An Introduction to Ecological Economics: Chapter 2

Published: September 21, 2007, 2:45 pm

Topics:

Ecological Economics (main)

The Historical Development of Economics and Ecology

As recently as three hundred years ago, philosophers built systemic, logical arguments with respect to the nature of the cosmos, social order, and moral duty. Empiricism was largely associated with the description of broad geographical differences between regions and cultures. The sciences as we now know them arose with the joining of systemic thinking and empirical analyses of different aspects of the natural world. Francis Bacon (1561–1626) argued for joining logic and empiricism. Galileo Galilei (1564–1642) provided evidence in support of the sun-centered systemic theory of Nicolaus Copernicus (1473–1543) with telescopic observations. Discrepancies between Copernicus’ theory and astronomical observations were resolved by Isaac Newton (1642–1727) through his theoretical advances with respect to gravity and the mechanics of motion. Thereafter, scientific disciplines began to arise, defined by the subject matter to which logical thinking was applied rather than by the patterns of logic used. Nevertheless, for several centuries scholars continued to work across broad areas of knowledge. Newton wrote about religion and morals as well as physics. John Locke (1632–1704) contributed to medical knowledge and the revival of the idea of atoms even while his most important contributions were to social philosophy. This scholarly tradition of contributing across disciplines lasted through the 19th century. Well into the 20th century, many scholars maintained an awareness of developments beyond their specialty. Frank Knight (1895–1973), for example, expounded at some length on recent developments in physics and their implications for economic theory and methodology^[2]. By the latter half of the 20th century, however, transdisciplinary scholarship was extremely rare.

Economics arose in the midst of the transdisciplinary tradition. During the second half of the 18th century, at a time of great social change and scientific promise, the formal field of economics emerged from moral philosophy^[3]. Long-standing moral questions with respect to the obligation of individuals to larger social goals were being challenged by the development of markets and scientific advances, both of which brought new opportunities for personal material improvement and fueled great hopes for a plentiful future. Then, in the second half of the 18th century, as today, people were concerned that following one’s own interests might hurt society as a whole. Economists began to argue, as they continue to do, that markets guided individual behavior, as if by an “invisible hand,” to the common good.

About a century later, the formal field of ecology arose from biology and natural history. Like economics, it too was concerned with how systems as a whole could work for the common good of the species that composed them. The two disciplines share some theoretical features and at various times each has drawn on advances in the other. How two conceptually complementary fields have become associated with such opposing prescriptions for how people should interact with their environment is a fascinating story^[4].

And it is a story that must be understood for ecological economics to emerge from the separate disciplines. The sections in this chapter briefly document some of the historical development of the two disciplines, showing how they have learned from each other and explaining how they have evolved such different environmental prescriptions from shared conceptual bases. The two disciplines differ markedly in that economics, especially in the United States and as practiced through the international agencies, is conceptually monolithic, while ecology consists of many competing and complementary conceptual frameworks. Similarly, environmental economics (a subdiscipline of economics concerned with environmental problems) today presents itself as a single, grandly conceived, coherent theory. The following sections explain how today’s environmental economics was constructed from earlier economic theories while the assumptions that drive the theories to policy conclusions are rooted in popular beliefs about nature and technical progress. The earlier theories which were once very influential within economics are central to environmental understanding today. Ecology, in addition to maintaining its diverse theoretical roots, also contrasts with economics in that it has combined with quite a different, yet still popular, set of beliefs about both nature and technology.

A few of these popular beliefs have long histories. Until 300 years ago, material security was thought to be one of the rewards of moral conduct. Increasingly after the Renaissance, however, it was argued that material security was needed to establish the conditions for moral progress. Scarcity caused greed and even war; scarcity forced people to work so hard that they did not have time to contemplate the scriptures and live morally. Material progress, in short, was necessary to establish the conditions for moral progress. Thus, as economics emerged two centuries ago, the individual pursuit of materialism was justified on the presumption that once the basic material needs of food, shelter, and clothing were met, people would have the time and conditions to pursue their individual moral and collective social improvement. Today, these earlier concerns with moral and social progress have largely been forgotten while individual materialism for many people has become an end in itself.

Two centuries ago, as now, technological optimists were convinced that the essentials of life would eventually be assured through the advance of human knowledge leading to a mastery of underlying natural laws. The presumption has been that such laws are relatively few in number and that their mastery would make superfluous our dependence on the particular ways that nature, and people’s place therein, evolved. To those only concerned with material well-being, the expectation of such mastery meant that people did not have to be concerned with long-term scarcities or how their activities otherwise might affect the future^[5]. Over the past two centuries, scientists have touted the eventual mastering of nature and have justified research on this basis. The idea that scientific progress will inevitably lead to the control of nature and material plenty is still popularly held and frequently invoked, even by scientists, to support further population increases, technological change, and economic development along their historic, environmentally destructive, unsustainable paths.

Figure 2.1. Life spans of the individuals mentioned in the text. (Source: Authors)

Economic thought evolved in the context of these dominant moral, material, and scientific beliefs. Reality, however, does not always unfold as expected; the social and environmental problems associated with economic growth have dampened earlier dominant beliefs and empowered other interpretations. Natural historians and then ecologists have long harbored concerns about the wisdom of human transformation of natural environments. Most scientists no longer think of the world as a system that will soon be understood and brought under control. Rather, the world is an evolving, complex, and uncertain system. With less confidence in their ability to predict and prescribe, scientists tend to be more humble and take a precautionary approach. Most notable among them are environmental scientists, ecologists, and conservation biologists who argue that we need to direct the best of our scientific expertise and far more of our educational effort at learning how to work with nature^[6]. Similarly, environmental ethicists are challenging the vacuity of individual material progress for its own sake. While economic thought is also beginning to evolve in the context of these newer understandings, the historical beliefs remain dominant within the profession as a whole and still influence environmental economics.

As the following sections highlight, throughout most of their historical development economics and the natural sciences interacted extensively. Of course, there were fewer scientists then and the specialization and fragmentation that characterize modern academia had not yet occurred to the degree it has today. Ecological economics represents an attempt to recapture the spirit of integrated, interactive analysis of problems that characterized the early history of science. It is only through this reintegrated analysis that we can hope to comprehend and solve our most pressing and complex social problems.

The sections that follow give a brief overview of the historical development of both economics and the natural sciences, especially ecology. Each section is structured around a prominent individual who began a line of inquiry that has been continued and elaborated by subsequent scholars to this day. These lines have tangled over the years and ecological economics attempts to reorganize them into a coherent whole. Figure 2.1 shows the life spans of the various individuals we mention on a time line.

The Early Codevelopment of Economics and Natural Science

There has been no revolution in economic science, and [there] is not likely to be any. The question we have really to determine is how we can make the best use of the accumulated knowledge of past generations, and to do that we must look more closely into the economic science of the 19th century.
—William A. S. Hewins, 1911, p. 905

Among the natural sciences, ecology was a “late bloomer.” People interested in biology described natural environments and contemplated how biological systems developed historically, but such empirical descriptions were not combined with systemic thinking until the second half of the 19th century. Thus our story starts with economics.

The “physiocrats,” a group of French social philosophers writing in the mid 18th century, were the first school of economics. They believed that the universal laws of physics (hence the school’s name) extended their grand rule in some yet to be identified way to create a natural social order. This social order was made up of people with sovereign rights entitled to the produce of their labor. According to the physiocrats, real economic activity consisted of working the land. Food wholesalers, processors, and retailers were simply living off the fruits of others and their take should be minimized. The belief that natural law determines social order has taken many forms since the physiocrats and inevitably generates controversy. The physiocrats never identified how the laws of physics applied to economic systems, but their insistence on treating individuals as sovereign entities, like atoms, in the tradition of key liberal social philosophers such as Hobbes and Locke who assumed that society is merely the sum of its individuals, has stayed with mainstream economics ever since. While subsequent economists never discovered how the laws of physics ruled economies, they did duplicate the pattern of thinking of mechanics in their conception of market interactions. Adam Smith initiated this pattern of reasoning.

Adam Smith and the Invisible Hand

Adam Smith (1723–1790), widely recognized as the founder of modern economics, was a moral philosopher. While economics since Smith has assumed a heavy scientific gloss, critical ethical issues have always been embedded in its theory. And the key ethical issue has always been whether the pursuit of individual greed can be in the interest of society as a whole. Smith reasoned that if two people who are fully informed of the consequences of their decision choose to enter into an exchange, it is because the exchange makes each of them better off. Appealing to Judeo-Christian images of God, Smith invented the metaphor of the “invisible hand,” arguing that markets induce people to behave for the common good as if they were guided by a higher authority.

Modern economics typically continues to assume that society is simply the sum of its individuals, the social good is the sum of individual wants, and markets automatically guide individual behavior to the common good. By the end of the 19th century, the market model had been formalized mathematically and it turned out to be the same mathematics as used by Newton (Newton, Isaac) for mechanical systems. This atomistic view of individuals and mechanistic view of a social system contrasts sharply with the more organic, or ecological, view that community relations define who people are, affect what they want, facilitate collective action, and have a historical continuity of their own. While Adam Smith was a moral philosopher, his economics made morality less important. For most of human history, people’s sense of identity has come through living within a community and its moral precepts. Today, this is increasingly less important among either the materially wealthy or aspirants to material wealth (and may indeed account for their frequent visits to the psychiatrist). Among the multiplicative factors affecting environmental degradation, the role of materialism and its relation to moral behavior is rarely discussed and is in need of broader, more serious scientific and public discourse. We discuss these points in later sections.

The growth of individualism and materialism associated with modernity and the consequent decline in community and concern with moral conduct are not Adam Smith’s fault, but he played a decisive role in setting up the reasoning that justified individual greed^[7]. In an age when Europeans and North Americans were rebelling against the tyranny of church and state and social philosophers were building theories from the individual up to the society rather than from society down to the individual, Adam Smith argued that markets link individual greed to the common good without coercive social institutions. And ever since Smith, the critical question, if too rarely discussed, has been whether markets really do this as well as he believed. One glaring contradiction is that the economic model of society argues that individual behavior supports the common good while simultaneously arguing that communities are not needed because markets will provide for the common good. The issues of market and community are being addressed at the end of the twentieth century by a variety of scholars who argue that communities are necessary at different geographic scales to define the social good, adapt the social order, and manage environmental systems^[8].

Thomas Malthus and Population Growth

Figure 2.2. Thomas Malthus’ model of population growth and collapse. (Source: Authors)

The cleric-turned-economist Thomas R. Malthus (1766–1834) explained the prevalence of war and disease as secular, material phenomena rather than as acts of God. He argued that human populations were capable of increasing exponentially and would do so as long as sufficient food and other essentials of life were available^[9]. He further hypothesized that people could expand their food supply arithmetically through new technologies and expansion into new habitats. Given the potential for geometric increases in population and only arithmetic increases in food supply, population periodically surpasses food supply (Figure 2.2). At these times, Malthus argued, people would ravage the land, go to war over food, and succumb to disease and starvation. Human numbers would consequently drop to sustainable levels whence the process would repeat. This basic model from economics is still widely used today by biological scientists.

