Ecological economics
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Ecological economics, bioeconomics, ecolonomy, eco-economics, or ecol-econ is both a
Ecological economics was founded in the 1980s as a modern discipline on the works of and interactions between various European and American academics (see the section on History and development below). The related field of green economics is in general a more politically applied form of the subject.[4][5]
According to ecological economist
History and development
The antecedents of ecological economics can be traced back to the
The debate on energy in economic systems can also be traced back to Nobel prize-winning radiochemist Frederick Soddy (1877–1956). In his book Wealth, Virtual Wealth and Debt (1926), Soddy criticized the prevailing belief of the economy as a perpetual motion machine, capable of generating infinite wealth—a criticism expanded upon by later ecological economists such as Nicholas Georgescu-Roegen and Herman Daly.[14]
European predecessors of ecological economics include
The first organized meetings of ecological economists occurred in the 1980s. These began in 1982, at the instigation of Lois Banner,
Articles by Inge Ropke (2004, 2005)[23] and Clive Spash (1999)[24] 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. An article by Robert Costanza, David Stern, Lining He, and Chunbo Ma[25] responded to a call by Mick Common to determine the foundational literature of ecological economics by using citation analysis to examine which books and articles have had the most influence on the development of the field. However, citations analysis has itself proven controversial and similar work has been criticized by Clive Spash for attempting to pre-determine what is regarded as influential in ecological economics through study design and data manipulation.[26] In addition, the journal Ecological Economics has itself been criticized for swamping the field with mainstream economics.[27][28]
Schools of thought
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. Clive Spash has argued for the classification of the ecological economics movement, and more generally work by different economic schools on the environment, into three main categories. These are the mainstream new resource economists, the new environmental pragmatists,[29] and the more radical social ecological economists.[30] International survey work comparing the relevance of the categories for mainstream and heterodox economists shows some clear divisions between environmental and ecological economists.[31] A growing field of radical social-ecological theory is degrowth economics.[32]Degrowth addresses both biophysical limits and global inequality while rejecting neoliberal economics. Degrowth prioritizes grassroots initiatives in progressive socio-ecological goals, adhering to ecological limits by shrinking the human ecological footprint (See Differences from Mainstream Economics Below). It involves an equitable downscale in both production and consumption of resources in order to adhere to biophysical limits. Degrowth draws from Marxian economics, citing the growth of efficient systems as the alienation of nature and man.[33] Economic movements like degrowth reject the idea of growth itself. Some degrowth theorists call for an "exit of the economy".[34] Critics of the degrowth movement include new resource economists, who point to the gaining momentum of sustainable development. These economists highlight the positive aspects of a green economy, which include equitable access to renewable energy and a commitment to eradicate global inequality through sustainable development (See Green Economics).[34] Examples of heterodox ecological economic experiments include the Catalan Integral Cooperative and the Solidarity Economy Networks in Italy. Both of these grassroots movements use communitarian based economies and consciously reduce their ecological footprint by limiting material growth and adapting to regenerative agriculture.[35]
Non-traditional approaches to ecological economics
Cultural and heterodox applications of economic interaction around the world have begun to be included as ecological economic practices. E.F. Schumacher introduced examples of non-western economic ideas to mainstream thought in his book, Small is Beautiful, where he addresses neoliberal economics through the lens of natural harmony in Buddhist economics.[18] This emphasis on natural harmony is witnessed in diverse cultures across the globe. Buen Vivir is a traditional socio-economic movement in South America that rejects the western development model of economics. Meaning Good Life, Buen Vivir emphasizes harmony with nature, diverse pluralculturism, coexistence, and inseparability of nature and material. Value is not attributed to material accumulation, and it instead takes a more spiritual and communitarian approach to economic activity. Ecological Swaraj originated out of India, and is an evolving world view of human interactions within the ecosystem. This train of thought respects physical bio-limits and non-human species, pursuing equity and social justice through direct democracy and grassroots leadership. Social well-being is paired with spiritual, physical, and material well-being. These movements are unique to their region, but the values can be seen across the globe in indigenous traditions, such as the Ubuntu Philosophy in South Africa.[36]
Differences from mainstream economics
Ecological economics differs from mainstream economics in that it heavily reflects on the ecological footprint of human interactions in the economy. This footprint is measured by the impact of human activities on natural resources and the waste generated in the process. Ecological economists aim to minimize the ecological footprint, taking into account the scarcity of global and regional resources and their accessibility to an economy.
