#41 Transforming economics for sustainability

No Island hopping but building bridges

Hi all,

Yes, it's finally done. Yesterday, I defended my PhD dissertation before a critical, diverse, and deeply engaged committee under the watchful eyes of what I was told was a pretty large audience, in a venue that was, quite literally, sweltering.

What mattered most to me was that we had a genuine academic dialogue about our economic system, examining it from sharply different perspectives. The goal wasn’t to arrive at definitive answers, but to reflect critically, listen, understand, build on ideas, and, naturally, defend my findings and thinking.

If you're curious to see how the defence unfolded—and perhaps form your impression—you can watch it here.

Of course, this was a moment of celebration for me. But to be honest, it feels more like a meaningful milestone in a much longer journey — one that is far from over.

Because the topic of my dissertation was so ambitious, it should come as no surprise that I did not – and could not – find all the answers. The questions I raised reach far beyond a single thesis: they touch on the very foundations of how we think about economics, and how we can transform it to serve ecological and social sustainability. There is still so much more to explore, to debate, to research – and, crucially, to co-create and experiment with others. Not just to make economics more relevant, but to make science itself more helpful in understanding and shaping complex systems, and for supporting systemic change.

In my dissertation, I investigated how economic theory, policy, and practice could be fundamentally reimagined in light of today’s ecological and social challenges. I examined how deep-rooted assumptions, such as the dependence on perpetual economic growth, have become structural features of our economic systems, limiting their ability to adapt or remain within planetary boundaries. I explored the dynamics of tipping points, both ecological and social, and how systemic risks tend to be overlooked by models built for equilibrium rather than disruption.

The dissertation also examines the diversity of institutional arrangements – varieties of capitalism – and how they influence different sustainability outcomes. I show that no system performs well across the board, but that institutional design matters: not just for redistribution or innovation, but for the very resilience and direction of economic development. Finally, I explore the nature of transitions – how systems change, and under what conditions transformation is possible, beyond mere optimisation or reform. I argue that a sustainability transition requires more than better tools or more innovative policies: it demands a rethinking of core goals, values, and epistemologies.

This is not the end of a project – it is part of a much longer journey. One that will require collective reflection, experimentation, and bridge-building across disciplines, institutions, and sectors.

For those who want to read my PhD, you can download it here:

Transforming Economics For Sustainability

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I will share here as a newsletter my ‘layman’s speech’ (a slightly adjusted version), so my dissertation and findings can be explained to non-experts. But this piece is not a summary. It is a reflection on how our economic thinking has evolved – and how it must evolve further, if we are to face the challenges of our time. It is a plea for reconnection: between disciplines, between people, and between our economy and the living systems it depends on.

From Island to Archipelago: Rethinking Economics for a Sustainable Future

Ladies and gentlemen,

Imagine a man washing ashore on a seemingly untouched island.
No markets. No prices. No laws.
Just himself, his ingenuity, and whatever the island has to offer.

This is the familiar image of Robinson Crusoe, not just a literary character, but also, perhaps surprisingly, the starting point for much of modern economic theory because many economic models begin with a kind of Crusoe: a rational individual, isolated from society, doing his best to allocate scarce resources as efficiently as possible.

From that solitary figure, we construct entire systems: markets, profit mechanisms, choices, incentives.
It’s a powerful metaphor. It simplifies. It clarifies. It allows us to model and predict.

However, when we examine the world around us today, we also see the limitations of this way of thinking.

What if the island isn’t endlessly fertile, even though our economic systems behave as if it is?
What if we always need more–more consumption, more growth, more profit – and we’re slowly running out of “more”?
And what if Crusoe is not alone on the island after all, but surrounded by others? Others with whom he must collaborate – or perhaps compete over the last coconut?

Why rethink economics?

Let me start with a reassuring message: economists are not indifferent to sustainability. Far from it.
There is a vast body of research on climate change, biodiversity, inequality –
and on the role of markets, behaviour, and policy in addressing these issues.

But still… something’s missing.

Much of this work is being done within frameworks that were designed for a different era – frameworks built on assumptions of infinite substitutability, perfectly functioning markets, and continuous growth. These assumptions are rarely questioned. They look at individuals, sectors, and even countries – but rarely at the entire system. They are embedded in the architecture of our models, like invisible scaffolding.

And as long as those foundations remain intact, sustainability remains an external factor—an afterthought.
It is treated as a side constraint, an externality, or a footnote to the “real” economic story.

But what if we turned that perspective around?
What if sustainability was not an appendix, but the starting point?
What kind of economics would we need if our primary concern were to ensure that human societies can thrive within ecological limits and social boundaries?

To answer those questions, we must look both forward and back.

A science frozen in time

Modern macroeconomics has a rich and complex history. It began as political economy, a field concerned not just with markets, but with moral philosophy, justice, and the organisation of society.

Over time, the discipline evolved into a more technical and mathematical field. The focus shifted towards rational choice, market equilibria, and efficiency. This brought increased precision – but at a cost.

The broader societal anchoring of economics was gradually lost.
Ecological limits, moral questions, and social dynamics all began to disappear from the heart of the discipline. Not because they were unimportant, but because they became hidden inside the assumptions.

And here lies the deeper issue: economics, like many of our institutions, has in some ways become frozen in time.