Malthus’ model is beguilingly simple and consequently demographic history never quite supports it precisely. Yet periodically in specific places, Malthus’ model has been confirmed, and history may yet confirm it globally. Few question whether population must ultimately be stabilized in order to sustain human well-being at a reasonable level. The expansion of human populations into previously unpopulated or lightly populated regions, the intensity with which firewood is collected, and the push to increase food production through modern agrochemical, monocultural techniques, so harmful to biodiversity, are driven over the long run by population increase. The continued rapid rate of population growth in the poorest nations threatens to keep them poor while diminishing the possibilities that the people of these nations will ever be able to consume at levels comparable to people in the rich nations using current modern technologies without vastly accelerating environmental degradation.

Malthus’ model has become a part of human consciousness, making it difficult to contemplate, let alone discuss, the issues of population and its effects on the environment without his framing becoming central to the discussion. The success of Malthus’ model stems from its simplicity, but the dynamics of population growth and how people depend on the environment are much more complex than the model suggests. Thus, while Malthus provided us with a powerful model, its simplicity restricts its usefulness for policy making beyond the obvious prescription that fewer people would probably be better for sustainability than more people.

In addition to his influence on economic and demographic thought, Malthus had an enormous influence on other key intellectual figures. Both Charles Darwin and Alfred Russell Wallace credited Malthus with providing them the key insight that led them to the theory of natural selection. Marx developed many of his views in opposition to Malthus. Even John Maynard Keynes (1883–1946) was influenced by Malthus’ theory and incorporated it in a theory of underconsumption, inventory buildups, and the business cycle.

David Ricardo and the Geographic Pattern of Economic Activity

Figure 2.3. Ricardo’s explanation of rent, represented by the shaded area. (Source: Authors)

David Ricardo (1772–1823) introduced a second model of how economic activity relates to the environment, not because he was concerned with environmental degradation or human survival, but rather because he wished to justify why landlords received a rent from land ownership^[10]. Ricardo argued that people would initially farm the land that produced the most food for the least work (labor per unit of food, the y-axis of Figure 2.3). As population increased, farming would extend to less fertile soils requiring more labor (the extensive margin). Food prices would have to rise to cover the cost of the extra labor on the less fertile land. This means that the initial land would earn a rent, a return above production cost, indicated by the shaded area in Figure 2.3. Higher food prices, in turn, would also induce a more intensive use of labor on the better land (the intensive margin). This model indicates how increasing population drives people to farm in previously undisturbed areas and how higher food prices lead to the intensification and, in modern agriculture, to the greater use of fertilizers and pesticides on prime agricultural lands. This model also gives us insights into how fluctuations in food prices can result in the periodic entry and exit of farmers on the extensive margin and in shifts in farming practices on the intensive margin. Ricardo’s model of how agricultural activities are patterned on the land in response to population growth and changes in food prices is critical to our understanding of the complex interrelations between human survival and ecological life-support systems.

Ricardo’s model of resource use patterns is similar to how those in the earth sciences think about the use of mineral resources. Petroleum geologists and mineralogists often presume, just as Ricardo did, that the best quality resources are used first even though history shows that a significant portion of the best quality resources are frequently not discovered until poorer quality resources have already been used.

The models of Malthus and Ricardo led to classical economics being called the “dismal science.” The carrying capacity limits of Malthus’ model and the lower quality of the next available resources in the model of Ricardo conflicted with the beliefs in progress which were so prevalent during the 19th century. The Ricardian theory of differential rent also had dismal distributive consequences since an increasing share of the total product of the land went to landlords.

These models are now touted by environmental scientists concerned about population growth, excessive consumption, and environmental degradation, and argued against by mainstream economists. During most of the twentieth century, economists built new models with different assumptions in combinations that support beliefs in unlimited material progress.

Sadi Carnot, Rudolf Clausius, and Thermodynamics

Sadi Carnot (1796–1832) founded thermodynamics with his classic 1824 study of the efficiency of steam engines, Reflections on the Motive Power of Fire. Carnot was the first to recognize that the amount of work that could be extracted depended on the temperature gradient between the source and sink. He effectively identified what were to become formalized as the laws of thermodynamics by Rudolf Clausius (1822–1888) a quarter century after Carnot’s death. The first law of thermodynamics states that energy can neither be created nor destroyed. The second law, also known as the entropy law, states that the amount of energy available for work in a closed system only decreases with use. The laws of thermodynamics are frequently invoked in the construction of models of ecosystems and have been extended to models of human–environment interactions as well^[11].

The second law effectively makes physics the dismal science for it states that the total useful energy in the universe, the amount of work remaining that can be done, is constantly declining. Since any action requires energy, any activity today is at the expense of potential activity in the future. What hope is there for progress in a constantly degrading universe? This question has been pursued again and again for well over a century. Whether and how it is resolved depends on how fast the entropy of the universe is increasing and just how far into the future we are concerned^[12].

An important point to remember, however, is that the Earth is an “open” system, and even if the entropy of the universe is increasing, the entropy of Earth may be declining (by a smaller amount, of course). The study of the thermodynamics of open, non-equilibrium systems came much later and we discuss it further in Section 2.3.

Charles Darwin and the Evolutionary Paradigm

Charles Darwin (1809–1882) was influenced by the economic arguments of Malthus as he began thinking about the question: why are there so many different types of plants and animals? After years of observing the natural and human-dominated ecosystems of his time (most notably as a naturalist aboard the H.M.S. Beagle on its voyage around the world in 1831–1836) and thinking about this question, he arrived at what, to him, seemed the only possible explanation. His answer, which has come to be a cornerstone of modern biology and ecology, was that species evolve by the processes of adaptation and natural selection. Population pressure, associated with the ability of species to expand their numbers to the carrying capacity of their environment, favored the survival of those individuals with the particular characteristics that made them more effective at reproducing themselves.

Darwin waited until late in his professional career to publish his findings. His On the Origin of Species by Natural Selection was first published in 1859 when the author was 50 (the same year, by the way, as Karl Marx’s Critique of Political Economy). Darwin was immediately attacked by those holding what was then the mainstream view of “divine creation.” The evolutionary paradigm continues to be attacked to this day by those espousing “creationism,” but, in spite of its gaps, no other theory possesses anything approaching the explanatory power of evolution.

Since Darwin’s day, the paradigm of evolution has been tested and broadly applied to both ecological and economic systems^[13] as a way of formalizing our understanding of adaptation and learning behaviors in nonequilibrium dynamic systems. The general evolutionary paradigm posits a mechanism for adaptation and learning in complex systems at any scale using three basic interacting processes: 1) information storage and transmission; 2) generation of new alternatives; and 3) selection of superior alternatives according to some performance criteria.

The evolutionary paradigm is different from the conventional mechanical paradigm of economics in at least four important respects^[14]: 1) evolution is path dependent, meaning that the detailed history and dynamics of the system are important; 2) evolution can achieve multiple equilibria; 3) there is no guarantee that optimal efficiency or any other optimal performance will be achieved due in part to path dependence and sensitivity to perturbations; and 4) “lock-in” (survival of the first rather than survival of the fittest) is possible under conditions of increasing returns. While, as Arthur notes, “conventional economic theory is built largely on the assumption of diminishing returns on the margin (local negative feedbacks),” life itself can be characterized as a positive feedback, self-reinforcing, autocatalytic process^[15] and we should expect increasing returns, lock-in, path dependence, multiple equilibria, and suboptimal efficiency to be the rule rather than the exception in economic and ecological systems.

In biological evolution, the information storage medium is the genes, the generation of new alternatives is by sexual recombination or genetic mutation, and selection is performed by nature according to a criterion of “fitness” based on reproductive success. The same process of change occurs in other ecological, economic, and cultural systems, but the elements on which the process works are different. For example, in cultural evolution the storage medium is the culture (the oral tradition, books, film, or other storage medium for passing on behavioral norms), the generation of new alternatives is through innovation by individual members or groups in the culture, and selection is again based on the reproductive success of the alternatives generated, but reproduction is carried out by the spread and copying of the behavior through the culture rather than biological reproduction. One may also talk of “economic” evolution, a subset of cultural evolution dealing with the generation, storage, and selection of alternative ways of producing things and allocating that which is produced. Evolutionary theories in economics have already been successfully applied to problems of technical change, to the development of new institutions, and to the evolution of means of payment^[16].

For large, slow-growing animals like humans, genetic evolution has a built-in bias toward the long run. Changing the genetic structure of a species requires that characteristics (phenotypes) be selected and accumulated by differential reproductive success. Behaviors learned or acquired during the lifetime of an individual cannot be passed on genetically. Genetic evolution is therefore usually a relatively slow process requiring many generations to significantly alter a species’ physical and biological characteristics.

Cultural evolution is potentially much faster. Technical change is perhaps the most important and fastest evolving cultural process. Learned behaviors that are successful, at least in the short term, can be almost immediately spread to other members of the culture and passed on in the oral, written, or video record. The increased speed of adaptation that this process allows has been largely responsible for Homo sapiens’ amazing success at appropriating the resources of the planet. As already mentioned, humans now directly control from 25 to 40% of the total primary production of the planet’s biosphere^[17] and this is beginning to have significant effects on the biosphere, including changes in global climate and in the planet’s protective ozone shield.

Thus the costs of this rapid cultural evolution are potentially significant. Like a car that has increased speed, humans are in more danger of running off the road or over a cliff. Cultural evolution lacks the built-in long-run bias of genetic evolution and is susceptible to being led by its hyper-efficient short-run adaptability over a cliff into the abyss.

Another major difference between cultural and genetic evolution may serve as a countervailing bias, however. As Arrow^[18] has pointed out, cultural and economic evolution, unlike genetic evolution, can at least to some extent employ foresight. If society can see the cliff, perhaps it can be avoided.

While market forces drive adaptive processes^[19], the systems that evolve are not necessarily optimal, so the question remains: what external influences are needed and when should they be applied in order to improve an economic system via evolutionary adaptation? The challenge faced by ecological economic systems modelers is first to apply the models to gain foresight, and then respond to and manage the system feedbacks in a way that helps avoid any foreseen cliffs^[20]. Devising policy instruments and identifying incentives that can translate this foresight into effective modifications of the short-run evolutionary dynamics is the challenge^[21].

