An Introduction to Ecological Economics

| October 30, 2017 | Leave a Comment

Media Type: Article - Foundational

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The authors present an introduction to ecological economics, including the economic and ecological histories it builds upon, how it differs from neoclassical economics, and what it means for our way forward. Broadly, “Ecological economics represents an attempt to recast economics in this different scientific paradigm, to reintegrate the many academic threads that are needed to weave the whole cloth of sustainability” (p18). The authors state, “Economics arose in midst of moral questions with respect to the obligations of individuals to larger societal goals while chances for personal material improvement emerged…Key ethical issue has always been whether the pursuit of individual greed can be in the interest of society as a whole” (p19). Classic economics answered these questions with the theory that market forces operate as an “invisible hand” that guides free markets to a beneficial state of equilibrium. Individuals pursuing self-interests within the market, therefore, benefit the common good. This theory relies on multiple assumptions, some which deviate from reality. Despite these differences, the theory of the market as an “invisible hand” continues to dictate economic policies. Ecological economics is a commitment to working across the disciplines of ecology and economics to improve both economic and environmental policies. At its heart, ecological economics holds three interdependent goals: sustainable scale, fair distribution, and efficient allocation (p79).

It is ecological economics’ inclusion of scale that most distinguishes it from neoclassical economics. Scale refers to the “physical volume of throughput”, that is “the flow of matter-energy from the environment as low-entropy raw material and back to the environment as high-entropy wastes” (p80). The author argue that when attention is paid to the scale of the current economy is is clear that “limits have been reached and exceeded” (p12). Unlike neoclassical economics, ecological economics does not make the assumption of substitutability between human-made and natural capital, which is often used to argue against the presence of environmental limits to economic growth. Grounded heavily in the science of thermodynamics, ecological economics instead assumes the types of capital are complements but not perfect substitutes and makes the point that due to the “increasing scale of human presence” we have switched from facing a limiting factor of human-made capital to one of natural capital. As we move forward, natural capital and the unique role it plays in the economy, must be sustained.

The total impact, or economic throughput, determines whether natural capital can be sustained and serve as assets for future generations. Similarly to the I=PAT formula of Holdren and Ehrlich, the authors note “In a full world both human numbers and per capita resources use must be constrained” (p88). The authors go on to dismiss the potential for decoupling and further technological fixes to meaningfully reduce this impact. Stating, “…the welfare of the poor, and indeed of the rich as well, depends much more on population control, consumption control, and redistribution than on the technical fix of a 5- to 10-fold increase in total factor productivity” (p103).

In the above statement, and in other instances throughout the book, the authors explicitly mention the need to realize a stable human population size that is consistent with an economy of sustainable scale. In this, the authors are clear that “…the policy of focusing solely on population control is known to be insufficient” (p110). Instead, they propose that demographic research and policies expand to consider other issues and move beyond solely focusing of population control:

“…a new framework should expand the definitions of issues: focus not only on population size, density, rate of increase, age distribution, and sex ratios by also on access to resources, livelihoods, social dimensions of gender, and structures of power. New models have to be explored in which population control is not simply a question of family planning but of economic, ecological, social and political planning; in which the wasteful use of resources is not simply a question of finding new substitutes but of reshaping affluent lifestyles; and in which sustainability is seen not only as a global aggregate process but also as one having to do with sustainable livelihoods for a majority of local people” (p111).

This new framework fits with the general point that the scale of population and consumption together determine our total impact. Whereas the total impact is ultimately constrained by what earth has capacity for, it is up to society to decide how to divide it between numbers of people and per capita resources. Decisions about this division relate to the second and third goals of ecological economics: fair distribution and efficient allocation. In regards to fair distribution, the authors assert that it would be “Reasonable for ‘the poor’ to demand access to remaining natural resource base –at least to reach minimally acceptable material living standards” (p14). Referencing concepts including the threshold hypothesis for the relationship between wellbeing and income and Max-Neef’s nine categories of human needs, the authors also stress the difference between qualitative development and quantitative throughput growth. “A developing economy is one that is getting better, not necessarily bigger, so that the well-being of the (stable) population improves” (p16).

Ultimately, the authors present some concrete directions for ecological economic policies to pursue: 1) broad natural capital depletion tax (Costanza & Daly 1992); (2) application of precautionary polluter pays principle; and (3) system of ecological tariffs (p221). Additionally, the case is made for “Getting the price right” by finding ways to include environmental externalities. The author conclude with the following sentiment:

“…over centuries of believing the progress will take care of our progeny, modern peoples lost their sense of responsibility for their offspring and the institutions needed to assure appropriate transfers of assets. Let’s consider the institutional aspects that complemented and maintained responsibility” (p160).

Overall, the book provides a very sound introduction to economics, ecology, and ecological economics. This is helpful both for understanding the strengths of ecological economics, and some of the critiques the movement have received. Particularly, criticism that the ecological economic movement thus far has fallen short of its goals because it continues to look for solutions within the neo classical economic system, is also applicable to this book.

Find more resources on alternatives to a progrowth economy.

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