Ecological economics 177694 225716971 2008-07-15T01:37:48Z Bunnyhop11 7345738 /* Environmental services */ '''Ecological economics''' is a transdisciplinary field of academic research that addresses the dynamic and spatial interdependence between human economies and natural [[ecosystem]]s. Its main focus is the "scale" conundrum: how to operate an economy within the ecological constraints of the biosphere. Ecological economics brings together and connects different disciplines, within the natural and social sciences but especially between these broad areas. == Overview == As the name suggests, some of the researchers in this field have a background in [[economics]] some in [[ecology]] and a few both, although the field has also attracted a much broader range of researchers concerned about environmental problems and human interaction with the non-human world. The term '''green economics''' is often used for the broader field including social and human welfare impacts and altering human behavior towards more sustainable lifeways. This is an inherently political or legal goal and accordingly more an applied or political economic or public finance study. Closely related is the valuation of [[natural capital]] as a [[capital asset]] and the study of [[environmental law]]. {{Environmental law}} == Differentiation from classical and neoclassical approaches == ''Main articles: [[history of economic thought]] and [[schools of economics]]'' An important motivation for the emergence of ecological economics has been criticism of the assumptions and approaches of traditional [[environmental economics|environmental and resource economics]], and further a need to distinguish from the social goals of [[green politics]]. By contrast, ecological economics presents a scientific but still more pluralistic approach to study of environmental problems and policy solutions, characterized by systems perspectives, adequate physical and biological contexts, and a focus on long-term [[environmental sustainability]]. Ecological economics might be regarded as a version of [[environmental science]] or [[human geography]] with much emphasis on social, political, economic, behavioral and ethical issues. However, it seeks to state its assumptions in a framework similar to that of [[classical economics]] with expanded definitions of infrastructure, defense, currency and justice that match the constraints of a society in which [[carrying capacity]] is now scarcer. Various competing schools of thought exist in the field. Some are close to resource and environmental economics while others are far more heterodox in outlook. An example of the latter is the ''European Society for Ecological Economics''. An example of the former is the Swedish ''Beijer International Institute of Ecological Economics.'' What differentiates ecological economics schools from classical thought is that [[capital asset]] analysis (land, labour, financial capital) has been expanded to make land more active and include the operations of other ecosystems such as rivers, oceans and the atmosphere. In other words, land has been broadened into the concept of [[natural capital]]. Furthermore, the analysis of labour is often much more fine-grained and includes examination of the unique ways in which labour adapts to its surroundings. [[indigenous language]]s, for instance, tend to acquire distinctions that match the ecosystems and lifeways in which they operate to enable awareness that [[colonialism]] and [[globalization]] generally override and ignore. The [[social capital]] and possibly unique talents or instructions of a culture will be more closely identified with the location and surrounding ecosystems than in the classical. Ecological economics inherits some mathematical assumptions from neoclassical economics in that it will employ aggregate measures for genuinely aggregated resources such as the CO2 absorption capacity of the atmosphere (the amount it can absorb before [[global warming]] begins to occur). It however generally rejects the neoclassical assumption that local differences in the means of production or extraction method are just another externality, since living ecosystems are impossible to repay or reproduce and often extraordinarily expensive to replace or augment. Unlike the neoclassical assumption of a high-liquidity world in which there are a near infinite number of technology and supply substitutes, ecological economics tends instead to assume that only a narrow range of such substitutes, similar to those used in nature (see [[biomimicry]]), will prove feasible as a long-term economic proposition for those living within the biosphere. The major and most obvious difference is that neoclassical economics is wholly unconcerned with the proportion of the supply chain absorbed by transport costs and also unconcerned with the issues in alienation of property rights when consuming goods from far away. The most cogent example of how the different theories treat similar assets is [[tropical rainforest]] ecosystems, most obviously the [[Yasuni]] region of [[Ecuador]]. While this area has substantial deposits