John Stuart Mill and the Steady-State

John Stuart Mill (1806–1873) was the son of social philosopher James Mill (1773–1836), who also wrote on economics. Mill is important for having expanded on the linkages between individual behavior and the common good suggested by Adam Smith, arguing that competitive economies had to be based on rules of property use and a sense of social responsibility that favored the common good. At the same time, he argued that competitive markets were essential to freedom. As a social philosopher seriously concerned with liberty, Mill also wrote on the immorality and waste of human productive talent that resulted from the subjugation of women by men. While his concern with subjugation of women was perhaps too instrumentally based, he neither saw material prosperity as an end in itself nor foresaw that continuous growth in material well-being was possible. Mill was one of the first economists to plead for conservation of biodiversity, or against the conversion of all natural capital into man-made capital. Mill envisioned economies becoming mature and reaching a steady-state in which people would be able to enjoy the fruits of their earlier savings, or material abstinence, which had been necessary for the accumulation of industrial capital. The idea that economies would reach a steady-state was both consistent with the Newtonian view of systems so dominant at the time and consistent with natural phenomena. Unceasing growth is not observed in nature, and relatively steady-states rather than random change are perceived as “natural.” Herman Daly (Daly, Herman E.) builds on Mill and argues for a steady-state economy where flows of resources into production and of pollutants back to the environment are kept at a steady level. The steady-state metaphor has become critical to finding common ground for achieving sustainable development^[22].

Karl Marx and the Ownership of Resources

Karl Marx (1818–1883) addressed, among his multiple critiques of capitalism, how the concentration of land and capital among a small portion of society affected how economies worked. There is an extensive collection of literature written by scholars influenced by Marx. Some of this literature addresses the sustainability of development and how the ownership of resources affects the path of development^[23]. Neoclassical models also readily show how resource ownership affects resource use^[24]. However, for a variety of political reasons, this facet of the neoclassical model was ignored in the West during the Cold War. Indeed, in the United States, economists who were concerned with the distribution of ownership of resources were politically disempowered through their association with a central concern of Marx. Western neoclassical economists, including resource and environmental economists, addressed questions of the efficient allocation of resources, leaving the initial distribution of resources among people as a given, not to be questioned. We now recognize that the initial distribution of rights to resources and to the services of the environment is critically important to resource and environmental conservation and the prospects for sustainability^[25].

It has long been known that how economies allocate resources to different ends depends on how resources are distributed among people, that is, whether they are owned by or otherwise under the control of different people. Peasants or others who work land and interact with biological resources owned by someone else have little incentive to protect them. Landlords can only counteract this lack of incentive by diverting their own labor or that of managers under them from other productive activities and employing it to monitor and enforce their interests in protection. This diversion of human potential would not be necessary with a more equal distribution of control. Furthermore, especially wealthy landlords may have little interest in protecting any particular land or biological resource for their descendants when they hold land in such abundance that their foreseeable descendants are certain to have an adequate share.

To illustrate why distribution is important, imagine two countries with identical populations and identical resources allocated by perfect markets. In the first country, rights to resources are distributed between people approximately equally, people have similar incomes, and they consume similar products, perhaps corn, chicken, and cotton clothing. In the second country, rights are concentrated among a few people who can afford luxury goods such as beef, wine, caviar, fine clothes, and tourism, while those who have few rights to resources, living nearly on their labor alone, consume only the most basic of goods like rice and beans. In each country, markets efficiently allocate resources to the production of products, but how land is used, the types of products produced, and who consumes them depend on how rights to resources are distributed. For different distributions of rights, the efficient use of resources is different.

Within the 20th-century global discourse on development policy, many have argued that economic injustices within nations as well as between nations have limited the development options of poor nations and thereby, in the long run, those of the rich as well. Similarly in the late 20th century global environmental discourse, many argued that environmental injustices and the international ecological order limit the possibilities for conservation. The vast majority of the people on the globe still consume very little. The poor are poor for two reasons. First, they do not have sufficient long-term access to resources to meet their ongoing material needs. Second, they are well aware that others consume far more than they do, that their poverty is relative, and rightfully strive to improve their own relative condition. Striving to meet their material needs and aspirations without long-term secure access to adequate resources, the poor have little choice but to use the few resources at their disposal in an unsustainable manner. The poor, excluded from the productivity of the fertile valleys or fossil hydrocarbon resources controlled by the rich, are forced to work land previously left idle because of its fragility and low agricultural productivity: the tropical forests, the steep hillsides, and arid regions.

An Environmental Justice movement addresses why the poor and people of color bear a heavy share of the environmental costs of development. The poor and people of color are more likely to live near waste disposal sites and more likely to work in polluted environments. This movement also speaks to the excessive material and energy consumption of the wealthy 20–30% of the world’s population made up of the middle classes and rich in the northern, industrialized nations as well as the elite in middle income nations and in some poorer ones. The rich consume the bulk of the resources and account for many of our environmental problems. The global access to resources by the rich means that many of the environmental impacts of their consumption decisions occur at a great distance, beyond their view, beyond their perceived responsibility, and beyond their effective control. The relationships between unequal access to resources, the unsustainability of development generally, and the loss of biodiversity in particular were major themes of the United Nations Conference on Environment and Development held in Rio de Janeiro in June 1992. Rich peoples and political leaders of northern industrialized countries generally have understandably had some difficulty participating in this discourse and even greater difficulty participating in the design of new global institutions to address the role of inequity in environmental degradation.

Our understanding of the environmental consequences of concentrated ownership and control are rooted in economic thinking, especially that of Karl Marx. Questions of equity are extremely important to the process of environmental degradation and to the possibilities for sustainable development. The occupation and ecological transformation of the Amazon have been partly driven by the concentration of the ownership of land in the more productive regions of Amazonian nations and partly driven by the economic power and hence political influence of the rich that has enabled them to obtain subsidies to engage in large-scale land speculation or cattle ranching. The ongoing efforts to establish international agreements on the management of biodiversity and climate change have been repeatedly forestalled by debates over the ownership and control of resources. But it is not simply a debate over fairness. The structure of the global economy and how specific economies interact with nature in the future will depend on which nations—the nations of origin or of the Northern commercial interests, the likely discoverers of new uses for heretofore unused species—receive the “rent” from resources.

Marx and his followers in communist countries have made a negative contribution to the allocative efficiency problem, even while highlighting issues of just distribution. Their ideological rejection of rent and interest as necessary prices, and their insistence on a labor theory of value that neglected nature’s contribution were responsible for much of the environmental destruction in communist countries.

W. Stanley Jevons and the Scarcity of Stock Resources

W. Stanley Jevons (1835–1882) contributed initially to meterology, logic, induction, and statistics while also making contributions to economics. He was one of the pioneers of the marginal utility theory of value. However, of more interest to ecological economics is his recognition of the critical importance of energy, which in his day meant coal. It was his argument that the British economy and the success of the empire were dependent on coal, a rapidly dwindling resource (The Coal Question, 1865), that brought him notoriety as an economist and a chair in political economy. He subsequently contributed to the mathematical formalization of economics (The Theory of Political Economy, 1871), continued to write on the philosophy of science (The Principles of Science, 1874), and speculated on the relationship of sunspots and financial crises (published in Investigations in Currency and Finance, 1884).

Ernst Haeckel and the Beginnings of Ecology

While ecology has been said to have its roots in the Greek science of Hippocrates, Aristotle, and Theophrastus, or in the 18th-century natural history of Linnaeus and Buffon, or in Darwin and Wallace’s evolutionary biology, ecology as a named science did not emerge as a “self-conscious” discipline with its own name until Ernst Heinrich Haeckel (1834–1919) first used the word oecologie in 1866. Practitioners began to use this term in the last decade of the 19th century^[26], Eugenius Warming (1841–1924) published the first ecology text in 1895^[27], and the first formal ecological societies formed during the second decade of the 20th century. Thus, as a practical and practiced science, ecology is a 20th-century phenomenon.

In 1870 Haeckel produced the first full-fledged definition of ecology:

By ecology we mean the body of knowledge concerning the economy of nature—the investigation of the total relations of the animal both to its inorganic and to its organic environment including above all, its friendly and inimical relations with those animals and plants with which it comes directly or indirectly into contact—in a word, ecology is the study of all those complex interrelations referred to by Darwin as the conditions of the struggle for existence^[28].

Thus, even in this initial definition of the field, a deep conceptual relationship with economics is evident. Ecology was, in Haeckel’s words, the study of the economy of nature. Economics, conversely, can be thought of as the ecology of humans. But historically the science of ecology evolved out of biology and ethology (the science of animal behavior) and thus had very different intellectual roots than economics. In practical terms, ecology became the study of the economy of that part of nature that does not include humans.

Since Haeckel’s early definition, many other interpretations of the definition of ecology proliferated based on changing areas of interest and emphasis. When there was a focus on animal populations, ecology was “the study of the distribution and abundance of animals”^[29]. Later, when ecosystems became a major focus, ecology was: “the study of the structure and function of ecosystems”^[30]. But what has remained at the core is the relationship of organisms to their environment. As the dominant species of animal on the planet, Homo sapiens and its relationship to its environment is obviously central to the scope of ecology by any of its various definitions.

Thus, from the very beginning of ecology as a science, there have been continuing attempts to incorporate humans and the social sciences. Most of these attempts, unfortunately, did not get very far. The tendency in the social sciences was to consider humans somehow outside the laws and constraints that applied to other animals, and ecologists were not persistent or effective enough in their attempts to extend ecological thinking to Homo sapiens.

As McIntosh points out:

If human factors are beyond ecological consideration, what then is human ecology? It is not clear whether ecology will expand to encompass the social sciences and develop as a metascience of ecology. The alternative is a more effective interdisciplinary relationship between ecology and the several social sciences^[31].

Ecological economics can be seen as an attempt to build this more effective interdisciplinary relationship as a bridge to a truly comprehensive science of humans as a component of nature that will fulfill the early goals of ecology. This reintegration of ecology and economics (and the other social sciences) is explored in the last section in this chapter.

Alfred J. Lotka and Systems Thinking

Alfred J. Lotka (1880–1949), was trained as a physical chemist, but his broad interests in chemistry, physics, biology, and economics led to a far-reaching synthesis of these fields together with thermodynamics in his 1925 book, Elements of Physical Biology^[32]. Lotka was the first to attempt an integration of ecological and economic systems in quantitative and mathematical terms. He viewed the whole world of interacting biotic and abiotic components as a system, where everything was linked to everything else and nothing could be understood without an understanding of the whole system. He also stressed the importance of looking at systems from an energetic point of view.

Lotka’s work was grand in scope and, although recognition was slow in coming, it eventually influenced both noted ecologists (like E. P. Odum and H. T. Odum) and economists (like Paul Samuelson, Henry Schultz, and Herbert Simon)^[33]. Lotka’s work was clearly in the synthetic, transdisciplinary spirit of the 19th century, but was coming at a time when the disciplines had already started to fragment. Lotka was not a professional scholar until late in his career, and his isolation from the pressures of the academic disciplines probably allowed him to more easily achieve and maintain his broad perspective.