The most cogent example of how the different theories treat similar assets is
While this natural capital and ecosystems services approach has proven popular amongst many it has also been contested as failing to address the underlying problems with mainstream economics, growth, market capitalism and monetary valuation of the environment.[40][41][42] Critiques concern the need to create a more meaningful relationship with Nature and the non-human world than evident in the instrumentalism of shallow ecology and the environmental economists commodification of everything external to the market system.[43][44][45]
Nature and ecology
A simple circular flow of income diagram is replaced in ecological economics by a more complex flow diagram reflecting the input of solar energy, which sustains natural inputs and environmental services which are then used as units of production. Once consumed, natural inputs pass out of the economy as pollution and waste. The potential of an environment to provide services and materials is referred to as an "environment's source function", and this function is depleted as resources are consumed or pollution contaminates the resources. The "sink function" describes an environment's ability to absorb and render harmless waste and pollution: when waste output exceeds the limit of the sink function, long-term damage occurs.[46]: 8 Some persistent pollutants, such as some organic pollutants and nuclear waste are absorbed very slowly or not at all; ecological economists emphasize minimizing "cumulative pollutants".[46]: 28 Pollutants affect human health and the health of the ecosystem.
The economic value of natural capital and
The Earth's
Global
Since
Ethics
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Green economics
In international, regional, and national policy circles, the concept of the green economy grew in popularity as a response to the financial predicament at first then became a vehicle for growth and development.[51]
The United Nations Environment Programme (UNEP) defines a 'green economy' as one that focuses on the human aspects and natural influences and an economic order that can generate high-salary jobs. In 2011, its definition was further developed as the word 'green' is made to refer to an economy that is not only resourceful and well-organized but also impartial, guaranteeing an objective shift to an economy that is low-carbon, resource-efficient, and socially-inclusive.
The ideas and studies regarding the green economy denote a fundamental shift for more effective, resourceful, environment-friendly and resource‐saving technologies that could lessen emissions and alleviate the adverse consequences of climate change, at the same time confront issues about resource exhaustion and grave environmental dilapidation.[52]
As an indispensable requirement and vital precondition to realizing sustainable development, the Green Economy adherents robustly promote good governance. To boost local investments and foreign ventures, it is crucial to have a constant and foreseeable macroeconomic atmosphere. Likewise, such an environment will also need to be transparent and accountable. In the absence of a substantial and solid governance structure, the prospect of shifting towards a sustainable development route would be insignificant. In achieving a green economy, competent institutions and governance systems are vital in guaranteeing the efficient execution of strategies, guidelines, campaigns, and programmes.
Shifting to a Green Economy demands a fresh mindset and an innovative outlook of doing business. It likewise necessitates new capacities, skills set from labor and professionals who can competently function across sectors, and able to work as effective components within multi-disciplinary teams. To achieve this goal, vocational training packages must be developed with focus on greening the sectors. Simultaneously, the educational system needs to be assessed as well in order to fit in the environmental and social considerations of various disciplines.[53]
Topics
Among the topics addressed by ecological economics are methodology, allocation of resources, weak versus strong sustainability, energy economics, energy accounting and balance, environmental services, cost shifting, modeling, and monetary policy.
Methodology
Thermodynamics |
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A 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 B. Norgaard argues traditional economics has hi-jacked the development terminology in his book Development Betrayed.[54]
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 is distinguishable from neoclassical economics primarily by its assertion that the economy is 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. Ecological economists argue that neoclassical economics has ignored the environment, at best considering it to be a subset of the human economy.
The neoclassical view ignores much of what the natural sciences have taught us about 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
There has then been a move to regard such things as natural capital and ecosystems functions as goods and services.[55][56] 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 referred to as ecologists 'selling out on Nature'.[57] 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
Weak versus strong sustainability
Ecological economics challenges the conventional approach towards natural resources, claiming that it undervalues natural capital by considering it as interchangeable with human-made capital—labor and technology.
