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