While Lotka is probably best known for his equations describing two-species population dynamics (which were simultaneously discovered by Vito Volterra and have come to be known as the Lotka-Volterra equations), these equations occupied only two pages of his 1925 book. His more important contributions from the perspective of ecological economics were his attempts to treat ecology and economics as an integrated whole, exhibiting nonlinear dynamics and constrained and structured by flows of energy. He attempted to model quite explicitly the economy of nature, and developed a general evolutionary approach to this problem. But since he was interested in systems, not just species and populations, he developed systems criteria to drive evolution. What has come to be known as “Lotka’s energy principle” or “Lotka’s power principle” posited that systems survive by maximizing their energy flow, defined as the rate of effectively using energy, or power. In single species populations this reduced to the usual criterion of reproductive success, but his formulation allowed the generalization to all systems, from simple chemical systems to biological, ecological, and economic systems. These ideas presaged the development of general systems theory (discussed later) and were very influential on later attempts to reintegrate ecology and economics.

A. C. Pigou and Market Failure

Arthur C. Pigou (1877–1959) formally elaborated how costs and benefits that are not included in market prices affect how people interrelate with their environment. An externality is a phenomenon that is external to markets and hence does not affect how markets operate when in fact it should. Consider, for example, pesticide use in agriculture and the associated loss of biodiversity. In Figure 2.4 below, S₀ illustrates the willingness of farmers to supply food at different prices. As the price of food increases (the y-axis), the quantity of food (the x-axis) that farmers are willing to supply increases. D is the demand curve illustrating the willingness of people to purchase greater quantities of food at lower prices. The market clears, in the sense that the quantity supplied equals the quantity demanded, at the price P₀ and quantity Q₀.

Figure 2.4. Market distortion due to an external cost. (Source: Authors)

Now imagine that we could measure, for example, the value of biodiversity lost through pesticide use and add this to the cost of pesticides. The higher cost of pesticides would reduce the quantity of food that farmers could produce at any given price, shifting the supply curve to S₁, the price of food to P₁, and the quantity of food supplied and demanded to Q₁. By internalizing the cost of lost biodiversity through farmers’ decision to use pesticides, we internalize a cost that was previously external to the market and thus affect how the market operates. Following the logic of Pigou and numerous environmental economists since, biodiversity is not protected adequately because its value is not included in the market signals that guide the economic decisions of producers and consumers and thereby the overall operation of the economic system. The logic of market failure has led economists, and increasingly biologists as well, to argue that the critical environmental resources need to be incorporated into the market system^[34].

One way of doing this is to grant to private individuals the sole rights to use particular environmental resources. This individual then both reaps the economic benefits from using the resource now but also may benefit through conserving the resource for use at a later date. This means consumers will pay a higher price, reflecting the costs of managing the species in a more sustainable manner. It is important to keep in mind, however, that incorporating species into the market system may not result in their conservation and indeed could even accelerate their extinction. Species within the market system, for example, will not be conserved if their value is expected to grow at less than the rate of interest unless other controls are also put on their harvest (see section on Hotelling).

The processes of biodiversity loss also interact with each other in a larger, reinforcing process of positive feedbacks. The degradation of any particular area increases the economic pressure on other areas. The loss of woody species through climate change reduces the possibilities for carbon fixation and reduces the opportunities to ameliorate further climate change. To bring a system into equilibrium, negative feedbacks are needed. Economics helps us see how biodiversity is decreasing because so few genetic traits, species, or ecosystems have market prices, the negative feedback signals that equilibrate market economies. In market systems, prices increase to reduce the quantity demanded when supplies are low and prices drop to increase the quantity demanded when supplies are high, keeping demand and supply in equilibrium. The problem, economists argue, is that most genetic traits, species, and ecosystems are being lost because they do not have prices acting as a negative feedback system to keep use in equilibrium with availability. When individuals of the species become fewer, there is no increase in price to decrease the quantity used. By putting economic values on species and through various ways including them in market signals, biodiversity loss would be reduced. Furthermore, the economic explanation and solution is systemic. Unlike bioreserves, which reduce human pressures on species within the protected area but typically increase them beyond it, including the value of biodiversity in the price system would beneficially affect decisions in every sector of the economy.

Biologists also find the idea that we need to know the economic values of species compatible with their own understanding that if the true value of species to society were understood, more species would be conserved. Clearly, if we knew the value of biological resources, we would be in a better position to manage them more effectively. And, to the extent these values could be included in the market system, markets themselves could assist in the conservation of biodiversity. The situation can frequently be improved through amending market signals. At the same time, it is important to remember that market values only exist within a larger system of values, which for many people include the preservation of nature for ethical or religious reasons^[35].

Even when species cannot be better conserved through the market, knowing their economic value can help convince people and their political representatives that the species deserves protection. Environmental valuation can also improve how we analyze the benefits and costs of development projects that affect biodiversity. Techniques for valuation include determining people’s willingness to pay to maintain diversity through questionnaires and through analyses of their expenditures to observe interesting environments and particular species^[36].

While several techniques for estimating the value of the environment are proving interesting, valuation is by no means an easy task and estimates should be used cautiously. A major difficulty is related to the systemic nature of economics, ecosystems, and the process of environmental degradation. Market systems relate everything to everything else. When the price of oil changes, for example, the price of gasoline changes, the demand and hence the price of products that use gasoline such as automobiles changes, the demand for and hence the price of coal changes, and so on. Prices bring markets to equilibrium and their flexibility is essential to this task. Similarly, the “right” price for a given species or ecosystem will depend on the availability of a host of other species or ecosystems with which they are interdependent as well as with other species and ecosystems that may be substitutes or complements in use. To think that a species or ecosystem has a single value is to deny both ecosystem and economic system interconnections. Nevertheless, environmental valuation can assist us in understanding at least the minimal importance of ecological services and conveying this understanding to the public to improve the political process of finding common ground.

Harold Hotelling and the Efficient Use of Resources over Time

Harold Hotelling (1895–1973) developed a model of efficient resource use over time that helps us understand how resources are exploited over time and the conditions under which conservation or depletion occur^[37]. Hotelling reasoned that the owner of mineral resources had two options: that of extracting the resource and putting the profits in the bank where they would earn interest, and that of leaving the resource in the ground to appreciate in value. The owner would choose the first option unless the potential profits that could be earned from mining the resource in the future were increasing in value at a rate faster than the rate of interest. If this were the case, then it made sense to leave the resource in the ground. He then reasoned that, under particular conditions, a mining industry consisting of competitive resource owners would behave such that resources in the ground would increase in value at the rate of interest, for this would be the condition under which resource owners would be indifferent between mining and not mining a little more. If this condition were not met, they would all mine more if they could earn more by putting their revenues in the bank, or mine less if they could earn more by leaving the resource in the ground. Expectations about the future are critical in Hotelling’s model, and are embodied in the expected interest rate and expected future price of the resource.

Figure 2.5. Commercial and noncommercial tree growth and harvest time. (Source: Authors)

Clearly the level of the interest rate affects how biological resources are managed and hence the rate and direction of ecosystem transformation and species extinction. Any species or ecosystem that cannot be managed at a level such that it is generating a flow of services at a rate greater than the rate of interest “should” be depleted (see Figure 2.5). Since even many economists find exploitation to extinction rather crass, there has been considerable interest in whether the interest rate produced by private capital markets reflects the social interest and whether, when these interests are factored in, a social rate of interest would not be significantly lower than the private interest rate. Might private capital markets work imperfectly, generating rates of interest that are too high and hence leading to excessive biodiversity loss^[38]? There are good reasons to expect that lower interest rates would favor the conservation of biodiversity, though there are situations when this would not be the case. Low interest rates allocate investments from the fastest growing projects, but increase the total number of projects that are worth investing in. Thus, low interest rates favor conservation in terms of their effects on allocation, but in terms of their scale-increasing effect they work against conservation. This has not been simply an academic argument. The World Bank now realizes how its own evaluation policies have hastened biodiversity loss and, in part for this reason, has a policy of not financing the transformation of natural forest habitat.

Economics and Ecology Specialize and Separate

Every profession lives in a world of its own. The language spoken by its inhabitants, the landmarks familiar to them, their customs and conventions can only be learnt by those who reside there.
—Carr-Saunders and Wilson 1933, p. iii

By the end of the 19th century the trend to increasing specialization and professionalization in science was well under way, and economics as a profession became more and more popular^[39]. What has come to be called the “reductionist” paradigm was beginning to hold sway. This paradigm assumes that the world is separable into relatively isolated units that can be studied and understood on their own, and then reassembled to give a picture of the whole. As the complexity of science increased, this was a very useful idea, since it allowed dividing up the problem into smaller, more manageable pieces that could be attacked intensively. Chemists could study chemistry without being distracted by other aspects of the systems they were studying. Also, the rapid increase in the sheer number of scientists that were actively working made it necessary to organize the work in some way, and the disciplinary structure seemed a logical and useful way to do this. But once university departments were set up in the various disciplines, internal reinforcement systems came to reward only work in the discipline. This rapidly led to a reduction in communication across disciplines and a tendency for the disciplines to develop their own unique languages, cultures, and ways of looking at the world.

In economics, this led to a growing isolation from the natural resource (or land) component of the classical triad of land, labor, and capital, and with it a growing isolation from the natural sciences. Economics departments began to reward theory more highly than applications and the discipline as a whole attempted to pattern itself on physics, which was probably the most successful example of the advantages of the disciplinary model of organization.

This trend continued in the early through mid-20th century and, by the time of the renewed environmental awareness of the 1970s, economics had become highly specialized and abstracted away from its earlier connections with the natural environment. Textbooks at the time barely mentioned the environment and concentrated instead on the microeconomics of supply, demand, and price formation and the macroeconomics of growth in manufactured capital and GNP.

At the same time, economics was becoming absorbed with professionalization. As A. W. Coats noted:

At least since the marginal revolution of the 1870s, mainstream economists have sought to enhance their intellectual authority and autonomy by excluding certain questions which were either sensitive (such as the distribution of income and wealth, and the role of economic power in society) or incapable of being handled by their preferred methods and techniques, or both. These are precisely the questions which are emphasized by their professional and lay critics and, more recently, by many economists who cannot be dismissed by their professional colleagues as either ignorant or incompetent^[40].

