Why Ecological Why Ecological Economics?Economics?
Coevolutionary economicsCoevolutionary economics• Hunter-gatherer economics
– Accumulation = death
• Economics of early agricultural societies– Depended on technological advance
– Advent of property rights
• Industrial market economics– Use of non-renewable resources, fossil fuels
• Macroeconomics– Response to great depression
• Ecological economics– Driven by the growing scarcity of natural capital
From From Empty Empty
World to World to Full WorldFull World
So what distinguishes So what distinguishes ecological economics from ecological economics from conventional (neoclassical) conventional (neoclassical)
economics?economics?
Pre-analytic vision, Physics, Pre-analytic vision, Physics, Ecology, Ethics and PracticeEcology, Ethics and Practice
The pre-analytic vision of ecological The pre-analytic vision of ecological economicseconomics
The sustaining and containing system
The Ecological-Economic System The Ecological-Economic System is Extremely Complexis Extremely Complex
• Feedback loops
• Highly non-linear change
• Emergent phenomena
• Surprise
• Chaotic behavior
• Uncertainty and ignorance
The Pre-analytic Vision of The Pre-analytic Vision of Neoclassical EconomicsNeoclassical Economics
The ever-growing circular The ever-growing circular economyeconomy
Circulatory system, but no digestive system
The Economic System is SimpleThe Economic System is Simple
• Human behavior is very simple
• The market system is simple
• We can model the system mathematically, and show it moves towards an optimal equilibrium– Empirical examples challenging this
assumption?
• Perfect knowledge dominates uncertainty and ignorance
Physics aPhysics andnd Ecology: Ecology: Thermodynamics and Ecosystem Thermodynamics and Ecosystem
ServicesServices
1rst Law of Thermodynamics1rst Law of Thermodynamics
• Matter energy cannot be created or destroyed– We can’t make something from nothing, and we can’t
make nothing from something
– Natural resources are essential to economic production
– The opportunity cost of economic growth is degradation to ecosystems, i.e. a reduction in the flow of goods and services generated by natural systems: macro opportunity cost
22ndnd Law of Thermodynamics Law of Thermodynamics
• Entropy increases in the universe– All work (economic production) requires energy
– Market economy and fossil fuel economy began at same time
– All economic production becomes waste
– One way flow from natural resource-> human made economic service-> waste; IRREVERSIBILITY
– Think of our digestive system vs. circulatory system
• Opportunity cost of economic growth: waste emissions further reduce the flow of goods and services from nature
• Throughputs, not inputs
Laws of PhysicsLaws of Physics• Can’t make something from
nothing or vice versa• Can’t do work without energy• Disorder increases
Laws of ecologyLaws of ecology• Conversion of ecosystem structure into
economic products degrades and destroys ecosystem services e.g. biodiversity
• Waste emissions degrade and destroy ecosystem services e.g. climate
Economic Implications of the EE visionEconomic Implications of the EE vision
Diminishing Diminishing marginal returns, marginal returns, opportunity costs, opportunity costs, and and uneconomic growthuneconomic growth
So What?So What?
• Sustainable growth is an oxymoron
• Ever continuing growth in material consumption is an impossible goal
• BUT welfare is a psychic flux, not a physical flux.
• Economic development is possible, but not continuous economic growth
Uneconomic growth is best Uneconomic growth is best defined asdefined as
• A. Two consecutive quarters with no increase in GDP
• B. A situation in which the marginal costs of additional economic production exceed the marginal benefits
• C. A recession or depression• D. A situation in which the total costs of
economic production exceed the total benefits
• E. An oxymoron, because more is always better
Ethics: the desirable endsEthics: the desirable ends
The desirable endsThe desirable ends
• How do we provide a high quality of life for this and future generations?
• Consumption is only one narrow component of human needs
Sustainable ScaleSustainable Scale
• Ethical assumption: Future generations matter• Scale= the size of the economic system relative
to the ecosystem that contains and sustains it• There is a finite limit to the physical size of the
economic system• The limits to economic growth are determined by
ecological constraints. • Macro opportunity costs of economic growth do
not provide economic signals
Just DistributionJust Distribution
• Ethical assumption: future generations matter– Does it make sense to care about the well-being of
people not yet born and ignore the well-being of those alive today?
• Is sustainability possible without more equal distribution?– Do hungry people care about the future?– Can Americans continue to consume 25% of the
Earth’s resources?• Is depleting the earth’s resources fair to future
generations?• How do we decide on a ‘Just’ distribution?
Efficient AllocationEfficient Allocation
• We must use scarce resources to satisfy unmet needs as efficiently as possible– E.g. with the least possibel throughput
• Instrumental ends, not an end in itself
Economics in PracticeEconomics in Practice
• NCE– Disciplinary: learn disciplinary tools and apply
them to problems– Try to force reality to comply with theory
• EE– Transdisciplinary: focus on problems and use
whatever tools are necessary to solve them– Test theories empirically, make theory
conform to reality