of [[bitumen]] it is also one of the most diverse ecosystems on Earth and some estimates establish it has over 200 undiscovered medical substances in its genomes - most of which would be destroyed by logging the forest or mining the bitumen. Effectively, the [[instructional capital]] of the genomes is undervalued by both classical and neoclassical means which would view the rainforest primarily as a source of wood, oil/tar and perhaps food. Increasingly the [[carbon credit]] for leaving the extremely carbon-intensive ("dirty") bitumen in the ground is also valued - the government of Ecuador set a price of US$350M for an oil lease with the intent of selling it to someone committed to never exercising it at all and instead preserving the rainforest. [[Bill Clinton]], [[Paul Martin]] and other former world leaders have become closely involved in this project which includes lobbying for the issue of [[International Monetary Fund]] [[Special Drawing Rights]] to recognize the rainforest's value directly within the framework of the Bretton Woods institutions. If successful this would be a major victory for advocates of ecological economics as the new mainstream form of economics. == History and Development== The first book with the title ''Ecological Economics'' was published in Europe by Juan Martinez-Alier (Blackwell, Oxford, 1987) tracing the history of ecological critiques of economics since the 1880s to the 1950s. European conceptual founders include [[Nicholas Georgescu-Roegen]], [[William Kapp]] (1944) and [[Karl Polanyi]] (1950).<ref>Kapp, K. W. (1950) The Social Costs of Private Enterprise. New York: Shocken.</ref> <ref>Polanyi, K. (1944) The Great Transformation. New York/Toronto: Rinehart & Company Inc.</ref> Furthermore, some key concepts of what is now ecological economics are evident in the writings of [[E.F. Schumacher]], whose book ''[[Small Is Beautiful]] &ndash; A Study of Economics as if People Mattered'' (1973) was published just a few years before the first edition of Herman Daly's comprehensive and persuasive ''Steady-State Economics'' (1977).<ref>Schumacher, E.F. 1973. ''Small Is Beautiful: A Study of Economics as if People Mattered''. London: Blond and Briggs.</ref><ref>Daly, H. 1991. ''Steady-State Economics'' (2nd ed.). Washington, D.C.: Island Press.</ref> The antecedents can be traced back to the [[Romantics]] of the 1800s as well as some [[Age of Enlightenment|Enlightenment]]] political economists of that era. Concerns over population were expressed by [[Thomas Malthus]], while [[John Stuart Mill]] hypothesized that the "stationary state" of an economy might be something that could be considered desirable, anticipating later insights of modern ecological economists, without having had their experience of the social and ecological costs of the dramatic post-World War II industrial expansion. As Martinez-Alier explores in his book the debate on energy in economic systems can also be traced into the 1800s e.g. Nobel prize-winning chemist, [[Frederick Soddy]] (1877-1956). In North America, conceptual founders include economists [[Kenneth Boulding]] and [[Herman Daly]], ecologists [[C.S. Holling]], [[H.T. Odum]] and [[Robert Costanza]], biologist Gretchen Daily and physicist [[Robert Ayres]]. Daly and Costanza were part of the institutional founding of the field - resulting in the establishment of the academic journal ''Ecological Economics'' and the International Society for Ecological Economics (ISEE). Some attribute origination of ecological economics as a specific field ''per se'' to professor [[Herman Daly]], University of Maryland, a former economist at the [[World Bank]]. Ecological economics has been popularized by ecologist and University of Vermont Professor [[Robert Costanza]]. CUNY geography professor [[David Harvey]] explicitly added ecological concerns to political economic literature. This parallel development in [[political economy]] has been continued by analysts such as sociologist [[John Bellamy Foster]]. The Romanian economist [[Nicholas Georgescu-Roegen]] (1906-1994), who was among Daly's teachers at [[Vanderbilt University]], provided ecological economics with a modern conceptual framework based on the material and energy flows of economic production and [[consumption]]. His ''magnum opus'', ''The Entropy Law and the Economic Process'' (1971), has been highly influential.<ref>Georgescu-Roegen, N. 1971. ''The Entropy Law and the Economic Process''. Cambridge, Mass.: Harvard University Press.</ref> Green Economics is a more recent development that goes beyond the traditional scope of Ecological Economics but shares some of its basic principles. Green Economics comprises all aspects and sub-disciplines of economics, not only ecology related, and analyses economic issues with a pluralistic, holistic and long term view. The aim of this emerging discipline is the reform of mainstream economics towards an unbiased understanding of economic facts and the political choices available to enhance the economic freedom available to all stakeholders. Comprehensive academic work in this field is organised and co-ordinated by the Green Economics Institute, an academic think tank founded in 2004 in the UK, which edits the International Journal of Green Economics. See links below to the Institute and the journal publisher. The term Green Economics is in addition employed by UK based individuals acting as a political lobby and activist forum rather than taking the purely academic approach dominant amongst other ecological economists. Articles by Inge Ropke (2004, 2005)<ref>Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314. Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290. </ref> and Clive Spash (1999)<ref>Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435.</ref> cover the development and modern history of ecological economics and explain its differentiation from resource and environmental economics, as well as some of the controversy between American and European schools of thought. == Topics in ecological economics == === Concept === The primary objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the [[laws of thermodynamics]]) and in knowledge of biological systems. It accepts as a goal the improvement of human well-being through development, and seeks to ensure achievement of this through planning for the [[sustainable development]] of ecosystems and societies. Of course the terms development and sustainable development are far from lacking controversy. Richard Norgaard explains how traditional economics has hi-jacked the development terminology in his book ''Development Betrayed''.<ref>Norgaard, R. B. (1994) Development Betrayed: The End of Progress and a Coevolutionary Revisioning of the Future. London: Routledge</ref> Well-being in ecological economics is also differentiated from welfare as found in mainstream economics and the 'new welfare economics' from the 1930s which informs resource and environmental economics. This entails a limited preference utilitarian conception of value i.e., Nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc. Ecological economics distinguishes itself from [[neoclassical economics]] primarily by its assertion that the economy is an embedded within an environmental system. Ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system. In contrast, [[neoclassical economics]] has historically ignored the environment at best relegating it to be a subset of the human economy. Economic theory, as encapsulated in [[general equilibrium]] models, then assume both an infinite resource base and also infinite waste sinks with no feedbacks. That is resource never run out and pollution never occurs. This allows [[neoclassical economics]] to claim theoretically that infinite [[economic growth]] is both possible and desirable. However, this belief disagrees with much of what the natural sciences have learned about the world, and, according to Ecological Economics, completely ignores the contributions of Nature to the creation of wealth e.g., the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and [[ecosystem services]] directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, food and medicine production, pollination, protection from solar and cosmic radiation, the view of a starry night sky, etc. There has then been a move to regard such things as [[natural capital]] and ecosystems functions as goods and services. <ref>Daily, G.C. 1997. ''Nature's Services: Societal Dependence on Natural Ecosystems''. Washington, D.C.: Island Press.</ref><ref>Millennium Ecosystem Assessment. 2005. ''Ecosystems and Human Well-Being: Biodiversity Synthesis''. Washington, D.C.: World Resources Institute.</ref> However, this is far from uncontroversial within ecology or ecological economics due to the potential for narrowing down values to those found in mainstream economics and the danger of merely regarding Nature as a commodity. This has been refereed to as ecologists 'selling out on Nature'.<ref>McCauley, D. J. (2006) Selling out on nature. Nature 443(7): 27-28</ref> There is then a concern that ecological economics has failed to learn from the extensive literature in [[environmental ethics]] about how to structure a plural value system. === Allocation of resources === [[Neoclassical economics]] focuses primarily on the efficient allocation of resources, and less on two other fundamental economic problems which are central to ecological economics: distribution ([[equity (economics)|equity]]) and the scale of the economy relative to the ecosystems upon which it is reliant.<ref name="Daly">Daly, H. and Farley, J. 2004. ''Ecological Economics: Principles and Applications''. Washington: Island Press.