Why Ecological Economics Coevolutionary economics Huntergatherer economics Accumulation

Why Ecological Economics?

Coevolutionary 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 Empty World to Full World

So what distinguishes ecological economics from conventional (neoclassical) economics? Pre-analytic vision, Physics, Ecology, Ethics and Practice

The pre-analytic vision of ecological economics

The sustaining and containing system

The Ecological-Economic System is Extremely Complex • • • Feedback loops Highly non-linear change Emergent phenomena Surprise Chaotic behavior Uncertainty and ignorance

The Pre-analytic Vision of Neoclassical Economics

The ever-growing circular economy Circulatory system, but no digestive system

The 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 • Perfect knowledge dominates uncertainty and ignorance

Physics and Ecology: Thermodynamics and Ecosystem Services

1 rst 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 a reduction in the flow of goods and services from nature: macro opportunity cost

2 nd 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 Physics • Can’t make something from nothing or vice versa • Can’t do work without energy • Disorder increases

Laws 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 vision Diminishing marginal returns, opportunity costs, and uneconomic growth

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 defined 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 ends

The 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 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 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 Allocation • We must use scarce resources to satisfy unmet needs as efficiently as possible • Instrumental ends, not an end in itself

Economics 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