Transcript L3-Why Ecological Economics

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
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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
– Empirical examples challenging this
assumption?
• Perfect knowledge dominates uncertainty
and ignorance
Physics and Ecology:
Thermodynamics and Ecosystem
Services
1rst 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
2nd 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
– E.g. with the least possibel throughput
• 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