Topic:Ecological economics

From Wikiversity

Eco-economics is an emerging Interdisciplinary Science that attempts to price materials, systems and innovations by their ecological value, a value upon which a universal standard has not yet been discovered. Examples of eco-economic problems include questions like "given its place in a forest ecosystem, what is the price of a 20-acre stand of trees?" In classical economics, the price would be determined by finding the intersection of demand and supply curves, with the seller of the trees maximizing his financial profit.

The 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 wellbeing through economic development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. It distinguishes itself from neoclassical economics (NCE) primarily by its assertion that economics is a subfield of ecology, in that 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, NCE has historically assumed implicitly (and, more recently, explicitly) that the environment is a subset of the human economy. (In this approach, if nature is valuable to our economies, that is because people will pay for its services: clean air, clean water, encounters with wilderness, etc.) It is largely this assertion which allows for NCE 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 EE, completely ignores the contributions of natural capital to the creation of wealth. (Natural capital can be considered the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, pollination, protection from solar and cosmic radiation etc.)

While NCE deals with the efficient allocation of resources, it ignores two other fundamental economic problems: distribution (equity) and the overall optimum scale of the economy. EE also makes a clear distinction between growth (quantitative) and development (qualitative improvement of the quality of life) while arguing that NCE confuses the two. EE challenges the common normative approach taken towards natural resources, claiming that it undervalues natural capital 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 capital, as human capital inevitably derives from natural capital. From these premises, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that, by undervaluing the importance of natural capital, sustainable development (as opposed to 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 (the economist's version 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 even on broader societal wellbeing.

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 interdisciplinarity with social and natural sciences as a means to address this.