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Ecological Economics is a branch of economics that addresses the interdependence and co-evolution between human economies and natural ecosystems. It has similarities to green economics and human development theory. These schools also embrace integration among diverse intellectual thoughts, and deem neoclassical economics as myopic and closed-minded; ecological economics seeks greater trans-disciplinary connections to solve complex issues facing humanity.

Concept

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.

A study was carried out by a number of leading ecological economists to determine the price of the services provided by the environment. This was determined by looking at the price to filter water and other such services provided by the environment. The total was determined to be 33 trillion dollars, more than twice the total GDP of the world at the time of the study. Source: Science, Vol 276, Issue 5315, 1029 , 16 May 1997. However, other ecological economists critiqued this valuation exercise as being unhelpful and inconsistent with an ecological economics approach (Source: Ecological Economics 25 (1998) 37–39).

Example of Sustainable Development Policy

This is an example of an ecological economic proposal that aims to more efficiently protect social and ecological systems (http://www.fs.fed.us/eco/st21p1.htm#policy) Costanza and Perrings (1990) provide an example of how to combine what we now know about the uncertainties of environmental protection with what we also know about the difficulties of more direct forms of social control such as regulation or outright prohibition. In order to develop more cost effective, less intrusive, and generally more positive stimuli to protect and/or manage environmental use, they evaluated a flexible assurance bonding system. This bond would be required by developers and would be set equal to the largest estimated potential environmental damage that might occur from the proposed action. The bond would be kept in an interest bearing account and would be returned to the developer with some of the interest as soon as the firm proved that the damage would or could not occur. If the catastrophe did occur, the bond would be used to compensate those harmed or help repair the damage. But no further payment would be required from the developer.

Proposed advantages:

• The firm would know at the outset what the bond would cost and could plan accordingly. Downside risk would be known and limited. But if the developer was diligent, careful, or lucky, all of the bond might be returned with some interest
• There would be positive incentives to adopt the most efficient known techniques or even develop new methods
• The bond would be proportional to the seriousness of the problem
• Costs would be shared among the responsible parties
• Private and social costs would be in accord

Criticism and Alternatives

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For the most part, neoclassical economists have not engaged with ecological economics and its criticisms of neoclassical economic theory, and have therefore not put forth a cogent rebuttal. Arguments against this field focus on its implementation rather than its development. Free market proponents argue that government-mandated regulation will result in an inefficient market, triggering monetary and fiscal fluctuations that will harmfully affect economic growth and stability. They promote its research and development but suggest that a better solution to achieve a sustainable ecological and societal system is to educate consumers about the need for living in harmony with nature. This will prevent government intervention and allow consumers and producers to act in the interest of the ecological economy.

History

The origination of ecological economics as a specific field per se is credited to ecologist and University of Vermont Professor Robert Costanza, who founded the International Society for Ecological Economics (ISEE) and carried out much of the founding research while at the University of Maryland. His University of Maryland colleague, Herman Daly, has significantly contributed to its development. The late economist Nicholas Georgescu-Roegen provided ecological economics with a conceptual framework based on the material and energy flows of economic production and consumption. Ecological economics' intellectual ancestor may be traced in large part to political economy, a refinement of early economic theory that includes among its earlier researchers Thomas Malthus, David Ricardo and John Stuart Mill. CUNY geography professor David Harvey was one of the first to explicitly add ecological concerns to political economic literature. This parallel development in political economy has been continued by analysts such as sociologist John Bellamy Foster.

See also

• Embodied energy
• Emergy Synthesis
• EcoTheology

External links and Sources

• International Journal of Ecological Economics & Statistics (IJEES) - http://www.ceser.res.in/ijees.html
• The Gund Institute of Ecological Economics - http://www.uvm.edu/giee
• The International Society for Ecological Economics - http://www.ecoeco.org/
• In-depth analysis of policy and research - http://www.fs.fed.us/eco/s21pre.htm
• Defense for classification as post-autistic economics - http://www.paecon.net/PAEReview/topics/ecologicaleconomics/Green32.htm
• New Zealand Centre for Ecological Economics - http://www.nzcee.org.nz
• Nature's Numbers: Expanding the National Economic Accounts to Include the Environment, 1999. Open access report from the National Research Council's Panel on Integrated Environmental and Economic Accounting.
• Ecological E-Credits. GRB

Template:Energy Sustainability Template:Sustainability and energy development group

• Environmental economics