The story in ecology is somewhat different. As we have previously noted, ecology is a much younger science, and it has always been more explicitly pluralistic and interdisciplinary. But its roots were in biology and the trend in biology was much the same as in other areas of science. The initial split into botany and zoology was followed by further specialization into biochemistry, biophysics, molecular biology, and so on. In ecology itself there was something of a split between the population ecologists (e.g., Robert MacArthur), who concentrated on individual populations of organisms, and systems ecologists (e.g., E. P. and H. T. Odum), who focused on whole ecosystems. But this split never got to the point of separation into distinct departments and disciplines, although many academic programs took on a decided flavor in one direction or the other.

Through all of this, ecologists, more so than any other discipline, have maintained communication across most of the natural sciences. To study ecosystems, one has to integrate hydrology, soil science, geology, climatology, chemistry, botany, zoology, genetics, and many other disciplines. The dividing line for ecologists has been at a particular species: Homo sapiens. Even though Haeckel’s original definition explicitly included humans, and many ecologists have argued and worked to operationalize this integration, for the vast majority of active ecologists, the study of humans is outside their discipline, left to the social sciences. Indeed, most ecologists looked for field sites as remote from human activities as possible to conduct their research. Ecological economics is an attempt to help rectify this tendency to ignore humans in ecology, while at the same time rectifying the parallel tendency to ignore the natural world in the social sciences.

The Reintegration of Ecology and Economics

Ecology and economics have been pursued as separate disciplines through most of the 20th century. While each has certainly borrowed theoretical concepts from the other and shared patterns of thinking from physics and other sciences, each has addressed separate issues, utilized different assumptions to reach answers, and supported different interests in the policy process. To be sure, individual scholars kept trying to introduce the issues addressed by natural science into economics, but they were systematically rejected by economists as a group^[41]. Indeed, in their popular manifestations as environmentalism and economism, these disciplines became juxtaposed secular religions, preventing the collective interpretation and resolution of the numerous problems at the intersection of human and natural systems.

Ecological economics arose during the 1980s among a group of scholars who realized that improvements in environmental policy and management and protecting the well-being of future generations were dependent on bringing these domains of thought together. Numerous experiments with joint meetings between economists and ecologists were held, particularly in Sweden and the United States, to explore the possibilities of working together^[42]. Meanwhile, there was also growing discontent with the deficiencies in the system of national accounts that generates measures of economic activity such as gross domestic product, while ignoring the depletion of natural capital through the mining of resources such as petroleum and through environmental degradation^[43]. Economists and ecologists joined to encourage the major international agencies to develop accounting systems that included the environment^[44]. Buoyed by such initial efforts, the International Society for Ecological Economics (ISEE) was formed during a workshop of ecologists and economists held in Barcelona in late 1987, and the journal, Ecological Economics, was initiated in 1989. Major international conferences of ecologists and economists have been held since then, many ecological economic institutes have been formed around the world, and a significant number of books have appeared with the term ecological economics in their titles^[45].

Figure 2.6. Relationship of domains of ecological economics and conventional economics and ecology, resource and environmental economics, and environmental impact analysis. (Source: Costanza, Daly, and Bartholomew 1991^[1])

Ecological economics is not a single new paradigm based in shared assumptions and theory. It represents a commitment among economists, ecologists, and others, both as academics and as practitioners, to learn from each other, to explore new patterns of thinking together, and to facilitate the derivation and implementation of new economic and environmental policies. To date, ecological economics has been deliberately conceptually pluralistic even while particular members may prefer one paradigm over another^[46]. One way of looking at it is to view ecological economics as encompassing economics and ecology and their existing links in the form of resource and environmental economics and environmental impact analysis as shown in Figure 2.6. Ecological economists are rethinking both ecology and economics by, for example, extending the materials balance and energetic paradigm of ecology to economic questions^[47], applying concepts from economics to better understand the nature of biodiversity^[48], and arguing from biological theory how natural and social systems have coevolved together such that neither can be understood apart from the other^[49].

Today’s ecological economists are indebted to particular scholars who, though they have been predominantly ecologists or economists themselves, have maintained and demonstrated the advantages of a transdisciplinary approach. We highlight the new patterns of thinking introduced by many of these scholars in the next sections while acknowledging that there are many more who have contributed to the founding of ecological economics in diverse ways.

General System Theory

Systems analysis is the study of systems that can be thought of as groups of interacting, interdependent parts linked together by complex exchanges of energy, matter, and information. There is a key distinction between “classical” science and system science. Classical science is based on the resolution, or reduction, of phenomena into isolatable causal trains and the search for basic, “atomic” units or parts of the system. Reductionist approaches are appropriate if the interaction between the parts is nonexistent, weak, or essentially linear so that they can be added up to describe the behavior of the whole. While these conditions are met in some physical and simple chemical systems, they are almost never met in more complex living systems. A “living system” is characterized by strong, usually nonlinear, interactions between the parts. Such complex feedbacks make resolution into isolatable causal trains difficult or impossible and also mean that small-scale behavior cannot simply be “added up” to arrive at large-scale results. Of course, this has not prevented scientists from assuming that living systems can be reduced to causal trains and isolatable parts, but this also explains why disciplinary environmental science and economics has produced inappropriate policies and management schemes.

As we noted earlier in our discussion of A. J. Lotka, some scientists have long addressed the difficulties of working with complex systems. Ludwig von Bertalanffy, however, is especially credited with advancing the formal study of systems through a paper he wrote in 1950. This paper drew the attention of others who then chose to explore the field together. In General System Theory (1968), von Bertalanffy and his cohorts argued that similar patterns of interaction could be found in quite different systems and ventured the argument that once these basic patterns were understood, all systems could be understood. While this has not proved to be the case, one participant of the general system theory group, Kenneth Boulding, produced a series of books drawing parallels between economic and ecological systems, inspired other potential ecological economists in their formative years, and then helped in the founding of ecological economics as a formal effort^[50].

Ecological and economic systems obviously exhibit the characteristics of living systems, and hence are not well understood using the methods of classical, reductionist science. While almost any subdivision of the universe can be thought of as a “system,” systems analysts look for boundaries that minimize the interaction between the system under study and the rest of the universe in order to make their job easier. Some systems theorists claim that nature “herself” presents a convenient hierarchy of scales rooted in these interaction-saving boundaries, ranging from atoms to molecules to cells to organs to organisms to populations to communities to ecosystems—including economic, or human-dominated ecosystems—to bioregions to the global system and beyond^[51]. By studying the similarities and differences between different kinds of systems at different scales and resolutions, one can develop hypotheses and test them against other systems to explore their degree of generality and predictability.

One might define systems analysis as the scientific method applied both across and within disciplines, scales, resolutions, and system types. In other words, it is an integrative manifestation of the scientific method, while most of the traditional or classical scientific disciplines tend to dissect their subjects into smaller and smaller parts hoping to reduce the problem to its essential elements. Thus, systems analysis forms a more natural scientific base and worldview for the inherently integrative transdiscipline of ecological economics than classical, reductionist science.

Beyond this distinction between synthesis and reduction, systems analysis usually applies mathematical modeling to these integrative problems. While this is neither a necessary nor a sufficient condition for systems analysis, it is a common characteristic, if for no other reason than that systems tend to be complex and mathematical modeling, especially on computers, is often necessary to handle that complexity. According to von Bertalanffy^[52] “the system problem is essentially the problem of the limitations of analytical procedures in science.” Recent years have seen an explosion in our ability to overcome these limitations and to actually model the complex, nonlinear, scale-dependent behavior of systems; hence the history of systems analysis is now understood to be tightly linked with the history of the computer. While computers first appeared in the 1950s, their widespread use did not commence until the 1960s and 1970s, and did not become common until the 1980s. With the increasing availability, power, and “user-friendliness” of computers has come an increasing feasibility of systems analysis. Today, many people can buy a personal computer and relevant software and begin to do practical systems analysis. Now the limitation is clearly the availability of appropriate data.

The possibility for this sort of analysis was recognized early and practical applications were developed more or less independently by modelers in economics, ecology, industrial management, and what was then called cybernetics^[53]. Early “systems analysts” in economics include Wassily Leontief^[54] and John Von Neumann and Oscar Morgenstern^[55] who mainly focused on static input–output networks and games. Jay Forrester of MIT began modeling complex industrial systems in the early 1960s^[56] and has spawned one of the most prolific schools of systems analysis. In ecology, H. T. Odum^[57], B. C. Patten^[58], and Bruce Hannon^[59] were among the early practitioners of both dynamic computer simulation and static network analysis. The International Biosphere Program (IBP) was an early large-scale attempt to perform ecological systems analysis for a range of ecosystems^[60]. Students of Jay Forrester developed the world systems model reported in The Limits to Growth^[61] which launched an impressive debate^[62] as well as expansions in their analysis^[63].

Open-Access Resource Management and Commons Institutions

When nature can be divided into separate properties that are individually owned, the owners have an incentive to use the property carefully so that they can continue to use it in the future. When nature cannot be so divided and many people use the resource together, problems can arise. Resources used by multiple users without rules governing their use will be overexploited. Both traditional and modern societies typically develop rules for the use of resources held in common. The important point is that nature rarely can truly be divided into separate parts, the very premise of systems theory discussed in the previous section, so the problems raised by collective use of resources must always be addressed. Indeed, as population and material consumption increase, the contradictions between the indivisibility of nature and the use of private property for environmental management become ever more critical.

A. C. Pigou addressed the problem of collective resource use in the 1920s and subsequent economists have developed formal models. The phenomenon did not become widely understood, however, until it was popularized in an article in Science magazine written by Garret Hardin, titled “The Tragedy of the Commons”^[64]. The problem Hardin addressed is more accurately referred to as “open access” resources rather than “common property.” Common ownership is not in itself a tragedy since many resources have been successfully managed as commons.

Open access can develop through the destruction of common institutions regulating the use of resources used jointly by people, leading to tragic consequences. Societies in transition between traditional and modern form frequently experience the tragedy of over use when neither traditional nor modern forms of common control prevail. Similarly, resources for which access is difficult to restrict, such as on frontiers beyond the control of governments, in the open sea, and wildlife that crosses national boundaries, are frequently overexploited^[65]. The absence or destruction of institutions regulating commons has led to the extinction of diverse species and the genetic impoverishment of many.

Figure 2.7. Excessive fishing effort occurs in an open-access fishery because existing fishermen expand their effort and new fishermen enter the fishery beyond level E₁, the point of maximum profit. Each fisherman continues to make a profit by increased fishing up to level E₂, where the total revenues equal total costs. Further fishing beyond this point is economically counterproductive because costs exceed revenues. (Source: Authors)

H. Scott Gordon^[66] formulated the problem of open-access resources as shown in Figure 2.7. Imagine an open-access fishery with total costs and total revenues from fishing effort as shown. Profits or rents from the fishery are maximized at level of effort E₁ but with unrestricted access, people would put more effort into fishing until the level E₂ was reached where no rent would be earned from fishing and no one would consider additional fishing worth the effort since costs would now be greater than revenues. Since more fish are caught at greater levels of effort, overfishing is more likely to occur in an open-access fishery than in a fishery managed as a commons.