The impending depletion of natural resources and increase of climate-changing greenhouse gasses should motivate us to examine how political, economic and social policies can benefit from alternative energy. Shifting dependence on fossil fuels with specific interest within just one of the above-mentioned factors easily benefits at least one other. For instance, photo voltaic (or solar) panels have a 15% efficiency when absorbing the sun's energy, but its construction demand has increased 120% within both commercial and residential properties. Additionally, this construction has led to a roughly 30% increase in work demands (Chen).
The potential for the substitution of man-made capital for natural capital is an important debate in ecological economics and the economics of sustainability. There is a continuum of views among economists between the strongly neoclassical positions of Robert Solow and Martin Weitzman, at one extreme and the 'entropy pessimists', notably Nicholas Georgescu-Roegen and Herman Daly, at the other.[59]
Neoclassical economists tend to maintain that man-made capital can, in principle, replace all types of natural capital. This is known as the
At the other extreme, the
Recently, Stanislav Shmelev developed a new methodology for the assessment of progress at the macro scale based on multi-criteria methods, which allows consideration of different perspectives, including strong and weak sustainability or conservationists vs industrialists and aims to search for a 'middle way' by providing a strong neo-Keynesian economic push without putting excessive pressure on the natural resources, including water or producing emissions, both directly and indirectly.[60]
Energy economics
A key concept of energy economics is
Ecological economics generally 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.
Exergy analysis is performed in the field of industrial ecology to use energy more efficiently.[65] The term exergy, was coined by Zoran Rant in 1956, but the concept was developed by J. Willard Gibbs. In recent decades, utilization of exergy has spread outside of physics and engineering to the fields of industrial ecology, ecological economics, systems ecology, and energetics.
Energy accounting and balance
An energy balance can be used to track energy through a system, and is a very useful tool for determining resource use and environmental impacts, using the First and Second laws of
Scientists have written and speculated on different aspects of energy accounting.[67]
Ecosystem services and their valuation
Ecological economists agree that ecosystems produce enormous flows of goods and services to human beings, playing a key role in producing well-being. At the same time, there is intense debate about how and when to place values on these benefits.[68][69]
A study was carried out by Costanza and colleagues
The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains controversial. A common objection
Despite these issues, many ecologists and conservation biologists are pursuing
Commodification of other ecological relations as in
Not 'externalities', but cost shifting
Ecological economics is founded upon the view that the
Concerning these externalities, some like the eco-businessman
In contrast, ecological economists, like Joan Martinez-Alier, appeal to a different line of reasoning.
Ecological-economic modeling
Monetary theory and policy
Ecological economics draws upon its work on resource allocation and strong sustainability to address monetary policy. Drawing upon a transdisciplinary literature, ecological economics roots its policy work in monetary theory and its goals of sustainable scale, just distribution, and efficient allocation.[101] Ecological economics' work on monetary theory and policy can be traced to Frederick Soddy's work on money. The field considers questions such as the growth imperative of interest-bearing debt, the nature of money, and alternative policy proposals such as alternative currencies and public banking.
Criticism
Assigning monetary value to natural resources such as
McCauley argues that ecological economics and the resulting ecosystem service based conservation can be harmful.[104] He describes four main problems with this approach:
Firstly, it seems to be assumed that all ecosystem services are financially beneficial. This is undermined by a basic characteristic of ecosystems: they do not act specifically in favour of any single species. While certain services might be very useful to us, such as
Secondly, allocating monetary value to nature would make its conservation reliant on markets that fluctuate. This can lead to
Thirdly, conservation programmes for the sake of financial benefit underestimate human ingenuity to invent and replace ecosystem services by artificial means. McCauley argues that such proposals are deemed to have a short lifespan as the history of
Lastly, it should not be assumed that conserving ecosystems is always financially beneficial as opposed to alteration. In the case of the introduction of the Nile perch to Lake Victoria, the ecological consequence was decimation of native fauna. However, this same event is praised by the local communities as they gain significant financial benefits from trading the fish.