</ref> Ecological Economics also makes a clear distinction between growth (quantitative) and development (qualitative improvement of the [[quality of life]]) while arguing that [[Neoclassical economics]] confuses the two. Ecological Economics challenges the common normative approach taken towards natural resources, claiming that it misvalues Nature by displaying it as interchangeable with [[human capital]]--labor and technology. EE counters this convention by asserting that human capital is instead complementary to and dependent upon natural systems, as human capital inevitably derives from natural systems. From these premises, it follows that [[economic policy]] has a [[fiduciary]] responsibility to the greater ecological world, and that, by misvaluing the importance of Nature, sustainable progress (as opposed to economic growth) --which is the only solution to elevating the [[standard of living]] for citizens worldwide--will not result. Furthermore, ecological economists point out that, beyond modest levels, increased per-capita [[consumption (economics)|consumption]] (the typical economic measure of "standard of living") does not necessarily lead to improvements in human wellbeing, while this same consumption can have harmful effects on the environment and broader societal wellbeing. === Energy economics === It rejects the view of [[energy economics]] that growth in the energy supply is related directly to well being, focusing instead on [[biodiversity]] and [[creativity]] - or natural capital and individual capital, in the terminology sometimes adopted to describe these economically. In practice, ecological economics focuses primarily on the key issues of [[uneconomic growth]] and [[quality of life]]. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests an interdisciplinary approach combining social and natural sciences as a means to address this. === Environmental services === A study was carried out by Costanza and colleagues<ref>Costanza, R., d'Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Naeem, S., Limburg, K., Paruelo, J., O'Neill, R.V., Raskin, R., Sutton, P., and van den Belt, M. 1997. The value of the world's ecosystem services and natural capital. ''Nature'' 387: 253-260.</ref> to determine the 'price' of the services provided by the environment. This was determined by averaging values obtained from a range of studies conducted in very specific context and then transferring these without regard to that context. Dollar figures were averaged to a per hectare number for different types of ecosystem e.g. wetlands, oceans. A total was then produced which came out at 33 trillion US dollars (1997 values), more than twice the total [[GDP]] of the world at the time of the study. This study was criticized by pre-ecological and even some [[Environmental economics |environmental economists]] - for being inconsistent with assumptions of [[financial capital]] [[valuation]] - and ecological economists - for being inconsistent with an ecological economics focus on biological and physical indicators.<ref>Norgaard, R.B. and Bode, C. 1998. ''Next, the value of God, and other reactions.'' ''Ecological Economics'' 25: 37-39.</ref>. ''See also [[ecosystem valuation]] and [[price of life]].'' The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains controversial to some. A common objection is that life is precious or priceless, but this demonstrably degrades to it being worthless under the assumptions of any branch of economics. Reducing human bodies to financial values is a necessary part of every branch of economics and not always in the direct terms of [[insurance]] or [[wages]]. Economics, in principle, assumes that conflict is reduced by agreeing on voluntary contractual relations and prices instead of simply fighting or coercing or tricking others into providing goods or services. In doing so, a provider agrees to surrender time and take bodily risks and other (reputation, financial) risks. Ecosystems are no different than other bodies economically except insofar as they are far less replaceable than typical labour or commodities. Despite these issues, many ecologists and conservation biologists are pursuing [[ecosystem valuation]]. [[Biodiversity]] measures in particular appear to be the most promising way to reconcile financial and ecological values, and there are many active efforts in this regard. The growing field of [[biodiversity finance]] [http://www.socialedge.org/features/opportunities/archive/2008/02/23/weblogentry.2008-02-20.6191038944] began to emerge in 2008 in response to many specific proposals such as the Ecuadoran Yasuni proposal [http://www.sosyasuni.org/en/News/Ecuadors-Oil-Change-An-Exporters-Historic-Proposal.html] [http://www.multinationalmonitor.org/mm2007/092007/koenig.html] or similar ones in the [[Republic of the Congo|Congo]]. US news outlets treated the stories as a "threat" [http://www.cnn.com/2007/BUSINESS/12/10/ecuador.oil.ap/] to "drill a park" [http://abcnews.go.com/International/wireStory?id=3980994] reflecting a previously dominant view that NGOs and governments had the primary responsibility to protect ecosystems. However [[Peter Barnes]] and other commentators have recently argued that a guardianship/trustee/commons model is far more effective and takes the decisions out of the political realm. Commodification of other ecological relations as in [[carbon credit]] and direct payments to farmers to preserve [[ecosystem services]] are likewise examples that permit private parties to play more direct roles protecting biodiversity. The [[United Nations]] [[U.N. Food and Agriculture Organization|Food and Agriculture Organization]] achieved