To the extent that biodiversity is manifested as different genetic traits, species, and ecosystems that cannot be owned by individuals and incorporated in market systems, we need common management institutions to conserve biodiversity for our descendants. At the end of the 20th century, international biodiversity agreements began to be formulated and implemented. In some cases, traditional common property institutions for the protection of biodiversity can be maintained in the face of modernization. In other cases, new institutions will be needed. Common property institutions may be communal, regional, national, or global. The health of institutions at all of these levels will be critical to conserving biological diversity and ecosystem integrity. For this reason, commons institutions are central to the work of many ecological economists^[67]. Similarly, it is now well understood that the global climate–regulating system is a common resource in need of common management institutions. For centuries, industrializing nations have dumped carbon dioxide, a by-product of fossil fuel combustion, and other greenhouse gases into the atmosphere without regard for their impacts on the climate system as a whole. Commons institutions for the management of the global climate system are in the process of being agreed to and implemented.

While Garret Hardin as a biologist “discovered” a phenomenon long understood by economists, Hardin was able to convey the larger meaning of the phenomenon to a broad audience and awake natural scientists to the importance of institutions for environmental management. His article is still one of the most frequently found among the readings for environmental courses. Hardin, by crossing disciplines and demonstrating the significance to policy of economics and ecology used together, contributed to the rise of ecological economics.

Energetics and Systems

In the year 1971 two influential books were published by two authors who did not yet know of each other, one a noted ecologist and one a noted economist. The books were very different in style and in many other ways, but both books were about energy, entropy, power, systems, and society and both can be said to have made a major contribution to setting the stage for ecological economics. One was Howard T. Odum’s Environment, Power, and Society and the other was Nicholas Georgescu-Roegen’s The Entropy Law and the Economic Process.

At the time, relatively few people were interested in the overall importance of energy to people in modern economies. But the public’s attention was soon galvanized in late 1973 by the Arab oil embargo and the agreement by the Organization of Petroleum Exporting Countries to significantly increase the price of oil. Subsequent further energy price increases during the Iran–Iraq War in the late 1970s and then a rapid decrease in the price of oil in the mid-1980s seriously perturbed both industrial and developing economies. In the process, the role of energy became a central theme in our understanding of economic systems and how we relate to the environment^[68].

Nicholas Georgescu-Roegen (1906–1994) was born in Romania, trained in mathematical statistics in France, assumed academic and government positions in his native country, and fled to the United States after World War II to become an economist, working with Professor Joseph Schumpeter at Harvard. His contributions to the further mathematical refinement of standard [[neoclassical] economics] in the areas of utility and consumer choice, production theory, input–output analysis, and development economics were honored by his being designated a Distinguished Fellow of the American Economic Association. He is most noted, however, for his contributions in the area of entropy and economics, which still stir considerable controversial discussion among economists.

Georgescu-Roegen argued that all economic processes entail the use of energy and that the [[second law] of thermodynamics], the entropy law, clearly indicates that the available energy in a closed system can only decline. Like others before him, he also noted the parallel between the degradation of the availability of energy and the degradation of the order of materials. Economic processes entail using relatively concentrated iron resources, for example, which are then further concentrated through the use of energy, but ultimately end up being dispersed as rust and waste, less concentrated than the original iron ore. Biodiversity degradation can also be thought of as a parallel problem. New technologies do not “create” new resources, they simply allow us to degrade energy, material order, and biological richness more rapidly.

Critics have argued that the entropy law is not important because the earth is not a closed system. It receives sunlight (Solar radiation) daily and is expected to continue to do so for another several billion years. Yet modern industrial economies are fueled by fossil hydrocarbons, accumulations of past solar energy which are clearly limited, while current solar energy is of limited flow and of relatively low concentration.

Georgescu-Roegen’s message is controversial, in part, because it conflicts with beliefs in progress that are still strongly held by economists. The message is also difficult to interpret because it does not inform us how quickly we need to make the transition from stock energy resources to flow energy resources. In this sense, we simply need to look at resource constraints as well as the ability of the global system to absorb carbon dioxide and other greenhouse gases; the entropy law itself does not provide additional information. The entropy law, however, does provide a strong bass beat to the sirens being sounded by scientists studying climate change, biodiversity loss, and soil degradation.

Nicholas Georgescu-Roegen not only motivated one of his students, Herman Daly (Daly, Herman E.), to address the long-term human predicament (discussed later), but also inspired many others to ponder the various ways the entropy law helps us understand irreversibility, systems and organization, and our options for the future^[69].

The hourglass analogy can be extended by considering the sand in the upper chamber to be the stock of energy in the sun. Solar energy arrives to earth as a flow whose amount is governed by the constricted middle of the hourglass that limits the rate at which sand falls. Suppose that in ancient geologic ages some of the falling sand had gotten stuck against the inner surface of the bottom chamber, but at the top of the bottom chamber, before it had fallen all the way. This becomes a terrestrial dowry of low entropy, a stock that we can use up at a rate of our own choosing. We use it by drilling holes in it through which the trapped sand can fall to the bottom of the lower chamber. This terrestrial source of low entropy can be used at a rate of our own choosing, unlike the sun whose energy arrives at a fixed flow rate—we cannot “mine” the sun to use tomorrow’s sunlight today, but we can mine terrestrial deposits and in a sense use up tomorrow’s petroleum today.

There is thus an important asymmetry between our two sources of low entropy. The solar source is stock abundant, but flow limited. The terrestrial source is stock limited, but flow abundant (temporarily). Peasant societies lived off the solar flow; industrial societies have come to depend on enormous supplements from the unsustainable terrestrial stocks.

Reversing this dependence will be an enormous evolutionary shift. Georgescu-Roegen argued that evolution has in the past consisted of slow adaptations of our endosomatic organs (heart, lungs, etc.), which run on solar energy. Now evolution has shifted to rapid adaptations of our exosomatic organs (cars, airplanes, etc.) that depend on terrestrial low entropy. The uneven ownership of exosomatic organs and the terrestrial low entropy from which they are made, compared to the egalitarian distribution of ownership of endosomatic capital, was for Georgescu-Roegen the root of social conflict in industrial societies.

Howard T. Odum was born in Durham, North Carolina in 1924, the son of Howard W. Odum, a noted sociologist. H.T. Odum was a meteorologist in the American tropics during World War II, received an A.B. in Zoology from the University of North Carolina in 1947, and a Ph.D. from Yale University in 1951, under ecologist G. Evelyn Hutchinson. He has been concerned with material cycles and energy flow in ecosystems and he produced one of the first energy flow descriptions of a complete ecosystem in his famous study of Silver Springs, Florida^[70]. He also contributed heavily to his brother Eugene P. Odum’s influential textbook, Fundamentals of Ecology, first published in 1953^[71]. This textbook was the standard in ecology for several decades and helped to establish several important ecological concepts, both in the profession and in the public consciousness. In particular, the concept of the ecosystem was fully developed and was quantified using units of energy and material flows.

In addition to his father and Hutchinson, H. T. Odum was influenced in his thinking by Lotka and von Bertalanffy, and he was concerned with many of the same problems as Georgescu-Roegen. His approach was broader than Georgescu-Roegen’s, however, and went beyond economics and thermodynamics to include systems in general, from simple physical and chemical systems to biological and ecological systems to economic and social systems. In Environment, Power, and Society he laid out a comprehensive integration of systems with energy flow used as the integrating factor. He even developed his own symbolic language (similar in intent and use to Forrester’s systems dynamics symbols) to help describe and model the common features of systems. This language was both an indispensable aid to the initiated practitioner in helping to understand systems concepts and a barrier to outsiders gaining access to these same concepts.

Odum’s work on energy flow through systems and dynamic modeling of systems spawned, or at least paralleled and encouraged, an immense amount of work by his students and others ranging from input–output studies of energy and material flow in ecological and economic systems^[72] to dynamic simulation models of whole ecosystems and integrated ecological economic systems^[73]. Probably the most concise and complete treatment of the application of many of H. T. Odum’s ideas to ecological economics is the 1986 book by C. A. S. Hall, C. Cleveland, and R. Kaufmann titled Energy and Resource Quality: The Ecology of the Economic Process.

Both E. P. and [[H. T. Odum]’s] work has inspired a whole generation of ecologists to study ecology as a systems science and to link it with economics and other disciplines. While many (if not most) of H. T. Odum’s ideas were controversial, they have spawned discussion of what we think are the right questions: How do systems work? How do they evolve and change? How do human systems and ecosystems interact over time? How can we develop an interdisciplinary understanding of systems? What patterns of human development are sustainable? All of these questions were being asked by H. T. and E. P. Odum in the 1950s, 1960s, and 1970s and are among the core questions of ecological economics today.

Spaceship Earth and Steady-State Economics

[[Kenneth Boulding]’s] classic “The Economics of the Coming Spaceship Earth”^[74] set the stage for ecological economics with its description of the transition from the “frontier economics” of the past, where growth in human welfare implied growth in material consumption, to the “spaceship economics” of the future, where growth in welfare can no longer be fueled by growth in material consumption. This fundamental difference in vision and worldview was elaborated further by Daly^[75] in recasting economics as a life science—akin to biology and especially ecology, rather than a physical science like chemistry or physics. The importance of this shift in “pre-analytic vision”^[76] cannot be overemphasized. It implies a fundamental change in the perception of the problems of resource allocation and how they should be addressed. More particularly, it implies that the focus of analysis should be shifted from marketed resources in the economic system to the biophysical basis of interdependent ecological and economic systems^[77].

Daly further elaborated on this theme with his work on “steady state economics”^[78] which worked out the implications of acknowledging that the Earth is materially finite and nongrowing, and that the economy is a subset of this finite global system. Thus the economy cannot grow forever (at least in a material sense) and ultimately some sort of sustainable steady state is desired. This steady state is not necessarily absolutely stable and unchanging. Like in ecosystems, things in a steady-state economy are changing constantly in both periodic and aperiodic ways. The key point is that these changes are bounded and there is no long-term trend in the system. Daly’s work in steady-state economics can be seen as one of the direct antecedents of ecological economics.

Adaptive Environmental Management

In the late 1970s, Canadian ecologist C. S. Holling became director of the International Institute for Applied Systems Analysis (IIASA). His earlier work on spruce budworm outbreaks in northern boreal forests had led him to a complex and dynamic view of ecosystems that eventually took over from the more “equilibrium” concepts that had held sway earlier. He was also concerned with how humans interacted with ecosystems and why their attempts at “management” failed so miserably (the spruce budworm/boreal forest was only one example). This all led to a groundbreaking book published in 1978 titled Adaptive Environmental Assessment and Management^[79].

