The Nature of Resources, The Nature of Resources, and the Resources of Nature: and the Resources of Nature: Framing an Ecological Economics Framing an Ecological Economics Approach to Problem-SolvingApproach to Problem-Solving

Jon D. EricksonJon D. EricksonRubenstein School of EnvironmentRubenstein School of Environment and Natural Resourcesand Natural ResourcesUniversity of VermontUniversity of VermontBurlington, Vermont, USABurlington, Vermont, USA

jon.erickson@uvm.edujon.erickson@uvm.eduwww.uvm.edu/~jdericks/www.uvm.edu/~jdericks/

Allocation of scarce resources Allocation of scarce resources toward alternative desirable endstoward alternative desirable ends

1.1. What are the desirable ends?What are the desirable ends?

2.2. What scarce resources are needed What scarce resources are needed to obtain those ends?to obtain those ends?

3.3. What ends get priority? (How do we What ends get priority? (How do we allocate?)allocate?)

Where do you stand?Where do you stand?

Economic growth and environmental Economic growth and environmental protection are fundamentally in protection are fundamentally in conflict with one another.conflict with one another.

There should be no limit to the There should be no limit to the amount of money that an individual amount of money that an individual can earn in today’s society.can earn in today’s society.

Technology and human ingenuity will Technology and human ingenuity will solve our environmental problems.solve our environmental problems.

Allocation of scarce resources Allocation of scarce resources toward alternative desirable endstoward alternative desirable ends

MEANS ENDSALLOCATION

f (N, L, K)

f (L, K)

f (K)

f ($)

Household Firms (production

Factor services

Goods

Investment(3)

Personal consumption(4)

Savings(3)

Imports(5)Exports(5)

(2)GovernmentSpendingTaxes(2) Government

Financial markets

Other countries

Wages, rents, interest, profits(1)

What’s Wrong with this Picture?

The Epoch of Fossil Fuel Exploitation(after Hubbert, 1969)

0-5 -4 -3 -2 -1 +1 +2 +3 +4 +5

Iron inMiddleEast

StonehengeBuilt

Parthenoncompleted

Pyramidsconstructed

Mayanculture

Inquisition

BlackDeath

Magellan'sCircumnavigation

Steam Engine

100

200

300

Tri

llio

n k

wh

per

yea

r

Composition of U.S. Energy Use (Cleveland)

K

Allocated toAllocated toHumansHumans

Allocated toAllocated tothe Rest of Naturethe Rest of Nature

Time

Low

en

trop

y m

att

er

& e

nerg

y

Ecosystem Goods Ecosystem Servicesvs.

Knowledge

Certainty Risk Uncertainty Ignorance

Allocation of scarce resources Allocation of scarce resources toward alternative desirable endstoward alternative desirable ends

1.1. What are the desirable ends?What are the desirable ends?

2.2. What scarce resources are needed What scarce resources are needed to obtain those ends?to obtain those ends?

3.3. What ends get priority? (How do we What ends get priority? (How do we allocate?)allocate?)

Desirable Ends:

1. Sustainable Scale

MB >= MC

2. Just Distribution

3. Efficient Allocation

Driving Questions:

1. Growth and the Environment?

2. Limits on income?

3. Technology and ingenuity?

1. Sustainable Scale1. Sustainable Scale

1. Sustainable Scale1. Sustainable Scale

1. Sustainable Scale1. Sustainable Scale

US

40

90

140

1940 1960 1980 2000

UK

40

90

140

1940 1960 1980 2000

Germany

40

90

140

1940 1960 1980 2000

Austria

40

90

140

1940 1960 1980 2000

Netherlands

40

90

140

1940 1960 1980 2000

Sweden

40

90

140

1940 1960 1980 2000

Chile

40

90

140

190

240

1940 1960 1980 2000

Indices of ISEW (Index of SustainableEconomic Welfare) and GDP (1970 = 100)

Energy per Capita vs. Happiness (worldvaluessurvey.org)

Is Qualitative Development Possible without US-style Energy Use?(Source: UNDP, 2002, WRI, 2002)