McCauley argues that, for these reasons, trying to convince decision-makers to conserve nature for
See also
- Agroecology
- Circular economy
- Critique of political economy
- Deep ecology
- Earth Economics (policy think tank)
- Earth system governance
- Eco-socialism
- Ecofeminism
- Ecological economists (category)
- Ecological model of competition
- Ecological values of mangrove
- Ecology of contexts
- Emergy
- Embodied water
- Energy quality
- Harrington paradox
- Green accounting
- Gund Institute for Ecological Economics
- Human development theory
- Human ecology
- Inclusive Democracy
- Index of Sustainable Economic Welfare
- International Society for Ecological Economics
- Natural capital accounting
- Natural resource economics
- Outline of green politics
- Social metabolism
- Spaceship Earth
- Steady-state economy
- Sustainability
- Thermodynamics
- Thermoeconomics
- Value of Earth
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Further reading
- Common, M. and Stagl, S. (2005). Ecological Economics: An Introduction. New York: Cambridge University Press.
- Costanza, R., Cumberland, J. H., Daly, H., Goodland, R., Norgaard, R. B. (1997). An Introduction to Ecological Economics. St. Lucie Press and International Society for Ecological Economics, (e-book at the Encyclopedia of Earth)
- Daly, H. (1980). Economics, Ecology, Ethics: Essays Toward a Steady-State Economy, W.H. Freeman and Company, ISBN 0716711796.
- Daly, H. and Townsend, K. (eds.) 1993. Valuing The Earth: Economics, Ecology, Ethics. Cambridge, Mass.; London, England: MIT Press.
- Daly, H. (1994). "Steady-state Economics". In: Ecology - Key Concepts in Critical Theory, edited by C. Merchant. Humanities Press, ISBN 0391037951.
- Daly, H., and J. B. Cobb (1994). For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future. Beacon Press, ISBN 0807047058.
- Daly, H. (1997). Beyond Growth: The Economics of Sustainable Development. Beacon Press, ISBN 0807047090.
- Daly, H. (2015). "Economics for a Full World." Great Transition Initiative, https://www.greattransition.org/publication/economics-for-a-full-world.
- Daly, H., and J. Farley (2010). Ecological Economics: Principles and Applications. Island Press, ISBN 1597266817.
- Fragio, A. (2022). Historical Epistemology of Ecological Economics. Springer.
- Georgescu-Roegen, N (1975). "Energy and economic myths". Southern Economic Journal. 41 (3): 347–381. JSTOR 1056148.
- Georgescu-Roegen, N. (1999). The Entropy Law and the Economic Process. iUniverse Press, ISBN 1583486003.
- Gowdy, J.; .
- Greer, J. M. (2011). The Wealth of Nature: Economics as if Survival Mattered. New Society Publishers, ISBN 0865716730.
- Hesmyr, Atle Kultorp (2020). Civilization: Its Economic Basis, Historical Lessons and Future Prospects. Nisus Publications.
- Huesemann, Michael H., and Joyce A. Huesemann (2011). Technofix: Why Technology Won't Save Us or the Environment, New Society Publishers, Gabriola Island, British Columbia, Canada, ISBN 0865717044, 464 pp.
- ISBN 9781849713238.
- Kevlar, M. (2014). Eco-Economics on the horizon, Economics and human nature from a behavioural perspective.
- Krishnan R., Harris J. M., and N. R. Goodwin (1995). A Survey of Ecological Economics. Island Press. ISBN 978-1-55963-411-3.
- Martinez-Alier, J. (1990). Ecological Economics: Energy, Environment and Society. Oxford, England: Basil Blackwell.
- Martinez-Alier, J., Ropke, I. eds. (2008). Recent Developments in Ecological Economics, 2 vols., E. Elgar, Cheltenham, UK.
- S2CID 209502532.
- Soddy, F. A. (1926). Wealth, Virtual Wealth and Debt. London, England: George Allen & Unwin.
- Stern, D. I. (1997). "Limits to substitution and irreversibility in production and consumption: A neoclassical interpretation of ecological economics". Ecological Economics 21(3): 197–215.
- Tacconi, L. (2000). Biodiversity and Ecological Economics: Participation, Values, and Resource Management. London, UK: Earthscan Publications.
- Vatn, A. (2005). Institutions and the Environment. Cheltenham: Edward Elgar.
- Vianna Franco, M. P., and A. Missemer (2022). A History of Ecological Economic Thought. London & New York: Routledge.
- Vinje, Victor Condorcet (2015). Economics as if Soil & Health Matters. Nisus Publications.
- Walker, J. (2020). More Heat than Life: The Tangled Roots of Ecology, Energy, and Economics. Springer.