Ecological economics, bioeconomics, ecolonomy, eco-economics, or ecol-econ is both a transdisciplinary and an interdisciplinary field of academic research addressing the interdependence and coevolution of human economy and natural , both intertemporally and spatially. By treating the economy as a subsystem of Earth's larger ecosystem, and by emphasizing the preservation of natural capital, the field of ecological economics is differentiated from environmental economics, which is the mainstream economic analysis of the environment.Jeroen C.J.M. van den Bergh (2001). "Ecological Economics: Themes, Approaches, and Differences with Environmental Economics," Regional Environmental Change, 2(1), pp. 13-23 (press +). One survey of German economists found that ecological and environmental economics are different schools of economic thought, with ecological economists emphasizing strong sustainability and rejecting the proposition that Physical capital can substitute for natural capital (see the section on weak versus strong sustainability below).Illge L, Schwarze R. (2006). A Matter of Opinion: How Ecological and Neoclassical Environmental Economists Think about Sustainability and Economics . German Institute for Economic Research.
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 economy is in general a more politically applied form of the subject.Paehlke R. (1995). Conservation and Environmentalism: An Encyclopedia, p. 315. Taylor & Francis.Scott Cato, M. (2009). Green Economics. Earthscan, London. .
According to ecological economist , ecological economics is defined by its focus on nature, justice, and time. Issues of intergenerational equity, irreversibility of environmental change, uncertainty of long-term outcomes, and sustainable development guide ecological economic analysis and valuation.Malte Faber. (2008). How to be an ecological economist. Ecological Economics 66(1):1-7. Preprint. Ecological economists have questioned fundamental mainstream economic approaches such as cost-benefit analysis, and the separability of economic values from scientific research, contending that economics is unavoidably normative, i.e. prescriptive, rather than positive or descriptive. Positional analysis, which attempts to incorporate time and justice issues, is proposed as an alternative.Mattson L. (1975). Book Review: Positional Analysis for Decision-Making and Planning by Peter Soderbaum. The Swedish Journal of Economics.Soderbaum, P. 2008. Understanding Sustainability Economics. Earthscan, London. . pp.109-110, 113-117. Ecological economics shares several of its perspectives with feminist economics, including the focus on sustainability, nature, justice and care values.
The debate on energy in economic systems can also be traced back to Nobel prize-winning radiochemistry 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. Zencey, Eric. (2009, April 12). Op-ed. New York Times, p. WK9. Accessed: December 23, 2012.
European predecessors of ecological economics include K. William Kapp (1950)Kapp, K. W. (1950) The Social Costs of Private Enterprise. New York: Shocken. Karl Polanyi (1944),Polanyi, K. (1944) The Great Transformation. New York/Toronto: Rinehart & Company Inc. and economist Nicholas Georgescu-Roegen (1971). Georgescu-Roegen, who would later mentor Herman Daly 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), is credited by Daly as a fundamental text of the field, alongside Soddy's Wealth, Virtual Wealth and Debt. Some key concepts of what is now ecological economics are evident in the writings of Kenneth Boulding and E. F. Schumacher, whose book Small Is Beautiful – 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).Schumacher, E.F. 1973. Small Is Beautiful: A Study of Economics as if People Mattered. London: Blond and Briggs.Daly, H. 1991. Steady-State Economics (2nd ed.). Washington, D.C.: Island Press.
The first organized meetings of ecological economists occurred in the 1980s. These began in 1982, at the instigation of Lois Banner, with a meeting held in Sweden (including Robert Costanza, Herman Daly, Charles Hall, Bruce Hannon, H.T. Odum, and David Pimentel). Most were ecosystem ecologists or mainstream environmental economists, with the exception of Daly. In 1987, Daly and Costanza edited an issue of Ecological Modeling to test the waters. A book entitled Ecological Economics, by Joan Martinez Alier, was published later that year.Costanza R. (2003). Early History of Ecological Economics and ISEE. Internet Encyclopaedia of Ecological Economics. Alier renewed interest in the approach developed by Otto Neurath during the interwar period.Martinez-Alier J. (1987) Ecological economics: energy, environment and society The year 1989 saw the foundation of the International Society for Ecological Economics and publication of its journal, Ecological Economics, by Elsevier. Robert Costanza was the first president of the society and first editor of the journal, which is currently edited by Richard Howarth. Other figures include ecologists C.S. Holling and H.T. Odum, biologist Gretchen Daily, and physicist Robert Ayres. In the Marxian tradition, sociologist John Bellamy Foster and CUNY geography professor David Harvey explicitly center ecological concerns in political economy.
Articles by Inge Ropke (2004, 2005) and Clive Spash (1999) 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 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. In addition, the journal Ecological Economics has itself been criticized for swamping the field with mainstream economics.
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 analyses that 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$350 million for an oil lease with the intent of selling it to someone committed to never exercising it at all and instead preserving the rainforest.