Adaptive environmental management redraws conventional boundaries by integrating science and management. Holling realized that laboratory and controlled field experiments on parts of ecological systems could not be aggregated to an understanding of the whole. At best, we experiment when we manage ecosystems. Of course, we only learn from experiments if we monitor them well, undertake a fair number of them, and are prepared to learn from them. Thus, environmental management agencies, rather than looking to science to determine for them what is good management practice, must consciously become a part of the experimentation and learning process. Furthermore, Holling argued, ecosystems do not have a single equilibrium state that they prefer. Rather, they have multiple equilibriums and evolve over time as well. This being the case, the scientists and agencies working with ecosystems must constantly adapt their management experiments to understand a changing system^[80]. This means that models and policies based on them are not taken as the ultimate answers, but rather as guiding an adaptive experimentation process within the regional system. More emphasis is placed on monitoring and feedback to check and improve the model rather than using the model to obfuscate and defend a policy that is not corresponding to reality.

Adaptive environmental management has proved to be an effective approach to understanding and managing complex, changing systems with large uncertainties. While this approach emerged out of ecology and its application to management, it has tremendous implications for social organization. Environmental managers, people in associated communities, and those in the broader public who are especially interested in environmental issues should question, assist in the monitoring, and share in the learning. This is a very different vision than that of objective scientists determining the truth about environmental systems, managers applying it, and the people being passive beneficiaries. The approach acknowledges the coevolutionary nature of ecological and economic systems (as discussed below) and is a key concept in ecological economics.

Coevolution of Ecological and Economic Systems

One of the strongest barriers to the union of economics and ecology has been the presumption that ecological and economics systems are separable and do not need to be understood together. Economists think of economic systems as separate from nature, while the vast majority of natural scientists think of natural systems as apart from people. Indeed, social scientists generally have thought that all social phenomena are culturally determined. When natural scientists do consider social phenomena, they “naturally” look to natural law to explain it. And so a “line in the sand” is frequently found between cultural and environmental determinists with economists among the cultural determinists and ecologists among the environmental determinists. As we have noted, this line reflects historic Western beliefs about systems and about science that had become a part of our problem, an explanation for the unsustainability of modern societies.

Evolutionary ecologists Paul Ehrlich and Peter Raven first alerted the scientific community to the importance of coevolution between species^[81]. The niche to which species evolve has most frequently been described as a fixed, physical niche. With the characteristics of the niche fixed, evolution acquires a direction, and evolutionary stories usually entail the species progressively fitting the characteristics better and better. Hence evolutionary stories are frequently stories of progress, with human evolution providing the ultimate story of progress. Coevolution simply acknowledges that the characteristics of a species’ niche at any one time are predominantly other species and their characteristics. Hence, the characteristics of any one species are selected in the context of the characteristics of other species and vice versa; species coevolve. Even as evolutionary direction and the analog to Western beliefs in progress are lost, coevolution helps explain why species fit together into ecosystems while at the same time species and ecosystems continue to change.

Figure 2.8. The coevolutionary development process. (Source: Authors)

Norgaard^[82] illustrates how understanding the coevolutionary process can help us to understand how natural and social systems interconnect and change. From this, he suggests new directions for social organization to enhance environmental sustainability, social justice, and human dignity. Consider development as a process of coevolution between knowledge, values, organization, technology, and the environment (Figure 2.8). Each of these subsystems is related to each of the others, yet each is also changing and affecting change in the others through selection. Deliberate innovations, chance discoveries, and random changes occur in each subsystem that affect, through natural selection, the distribution and qualities of components in each of the other subsystems. Whether new components prove fit depends on the characteristics of each of the subsystems at the time. With each subsystem putting selective pressure on each of the others, they coevolve in a manner whereby each reflects the other. Thus everything is coupled, yet everything is changing.

Environmental subsystems are treated symmetrically with the subsystems of values, knowledge, social organization, and technology in this coevolutionary explanation of development. New technologies, for example, exert new selective pressures on species, while newly evolved characteristics of species, in turn, select for different technologies. Similarly, transformations in the biosphere select for new ways of understanding the biosphere. For example, the use of pesticides induces resistance and secondary pest resurgence, selecting both for new pesticides and for more systematic ways of thinking about pest control. Pests, pesticides, pesticide production, pesticide institutions and policy, how we understand pest control, and how we value chemicals in the environment demonstrate an incredibly tight and rapid coevolution in the second half of this century. In the short run, people can be thought of as interacting with the environment in response to market signals or their absence. The coevolutionary model, however, incorporates longer-term evolutionary feedbacks. To emphasize coevolutionary processes is not to deny that people directly intervene in and change the characteristics of environments. The coevolutionary perspective puts its emphasis on the chain of events thereafter, and how different interventions alter the selective pressure and hence the relative dominance of environmental traits which, in turn, select for values, knowledge, organization, and technology and hence subsequent interventions in the environment.

While the coevolutionary perspective treats changes in the various subsystems symmetrically, let us use this model to address technology in particular. People have interacted with their environments over millennia in diverse ways, many of them sustainable over very long periods, many not. Some traditional agricultural technologies, at the intensities historically employed, probably increased biological diversity. There is general evidence that traditional technologies, again at the level employed, included biodiversity-conserving strategies as a part of the process of farming. Technology today, however, is perceived as a leading culprit in the process of biodiversity loss. Modern agricultural technologies override nature, but do so only locally and temporarily. They do not “control” nature. Pesticides kill some pests, solving the immediate threat to crops. But the vacant niche left by the pest is soon filled by a second species of pest (or the original pests evolve resistance), pesticides drift to interfere with the agricultural practices of other farmers, and pesticides and their by-products accumulate in soil and groundwater aquifers to plague production and human health for years to come. Each farmer strives to control nature but creates new problems beyond his or her farm and in subsequent seasons for others. Because of all the new problems created beyond the individual farm in space and time, preharvest crop losses due to pests since World War II have remained around 35% while pesticide use has increased dramatically.

New technologies that work with natural processes rather than override them are sorely needed. During the past two centuries, technologies have largely descended from physics, chemistry, and, at best, microbiology. Ecologists and evolutionary biologists were never given the opportunity to systemically review such technologies, nor is it clear that our ecological and evolutionary understanding are sufficient to review them adequately now. A few agricultural technologies, such as the control of pests in agriculture through the use of other biologicals, have descended from ecological thinking. But research and technological development in biological control was nearly eliminated with the introduction of DDT in agriculture after World War II. Research on and development of agricultural technologies requiring fewer energy and material inputs eventually received considerable support in industrial countries after the rise in energy prices during the 1970s and the farm financial crises in the United States during the early 1980s. Support for agroecology, for technologies based on the management of complementarities between multiple species including soil organisms, however, is still minimal. Learning how to use renewable energy sources will be long and difficult since most of our knowledge has developed to capture the potential of fossil energy. Our universities and other research institutions are still structured around disciplinary rather than systemic thinking, and public understanding of the shortcomings of current technologies and possibilities for ecologically based technologies is weak. Scientists and technologists reproduce themselves and their institutions through direct control and education; hence science and technology sometimes respond slowly to changes in the social awareness of environmental problems.

From the coevolutionary perspective, we can see more clearly how economies have transformed from coevolving with their ecosystems to coevolving around the combustion of fossil hydrocarbons. In this transformation, people have been freed from the environmental feedbacks on their economic activities that they experienced relatively quickly as individuals and communities. The feedbacks that remain, however, occur over longer periods and greater distances and are experienced collectively, even globally, by many peoples making them more difficult to perceive and counteract^[83]. By tapping into fossil hydrocarbons, Western societies freed themselves, at least for the short to medium term, from many of the complexities of interacting with environmental systems. Coevolution occurred around fossil hydrocarbons. Tractors replaced animal power, fertilizers replaced the complexities of interplanting crops that were good hosts of nitrogen-fixing bacteria with those which were not, and pesticides replaced the biological controls provided by more complex agroecosystems. Furthermore, inexpensive energy meant crops could be stored for longer periods and transported over greater distances. Social organization coevolved around these new possibilities very quickly. Each of these accomplishments was based on the partial understanding of separate sciences and separate technologies. At least in the short run and “on the farm,” separate adjustments of the parts seemed to fit into a coherent, stable whole. Agriculture transformed from an agroecosystem culture of relatively self-sufficient communities to an agroindustrial culture of many separate, distant actors linked by global markets. The massive changes in technology and organization gave people the sense of having control over nature and being able to consciously design their future while in fact problems were merely being shifted beyond the farm and onto future generations.

This coevolutionary explanation of the unsustainability of modern societies then is simply that development based on fossil hydrocarbons allowed individuals to control their immediate environments for the short run while shifting environmental impacts, in ways that have proven difficult to comprehend, to broader and broader publics (ultimately to the entire global polity) and on to future generations. These more distant impacts can select on our social organization as we realize their long-term and global implications and choose to respond in advance, or they can select directly as they are experienced in the future. Working with these collective, longer term, and more uncertain interrelationships is at least as challenging as environmental management had been historically. People’s confidence in the sustainability of development is directly proportional to their confidence in our ability to address these new challenges.

The coevolutionary perspective helps us see that the problem of humans interacting with their environment is not simply a matter of establishing market incentives or appropriate rules about the use of property. Our values, knowledge, and social organization have coevolved around fossil hydrocarbons. Our fossil fuel-driven economy has not simply transformed the environment, it has selected for individualist, materialist values; favored the development of reductionist understanding at the expense of systemic understanding; and preferred a bureaucratic, centralized form of control that works better for steady-state industrial management than for the varied, surprising dynamics of ecosystem management. And the coevolutionary framing highlights how our abilities to perceive and resolve environmental problems within the dominant modes of valuing, thinking, and organizing are severely constrained.

The coevolutionary framework elaborated by Norgaard complements the efforts of cultural ecologists in anthropology^[84]. It has instigated new developments in thought among political economists^[85], and is beginning to inspire ecological economics^[86].

The Role of Neoclassical Economics in Ecological Economics

After all of this description of alternative paradigms, it is important to reiterate that ecological economics is methodologically pluralistic and accepts the framework of analysis of [[neoclassical] economics] along with other frameworks. Indeed, neoclassical market analysis is still an important pattern of thinking within ecological economics. There are, however, differences between patterns of thinking and how the patterns are used with particular assumptions. We have already emphasized that most neoclassical economists assume that technological advance will outpace resource scarcity over the long run and that ecological services can also be replaced by new technologies. Ecological economists, on the other hand, assume that resource and ecological limits are critically important and are much less confident that technological advances will arise in response to higher prices generated by scarcities. This difference in worldview, however, does not prevent neoclassical and ecological economists from sharing the same pattern of reasoning.

