as the costs will vary greatly from region to region. There, we also take a closer look at how economists evaluate the costs and benefits of climate change in their simulation models and how this, in turn, can be evaluated from an ethical point of view.

But the topic also plays a role in my other courses.

What do you wish for the future in terms of teaching at the HSG in general and specifically in terms of economics?

Tackling the climate and biodiversity crises does not allow for silo solutions. We cannot find reasonable solutions if we look at them from an exclusively scientific, economic, managerial, legal, or political point of view. And the pandemic has again reminded us that questions of social acceptance do play a central role when we are discussing policies. And there is probably also a need to reflect on the ideological causes of our behavior. Therefore, I see the great opportunity of the HSG in the fact that we can combine at least some of the aspects mentioned above to make our contribution to a comprehensive and socially as well as ethically acceptable way of dealing with the crises. In doing so, we are in principle well positioned because of the integrative approach that we live at this university and our emphasis on contextualization of knowledge. We should take advantage of this strength.

Many people are afraid of the changes ahead or shy away from decisive reactions. Do you also see positive aspects of the crises?

Although the challenges are enormous, it is essential to accept them and to react with a positive attitude. We should remind ourselves that there are also opportunities in the transformation ahead, because otherwise change processes will not succeed. The great translator of Chinese philosophy and poetry David Hinton once put it this way: “If anything is going to alter our destructive path, it’s a shift in consciousness. Until people start feeling a connection between their own body and mind and the rest of “nature” – until they come to understand this as a continuum—they’re not going to care.” And this is where I see the great opportunity hidden in the crises: We can grow beyond ourselves and our everyday problems and prove that we can solve a global problem without giving up on humanitarian values. We can understand that we are a small part of a sublime, beautiful, and precious network of life and that we cannot lose but only gain if we get on our way to protecting it.

Author: Tabea Bereuther

Date: 27. June 2021