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.Martinez-Alier, J., 1994. Ecological economics and ecosocialism, in: O'Connor, M. (Ed.), Is Capitalism Sustainable? Guilford Press, New York, pp. 23-36Spash, C.L., Clayton, A.M.H., 1997. The maintenance of natural capital: Motivations and methods, in: Light, A., Smith, J.M. (Eds.), Space, Place and Environmental Ethics. Rowman & Littlefield Publishers, Inc., Lanham, pp. 143-173 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.
The economic value of natural capital and ecosystem services is accepted by mainstream environmental economics, but is emphasized as especially important in ecological economics. Ecological economists may begin by estimating how to maintain a stable environment before assessing the cost in dollar terms. Ecological economist Robert Costanza led an attempted valuation of the global ecosystem in 1997. Initially published in Nature, the article concluded on $33 trillion with a range from $16 trillion to $54 trillion (in 1997, total global GDP was $27 trillion). Half of the value went to nutrient cycling. The open oceans, continental shelves, and estuaries had the highest total value, and the highest per-hectare values went to estuaries, swamps/floodplains, and seagrass/algae beds. The work was criticized by articles in Ecological Economics Volume 25, Issue 1, but the critics acknowledged the positive potential for economic valuation of the global ecosystem.
The Earth's carrying capacity is a central issue in ecological economics. Early economists such as Thomas Malthus pointed out the finite carrying capacity of the earth, which was also central to the MIT study Limits to Growth. Diminishing returns suggest that productivity increases will slow if major technological progress is not made. Food production may become a problem, as erosion, an impending Water security, and soil salinity (from irrigation) reduce the productivity of agriculture. Ecological economists argue that industrial agriculture, which exacerbates these problems, is not sustainable agriculture, and are generally inclined favorably to organic farming, which also reduces the output of carbon.
Global wild fisheries are believed to have peaked and begun a decline, with valuable habitat such as estuaries in critical condition. The aquaculture or fish farm of piscivorous fish, like salmon, does not help solve the problem because they need to be fed products from other fish. Studies have shown that salmon farming has major negative impacts on wild salmon, as well as the forage fish that need to be caught to feed them.
Knapp G, Roheim CA and Anderson JL (2007) The Great Salmon Run: Competition Between Wild And Farmed Salmon World Wildlife Fund. Washington Post. Salmon Farming May Doom Wild Populations, Study Says.
Since are higher on the trophic level, they are less efficient sources of food energy. Reduced consumption of meat would reduce the demand for food, but as nations develop, they tend to adopt high-meat diets similar to that of the United States. Genetically modified food (GMF) a conventional solution to the problem, presents numerous problems – Bt corn produces its own Bacillus thuringiensis toxin/protein, but the pest resistance is believed to be only a matter of time.
Global warming is now widely acknowledged as a major issue, with all national scientific academies expressing agreement on the importance of the issue. As the population growth intensifies and energy demand increases, the world faces an energy crisis. Some economists and scientists forecast a global ecological crisis if energy use is not contained – the Stern report is an example. The disagreement has sparked a vigorous debate on issue of discounting and intergenerational equity.
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.
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.UNEP, 2012. GREEN ECONOMY IN ACTION: Articles and Excerpts that Illustrate Green Economy and Sustainable Development Efforts, p. 6. Retrieved 8 June 2018 from http://www.un.org/waterforlifedecade/pdf/green_economy_in_action_eng.pdf
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 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.Daily, G.C. 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Washington, D.C.: Island Press.Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-Being: Biodiversity Synthesis. Washington, D.C.: World Resources Institute. 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'. 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.
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.
Neoclassical economists tend to maintain that man-made capital can, in principle, replace all types of natural capital. This is known as the weak sustainability view, essentially that every technology can be improved upon or replaced by innovation, and that there is a substitute for any and all scarce materials.
At the other extreme, the strong sustainability view argues that the stock of natural resources and ecological functions are irreplaceable. From the premises of strong sustainability, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that sustainable development must therefore take a different approach to valuing natural resources and ecological functions.
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.Shmelev, S.E. 2012. Ecological Economics. Sustainability in Practice, Springer
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. When considering surplus energy, ecological economists state this could be used for activities that do not directly contribute to economic productivity but instead enhance societal and environmental well-being. This concept of dépense, as developed by Georges Bataille, offers a novel perspective on the management of surplus energy within economies. This concept encourages a shift from growth-centric models to approaches that prioritise sustainable and meaningful expenditures of excess resources.
Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood through the second law of thermodynamics, but also in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.Peter A. Corning 1 *, Stephen J. Kline. (2000). Thermodynamics, information and life revisited, Part II: Thermoeconomics and Control information Systems Research and Behavioral Science, Apr. 07, Volume 15, Issue 6, Pages 453 – 482Peter Corning (2002). " Thermoeconomics – Beyond the Second Law " – source: www.complexsystems.org As a result, thermoeconomics is often discussed in the field of ecological economics, which itself is related to the fields of sustainability and sustainable development.