Many of the theories we still use were developed in the 19th or early 20th century – a time when natural resources seemed limitless, climate change was not yet on the radar, and inequality was either ignored, suppressed, or violently addressed.

Don’t get me wrong – these weren’t foolish thinkers, far from it. Their insights were often brilliant. However, their ideas were rooted in the challenges of their time: industrial expansion, colonial expansion, and unwavering faith in technological progress.

The danger is not that these ideas were once misguided; rather, it is that they remain so.
It is that we continue to apply them, essentially unchanged, to entirely different problems.

Three islands

So we need a new framework. And to explain it, I return to the image of the island. Not one island, but three.

• First, there is the economic island, concerned with production, efficiency, and market transactions.

• Second, the ecological island, which sustains life through ecosystems, resources, and planetary boundaries.

• Third, the social island is built on trust, institutions, relationships, and cooperation.

  

Each of these domains matters. But sustainability doesn’t emerge from any one of them in isolation.
It arises between them.

If the ecological island collapses, the economy will eventually follow.
If the social fabric is torn, cooperation and long-term planning become impossible.
Economies don’t function in a vacuum. They are embedded in—and dependent on—both society and nature.

So it’s not enough to study the islands separately.
We must build strong, resilient bridges between them.
And maintain those bridges – economically, politically, institutionally – because they are what hold the system together.

Growth dependency

But there’s more. Sustainability doesn’t just require broader thinking.
It demands that we confront a more uncomfortable truth: the economic system we’ve built has become dependent on growth.

Growth is no longer just a policy objective. It is a systemic requirement.
For profits. For investment returns. For employment. For tax revenues.
Without it, budgets strain, debt levels rise, and political legitimacy weakens.

This creates a vicious cycle:
To maintain stability, we chase more growth, even if it comes at the expense of ecosystems, communities, our own health or future generations.

And that is what makes us so slow to act.
Because systemic growth dependence means that the most obvious sustainability solutions – consume less, slow down, restore – are politically and economically unthinkable.

Why tipping points matter

This is where the idea of tipping points becomes critical (no surprise, given the name of my newsletter).

Sometimes, systems do not respond gradually.
They hold steady and then suddenly shift. Irreversibly.

A glacier collapses. A species disappears. A society loses faith in its institutions.
By the time we see the full consequences, it is often too late to react.

At those moments, price signals, efficiency improvements or digital dashboards are not enough. We need robust public institutions, collective foresight, and the ability to act before the threshold is crossed.

What does the evidence tell us?

Looking around the world, we see that countries with stronger institutions – those that embed trust, redistribute fairly, and plan for the long term – tend to be more resilient and socially sustainable.

But no country gets it entirely right. Some are better on social dimensions, while others excel in ecological ones. Every institutional model has blind spots. There is no perfect blueprint.

One striking pattern: listed companies often perform better in countries with weaker public policy and worse in countries with stronger sustainability governance.

Why? Because where the government fails, companies sometimes step in.
But where policy leads, companies rarely take the initiative.
The lesson: only governments and institutional change can drive real, lasting sustainability. The market won’t do it on its own.

Rethinking change

If we accept that systems must change, we must also ask: how does change happen?

There are three levels:

1. Optimisation – tweaking what exists.

2. Reform – changing rules and institutions.

3. Transformation – rethinking our goals, values, and assumptions.

Most of our current efforts are stuck in the first two.
We tighten environmental regulations. We adjust tax incentives.
But we rarely challenge the underlying logic of extract, grow, and consume.

Yet how we think about change depends on how we see the economy.
Is it a machine to be fine-tuned?
Or a living system shaped by relationships, culture, and values?

The most promising movements today are those that seek not just to improve economics but to reimagine it.

So what should we do?

From this perspective, a few priorities emerge:

• Put public values at the heart and anchor them legally.
  If we want sustainability to matter, it must be more than a good intention – it needs legal weight to guide decisions, even when short-term interests suggest otherwise.

• Stop measuring success only in terms of GDP.
  As long as we treat GDP as the scoreboard, we’ll keep playing the same game, even if it means winning at the expense of people or the planet.

• Reduce growth dependencies.
  Measurement of well-being is not enough. We also need to reform institutional structures that perpetuate an economy's dependence on growth.

• Respect ecological boundaries.
  Planetary limits are not theoretical constraints. They are hard edges, beyond which recovery becomes uncertain or impossible.

• Curb corporate dominance and support diverse models of cooperation. When a handful of large firms set the rules of the game, other ways of organising, like cooperatives or commons, rarely get a fair chance.

• Reform the financial system to reward long-term value.
  As long as our financial system rewards short-term profits and externalises risks, sustainable investments will remain the exception. We need a system that measures value in decades, not in days.

This is not just about doing more.
It’s about doing differently.
This is systems change.

Returning to Crusoe

And so, we return to Crusoe. At the end of this story, he’s no longer alone.

He lives in a community. He shares the island. He respects the limits of his environment. He builds trust, follows rules, and nurtures collective wellbeing.

He is no longer a simplified abstraction, but a human being among others, seeking meaning, justice, and connection.

And maybe that is the central message of this journey:

We don’t have to throw out the story of economics. But we do need to rewrite it. From individual to interconnected. From optimisation to regeneration. From an island to a system of islands, with bridges connecting them.

Because if we stay stranded on our island, we lose sight of what truly connects us.

That’s it.

Take care.

Hans