Income

82.7%

11.7%

2.3%

1.9%

1.4%

Population

20%

20%

20%

20%

20%

Global Income Distribution

2. Just Distribution2. Just Distribution

OverconsumersOverconsumers

1.3 billion1.3 billion

> US$7,500 per capita> US$7,500 per capita

SustainersSustainers

3.5 billion3.5 billion

US$700-7,500 per US$700-7,500 per capitacapita

ExcludedExcluded

1.3 billion1.3 billion

< US$700 per capita< US$700 per capita

Travel by car and airTravel by car and air Travel by bicycle and Travel by bicycle and public surface public surface transporttransport

Travel by foot or Travel by foot or donkeydonkey

Eat high-fat, high-Eat high-fat, high-calorie, meat-based calorie, meat-based dietsdiets

Eat healthy diets of Eat healthy diets of grains, vegetables & grains, vegetables & some meatsome meat

Eat nutritionally Eat nutritionally inadequate dietsinadequate diets

Drink bottled water Drink bottled water and soft drinksand soft drinks

Drink clean water plus Drink clean water plus some tea and coffeesome tea and coffee

Drink contaminated Drink contaminated waterwater

Use throwaway Use throwaway products & discard products & discard substantial wastessubstantial wastes

Use unpackaged Use unpackaged goods and recycled goods and recycled wasteswastes

Use local biomass and Use local biomass and produce negligible produce negligible wasteswastes

Live in spacious, Live in spacious, climate-controlled, 1-climate-controlled, 1-family homesfamily homes

Live in modest, Live in modest, vented, multiple-vented, multiple-family homesfamily homes

Live in rudimentary Live in rudimentary shelters or in the openshelters or in the open

Maintain image-Maintain image-conscious wardrobesconscious wardrobes

Wear functional Wear functional clothingclothing

Wear secondhand Wear secondhand clothing or scrapsclothing or scraps

NATURE|VOL 415 | 10 JANUARY 2002 |www.nature.com

3. Efficient Allocation3. Efficient AllocationHouseholds Firms

MaximizeUtility

MaximizeProfit

P

Q

G1

G2

CS

PS

What are the characteristics of resources What are the characteristics of resources relevant to the allocation question?relevant to the allocation question?

Goods vs. Services (Flows vs. Funds)Goods vs. Services (Flows vs. Funds) SubstitutabilitySubstitutability IrreversibilityIrreversibility RenewabilityRenewability UncertaintyUncertainty ExternalityExternality

RivalnessRivalness ExcludabilityExcludability

Supply SideSupply Side f (N, L, K; r)

ExcludableExcludable Non-ExcludableNon-Excludable

RivalRival

Non-Non-RivalRival

Market GoodsMarket Goods Open AccessOpen Access(tragedy of the commons)(tragedy of the commons)

Tragedy of theTragedy of theNon-commonsNon-commons

Pure PublicPure PublicGoodsGoods

Privatization

~ Externalities ~

Demand SideDemand Side

Abandoning Abandoning Homo EconomicusHomo Economicus

Insights from Game TheoryInsights from Game Theory Insights from NeuroeconomicsInsights from Neuroeconomics

Functional MRI of Dopamine Activation

Cognitive Load Theory

Thinking Discount vs. Emotional Discount Rates

1700 2006A long time ago

The discovery of energy in fossil fuels has exponentially increased our ‘grab-bag’ of unexpected returns Rave clubs,

scuba diving, NASCAR, etc

Bread, butter and ale

A visit from a cousin

Riding a horse

Expected vs. Unexpected Rewards

Abandoning Abandoning Homo EconomicusHomo Economicus

Insights from Game TheoryInsights from Game Theory Insights from NeuroeconomicsInsights from Neuroeconomics Insights from SociobiologyInsights from Sociobiology Insights from Integrated Human and Insights from Integrated Human and

Environment HistoriesEnvironment Histories Insights from our Evolutionary Insights from our Evolutionary

HangoversHangovers

Ecological EconomicsEcological Economics

Get the scale right through Get the scale right through science-informed democracy,science-informed democracy,

Get distribution right through Get distribution right through social processes that are fair,social processes that are fair,

Recognize who we are and Recognize who we are and where we came from, and where we came from, and then …then …

Make the economy our Make the economy our servant, instead of our servant, instead of our master.master.