Exergy analysis is performed in the field of industrial ecology to use energy more efficiently. 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.
Scientists have written and speculated on different aspects of energy accounting.Stabile, Donald R. "Veblen and the Political Economy of the Engineer: the radical thinker and engineering leaders came to technocratic ideas at the same time," ''American Journal of Economics and Sociology (45:1) 1986, 43-44.
A study was carried out by Costanza and colleagues to determine the 'value' 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 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.
The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains controversial. A common objection is that life is precious or priceless, but this demonstrably degrades to it being worthless within cost-benefit analysis and other standard economic methods.
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 SocialEdge.org. Accessed: December 23, 2012. began to emerge in 2008 in response to many specific proposals such as the Ecuadoran Yasuni proposal Multinational Monitor, 9/2007. Accessed: December 23, 2012. or similar ones in the Congo. US news outlets treated the stories as a "threat" to "drill a park" 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 enable private parties to play more direct roles protecting biodiversity, but is also controversial in ecological economics. The United Nations Food and Agriculture Organization achieved near-universal agreement in 2008 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 and promote "free trade" agreements that facilitate their own control of the world transport network: The US, UK, Canada and Australia.
Concerning these externalities, some like the eco-businessman Paul Hawken argue an orthodox economic line 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-monetized human environment, community or future generations.Hawken, Paul (1994) "The Ecology of Commerce" (Collins) These arguments are developed further by Hawken, Amory and Hunter Lovins to promote their vision of an environmental capitalist utopia in .Hawken, Paul; Amory and Hunter Lovins (2000) "Natural Capitalism: Creating the Next Industrial Revolution" (Back Bay Books)
In contrast, ecological economists, like Joan Martinez-Alier, appeal to a different line of reasoning.Martinez-Alier, Joan (2002) The Environmentalism of the Poor: A Study of Ecological Conflicts and Valuation. Cheltenham, Edward Elgar Rather than assuming some (new) form of capitalism is the best way forward, an older ecological economic critique questions the very idea of internalizing externalities as providing some corrective to the current system. The work by Karl William Kapp explains why the concept of "externality" is a misnomer.Kapp, Karl William (1963) The Social Costs of Business Enterprise. Bombay/London, Asia Publishing House. In fact the modern business enterprise operates on the basis of shifting costs onto others as normal practice to make profits.Kapp, Karl William (1971) Social costs, neo-classical economics and environmental planning. The Social Costs of Business Enterprise, 3rd edition. K. W. Kapp. Nottingham, Spokesman: 305-318 Charles Eisenstein has argued that this method of privatising profits while socialising the costs through externalities, passing the costs to the community, to the natural environment or to future generations is inherently destructive.Eisenstein, Charles (2011), "Sacred Economics: Money, Gift and Society in an Age in Transition" (Evolver Editions) As social ecological economist Clive Spash has noted, externality theory fallaciously assumes environmental and social problems are minor aberrations in an otherwise perfectly functioning efficient economic system. Internalizing the odd externality does nothing to address the structural systemic problem and fails to recognize the all pervasive nature of these supposed 'externalities'.
Douglas McCauley argues that ecological economics and the resulting ecosystem service based conservation can be harmful. 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 coastal protection from hurricanes by for example, others might cause financial or personal harm, such as wolves hunting cattle.Mech LD. The Challenge and Opportunity of Recovering Wolf Populations. Conserv Biol. 1995 Apr;9(2):270–8 The complexity of Eco-systems makes it challenging to weigh up the value of a given species. Wolves play a critical role in regulating prey populations; the absence of such an apex predator in the Scottish Highlands has caused the over population of deer, preventing afforestation, which increases the risk of flooding and damage to property.
Secondly, allocating monetary value to nature would make its conservation reliant on markets that fluctuate. This can lead to devaluation of services that were previously considered financially beneficial. Such is the case of the bees in a forest near former coffee plantations in Finca Santa Fe, Costa Rica. The pollination services were valued to over US$60,000 a year, but soon after the study, coffee prices dropped and the fields were replanted with pineapple.Ricketts TH, Daily GC, Ehrlich PR, Michener CD. Economic value of tropical forest to coffee production. Proc Natl Acad Sci U S A. 2004 Aug 24;101(34):12579–82 Pineapple does not require bees to be pollinated, so the value of their service dropped to zero.
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 technology is about how humanity developed artificial alternatives to nature's services and with time passing the cost of such services tend to decrease. This would also lead to the devaluation of ecosystem services.
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 monetary reasons is not the path to be followed, and instead appealing to morality is the ultimate way to campaign for the protection of nature.
Schools of thought
Non-traditional approaches to ecological economics
Differences from mainstream economics
Nature and ecology
Ethics
Green economics
Topics
Methodology
Allocation of resources
Weak versus strong sustainability
Energy economics
Energy accounting and balance
Ecosystem services and their valuation
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Not 'externalities', but cost shifting
Ecological-economic modeling
Monetary theory and policy
Criticism
See also
Further reading
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