near-universal agreement in 2008 [http://www.panna.org/jt/agAssessment] that such payments directly valuing ecosystem preservation and encouraging [[permaculture]] were the only practical way out of a food crisis. The holdouts were all English-speaking countries that export [[GMO]]s and promote "[[free trade]]" agreements that facilitate their own control of the world transport network: The US, UK, Canada and Australia [http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/04/17/do1702.xml]. Increasingly the pro-GMO pro-trade view is in the extreme minority worldwide though it is disproportionately represented at the [[IMF]], [[World Bank]] and so on. === Externalities === Ecological economics is founded upon the view that the NCE assumption that environmental and community costs and benefits are mutually canceling ''"[[externalities]]"'' is not warranted. Juan Martinez Alier <ref>Jose Maria Figueres Olson (Foreword), Robert Costanza (Editor), Olman Segura (Editor), Juan Martinez-Alier (Editor), Juan Martinez Alier (Author) (1996) "Getting Down to Earth: Practical Applications Of Ecological Economics" (Intl Society for Ecological Economics) (Island Press)</ref>, for instance shows that the bulk of consumers are automatically excluded from having an impact upon the prices of commodities, as these consumers are future generations who have not been born yet. The assumptions behind future discounting, which assume that future goods will be cheaper than present goods, has been criticised by Fred Pearce<ref>Pearce, Fred "Blueprint for a Greener Economy"</ref> and by the recent [[Stern Report]]. Although the Stern report itself does employ discounting and has been criticised by ecological economists.<ref>Spash, C. L. (2007) The economics of climate change impacts à la Stern: Novel and nuanced or rhetorically restricted? Ecological Economics 63(4): 706-713</ref> Concerning these externalities, [[Paul Hawken]] argues that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to a hidden subsidy, paid by the non monetarised human environment, community or future generations<ref>Hawken, Paul (1994) "The Ecology of Commerce" (Collins)</ref>. These arguments are developed further by Hawken, Amory and Hunter Lovins in "Natural Capitalism: Creating the Next Industrial Revolution"<ref>Hawken, Paul; Amory and Hunter Lovins (2000) "Natural Capitalism: Creating the Next Industrial Revolution" (Back Bay Books)</ref>. ==See also== {{Portal|Sustainable development|Sustainable development.svg}} {{columns-list|2| *[[Deep ecology]] *[[Eco socialism]] *[[Ecofeminism]] *[[Embodied energy]] *[[Embodied water]] *[[Environmental economics]] *[[Environmental ethics]] *[[Human development theory]] *[[Human ecology]] *[[Inclusive Democracy]] *[[Industrial ecology]] *[[Natural capital]] *[[Sustainability]] *[[Spaceship Earth]] }} ==References== {{reflist|2}} ==Further reading== *Common, M. and Stagl, S. 2005. ''Ecological Economics: An Introduction''. New York: Cambridge University Press. *Daly, H. and Townsend, K. (eds.) 1993. ''Valuing The Earth: Economics, Ecology, Ethics''. Cambridge, Mass.; London, England: MIT Press. *Georgescu-Roegen, N. 1975. Energy and economic myths. ''Southern Economic Journal'' 41: 347-381. *Martinez-Alier, J. (1990) Ecological Economics: Energy, Environment and Society. Oxford, England: Basil Blackwell. *Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314. *Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290. *Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435. *Vatn, A. (2005) Institutions and the Environment. Cheltenham: Edward Elgar ==External links== * The International Society for Ecological Economics (ISEE) - http://www.ecoeco.org/ * The International Journal of Green Economics, http://www.inderscience.com/ijge * The Green Economics Institute http://www.greeneconomics.org.uk * Eco-Economy Indicators: http://www.earth-policy.org/Indicators/index.htm * Ecological Economics Encyclopedia - http://www.ecoeco.org/education_encyclopedia.php * The academic journal, ''Ecological Economics'' - http://www.elsevier.com/locate/ecolecon * The US Society of Ecological Economics - http://www.ussee.org/ * The Beijer International Institute for Ecological Economics - http://www.beijer.kva.se/ * Gaian Economics website - http://www.gaianeconomics.org/ and blog - http://gaianeconomics.blogspot.com/ * Sustainable Prosperity - http://sustainableprosperity.ca/ * The Gund Institute of Ecological Economics - http://www.uvm.edu/giee * Ecological Economics at Rensselaer Polytechnic Institute - http://www.economics.rpi.edu/ecological.html * An ecological economics article about reconciling economics and its supporting ecosystem - http://www.fs.fed.us/eco/s21pre.htm * "Economics in a Full World", by Herman E. Daly - http://sef.umd.edu/files/ScientificAmerican_Daly_05.pdf [[Category:Ecological economics|*]] [[Category:Industrial ecology]] [[de:Ökologische Ökonomie]] [[es:Economía ecológica]] [[fr:Éconologie]] [[it:Economia ecologica]] [[pl:Ekonomia ekologiczna]] [[pt:Economia Ecológica]] [[ru:Зелëная экономика]] [[fi:Vihreä talous]] [[sv:Ekologisk ekonomi]]