There is another way in which neoclassical and ecological economists differ even while using the same patterns of thinking. As noted in the previous chapter, neoclassical economists have chosen to ignore how the initial distribution of rights to resources affects how markets subsequently allocate resources between end products and consumers. They have chosen to ignore this relationship since World War II largely for two reasons. First, Karl Marx focused on questions of the distribution of power, and the “other” side of the Cold War, the former USSR, China, and other nations, invoked Marx’s name to rationalize their approach to social relations and development. In the West, especially the U.S. during the 1950s, questioning the distribution of power was effectively an act of disloyalty. But neoclassical economists also had a second rationale for ignoring equity in the initial distribution of rights to resources. Growing economies could avoid the political difficulties of redistribution by making everyone better off. This became an important argument for increasing the rate of economic growth even in the countries that were already rich.

Concern over sustainability has led to new concerns with equity in an era when Cold War politics have become history. Clearly, sustainability is a matter of transferring assets to future generations. This is a question of equity between generations. To understand sustainability using [[neoclassical] economic] reasoning, the distribution of resources between generations, or intergenerational equity, must be central. But sustainability is not simply a matter of intergenerational equity. In a world of very rich and very poor, asset transfer between generations is likely to be at less than a sustainable level. The very rich can be so rich that they do not worry about their progeny having enough. The very poor, on the other hand, can be so poor that each generation has to exploit resources and degrade environmental systems merely to subsist. For many ecological economists, these extremes characterize the world we live in and account for much of the unsustainability. The extremes internationally between rich and poor nations also make it very difficult to reach international understandings on managing the global commons. So sustainability is also a matter of intragenerational and international equity. The conventional stance of neoclassical economists remains that economic growth will provide the conditions to resolve these inequities. But there have been two generations of economic growth since the international development programs were established after World War II, and inequality has increased. Thus the conventional stance is wearing a little thin and is increasingly questioned.

There is yet a third reason why neoclassical economists historically have not included distribution in their arguments. Once distribution is taken into consideration, there are many possible efficient market allocations depending on how rights to resources are distributed between people. Since World War II, however, economists have undertaken analyses of the costs and benefits of alternative public projects and other public decisions so as to advise legislatures and public agencies as to which project or decision is best. The legislatures and agencies have asked them for “the” answer assuming the current distribution of rights to resources, not an array of answers depending on alternative distributions of rights to resources. Thus the tradition of not considering equity is firmly rooted in public practice.

The situation, however, is yet more complicated. Neoclassical economics cannot determine whether one distribution of resources between people is better than another. Moral criteria must be invoked and the decision must be made politically. But political decision making is more typically driven by the existing distribution of power than by moral discourse. To a large extent, economists were asked to undertake cost–benefit analysis in order to offset the politics of power. Economists see themselves as acting more in the public interest than the politicians responding to power and pressure groups. Yet, economists have been making their recommendations based on the existing distribution of power as well. So, it is difficult to see how things are going to change. If sustainability requires intergenerational and intragenerational redistribution, there will have to be a serious moral discourse and improvements in democratic politics to achieve sustainability. Paralleling this transition, economists will have to learn how to inform democratic debate with a working sense of trade-offs between options rather than undertaking cost–benefit analyses on behalf of the public.

The realization that economics must work with a more democratic politics complements another research style emerging within ecological economics. Acknowledging that economists need to understand ecology and vice versa further opens the door to asking whether anyone can possibly be excluded from sharing in the search for sustainability. Surely, to the extent that social and ecological systems differ from place to place, local, experiential knowledge will be essential to implementing specific solutions. For this reason, some ecological economists are beginning to experiment with participatory research methods that incorporate lay people with experiential knowledge^[87].

Ecological economics, as a new assemblage of concerned economists and ecologists, is not bound by the historic traditions of [[neoclassical] economics]. It uses the framework of neoclassical economics but is not constrained to use only that framework, nor is it constrained by the worldviews, politics, or cultures of economists in the past.

Critical Connections

It is difficult to determine where ecological economics ends and other approaches to understanding start. Ecological economists have reached out to other patterns of thinking and pursued a broad range of questions. And people from many fields have reached toward ecological economics. In the future, these connections may prove the most important of all, but for now, it is appropriate to describe them as a little less central to the origins of ecological economists.

Increased Efficiency and Dematerialization

Entrepreneurs and consumers have always had an incentive to get more from less. At the same time, when an individual uses less, he or she typically reaps only a portion of the benefits because of the numerous ways we are connected through ecosystems. Furthermore, choosing to use less must frequently be done collectively through developing new technologies, changing infrastructure such as that which supports automobile use over public transit, and adjusting the rules of the game for all. One response to the energy crises of the 1970s was to invest in the development of energy-efficient technologies, label the efficiency of electric appliances, mandate increased fuel efficiency for automobiles, and encourage public utilities to help their customers use less electricity through home insulation. One individual, Amory Lovins, has been especially effective in arguing how the United States could substantially change its course and avoid the environmental consequences of fossil fuel dependence and the risks of nuclear technology by shifting dramatically toward energy efficiency and renewable energy sources^[88].

A group of ecological economists are documenting the prospects for “dematerialization” at the Wuppertal Institute for Climate, Environment, and Energy in Germany^[89]. Their arguments parallel those of Lovins while also picking up on [[Herman Daly (Daly, Herman E.)]’s] argument that we need to stabilize the rate of material throughput in the economy. They have calculated the material input per unit of service (or MIPS) for numerous consumption goods. Material flows consist of flows of consumer goods and materials such as ores, soil, sand, and gravel, but do not include water and air which had to be moved to produce the consumer goods. Material flows amount to about 32 million tons per capita per year in Germany or about 1.2 kg per DM (1.75 lbs. per dollar) spent. But some rather insignificant consumer choices result in significant material flows relative to readily available alternatives, and in other cases flows could be reduced by increases in the efficiency with which materials are used or by increasing the longevity of the consumer product. Researchers at Wuppertal think material flows can be reduced by as much as a factor of 10. All of this may seem remote from an ecological management perspective, but the counterargument is that we are so far from a level of flow consistent with natural fluxes where management is even possible that the first step is massive reduction in human-induced material flows.

Ecosystem Health

To a considerable extent to date, while whole ecosystems have been protected, only individual species have been managed. Models have been derived from principles of population biology that suggest how, for example, Douglas fir trees or salmon can be harvested sustainably. But trees and the salmon do not thrive apart from other species and a myriad of other factors that affect ecosystem behavior. For this reason, efforts to manage individual species using these models have proven amazingly ineffective^[90]. In light of both broader concerns with maintaining ecosystems per se and the failures of individual species models, a group of ecologists and social scientists joined together in the early 1990s to study and promote the concept of ecosystem health^[91] and launched the journal Ecosystem Health in 1995. This group includes many participants from the field of ecological economics and, like ecological economics, is transdisciplinary. “Health,” the organizing metaphor, reminds us that for ecosystems, like people, “an ounce of prevention is worth a pound of cure.” But it is more than a metaphor once we get serious about defining its meaning, try to agree to preferred states of ecosystems, and set out to develop management criteria across diverse ecosystems in anticipation of multiple possible disturbances^[92]. Other ecologists are using the term “ecosystem integrity” to make new bridges between biology and policy. “Conservation biology” emerged as a field during the 1980s among biologists who were not content to simply study the decline of biodiversity and became intent on saving species from extinction. These multiple efforts include scientists who participate in ecological economics as well. They are all examples of groups of scientists who are using science effectively to new ends by shedding the old assumptions about how knowledge fits together and affects progress.

Environmental Epistemology

The field of philosophy that studies how we think we can learn “truth” is known as epistemology. Clearly, if Homo sapiens is so special because the species is smarter than other animals, then the special problems we have gotten ourselves into relative to other animals must in some sense also be related to how we think. And if we believe that science has indeed driven the technological, and even to some extent the institutional, changes that are behind development, then how we know things scientifically must also be partly responsible for the environmental consequences of development. In this sense, the environmental crises of the latter half of the 20th century are challenging the underlying premises of the dominant forms of Western science. To argue that separating economics from ecology is a mistake, a dominant premise of ecological economics, is to make an epistemological statement. Realizing this, several ecological economists have explored the history and philosophy of science to directly understand how environmental crises have developed^[93]. One of the dominant premises of Western science, for example, has been the idea that nature behaves in a predictable manner according to universal principles that once discovered are applicable everywhere. If nature, however, is evolving and, furthermore, has evolved differently in different places, then the expectation that there can be a “physics” of nature can lead people to make a good number of mistakes. If it is such basic premises that are at the root of our crises, then it would be most effective to tackle them directly before trying to create new ways of understanding.

Political Ecology

As noted in the previous chapter, Karl Marx has had an important influence on the social sciences. Besides focusing our attention on power and inequity, Marx has helped us keep our attention on history. The environmental crises of the latter half of the 20th century have stimulated new critiques of capitalism and development by Marxist anthropologists, economists, historians, and sociologists. From these critiques, a new field known as political ecology has emerged^[94]. Again, the overlap of participants between political ecology and ecological economics is strong^[95]. While most of the arguments with respect to equity made in ecological economics are formally neoclassical^[96], the concern with equity complements research in the area of political ecology on power, poverty, and environmental transformation using Marxian frames of analysis. In ecological economics, we are beginning to see the two historically separate strands of economic thought used to inform each other^[97].

Conclusions

Ecological economics is evolving through the interaction of diverse patterns of thinking with multiple disciplinary roots. The founding practitioners of ecological economics have combined understandings from multiple fields of thought, questioned historical assumptions, and risked being ostracized by their disciplinary peers. The opportunity for many more combinations and questioning of assumptions awaits whomever would like to join the field. Hopefully, disciplinary pressures will ease. This introduction to the field of ecological economics from this point pursues one dominant approach to the field. While ecological economists are certainly diverse, the largest “cluster” works from the initial premise that the earth has a limited capacity (An Introduction to Ecological Economics: Chapter 2) for sustainably supporting people and their artifacts determined by combinations of resource limits and ecological thresholds. To keep the economy operating sustainably within these limits, specific environmental policies need to be established. And so first we document the “pre-analytic vision” of this strain of ecological economics and then we elaborate on potential existing and new institutions for achieving it.

Related Links

• Griesinger Films: Ecological Economics videos

Notes

This is a chapter from An Introduction to Ecological Economics (e-book). Previous: Humanity's Current Dilemma (An Introduction to Ecological Economics: Chapter 2) |Table of Contents (An Introduction to Ecological Economics: Chapter 2)|Next: Problems and Principles of Ecological Economics

Citation

Costanza, R., Norgaard, R., Daly, H., Goodland, R., & Cumberland, J. (2007). An Introduction to Ecological Economics: Chapter 2. Retrieved from http://editors.eol.org/eoearth/wiki/An_Introduction_to_Ecological_Economics:_Chapter_2