Ecological Economics: One of the circles of sustainability
Srishti Vishwakarma ·What is Ecological Economics? According to United States Society for Ecological Economics, ecological economics is "a venue for intellectual exchange and collaboration on issues related to the theory, policy, and implementation of sustainable development." When studying sustainability, economic, social, and environmental domains must all be considered. It is important to understand that sustainable development requires a system of economic activity which is compatible with, and not destructive of, either the ecological of social webs of life. We are a part of these webs, and our health, well-being,and lives depend on their interaction.
In order to better understand this integrated topic, Dr. Klaus Hubacek, from the University of Maryland, joined us for last week's MEES 620 class discussion.
The lecture began with instructions for our mid-term assigned for the following week. Students were asked to provide a critique of the theories discussed to date during this semester. The requirement is to compare and contrast the five perspectives and begin to develop our own interdisciplinary approach.
Our lecture and discussion on ecological economics started with the comparison of empty world and full world. Human economy has changed from the time when the human capital was minimal. Nowadays, natural capital, which is the stock of natural resources, is a limiting factor to economic growth and success. Increases in human population, growth of a country's economy, and exploitation of unowned natural resources ("commons") are some of the main reasons behind this. Neoclassical economics considers factors of production of goods as substitutable, rather than complementary, which is not the case for world's stock of natural resources1. Ecological economics is driven by the growing scarcity of natural capital. Such movement from empty world to full world mentality has tested- and surpassed- our planet's limits2.
Our discussion this week suggested that we are under-evaluating the actual value of our nature. This under-evaluation leads to inappropriate decision making. Professor Hubacek provided the example of Pollution as Externalities based on a cost-benefit analysis so that we could better understand this evaluation process. According to this concept, the physical presence of pollution does not mean that 'economic' pollution exists. For instance, it could be possible that scientists are defining pollution differently. From an economic perspective, pollution is an external cost and it occurs only when one or more individuals suffer a loss of welfare. Hence, the cost-benefit analysis tries to account for the unpriced impacts. Such an evaluation process might fail because of the lexicographic preferences resulting in trade-offs between ecosystem services at different scales.
Are we living in the world of weak or strong sustainability? We could debate whether sustainable development out to be weak or strong. Weak sustainability looks for the full substitution of natural resources and manufactured capital3. It indicates that there is no essential difference in the kinds of well-being that each form of capital generates4. The most important objective is to collect the stock of capital and increase it for future generations. In contrast, strong sustainability considers that natural capital cannot be seen simply as a stock of resources. Instead, a set of complex systems help to determine an ecosystem's capacity to provide various functions and services to human society. Therefore, strong sustainability could be regarded as a useful approach to conserve environment with no-substitutability paradigm.
Professor Hubacek asked a thought-provoking question during our discussion: What would happen to GDP if you are driving to campus? Gross-Domestic Product, or GDP, is a measure of economic performance, and is often used as an indicator to measures the well-being of a country. However, GDP does not consider increasing inequality, pollution, or any other damage to people's health and the environment. In addition, it can treat crime, divorce, and other elements of social breakdown as economic gains. Thus, GDP may not deliver a true measure of well-being, and there is a need for some other indicator which measures welfare.
FriendsofEarth is an international community that provides solutions and resources that are directly related to solving environmental problems and improving the welfare of society. They measured an Index of Sustainable Economic Welfare (ISEW)5 and compared it with GDP. The intention for this comparison was to replace GDP with ISEW and provide a more reliable indicator of welfare and sustainability, however, ISEW was later regarded as a weak sustainability indicator that reflects an individualist vision of collective welfare.
We need to decide what we need - profit or sustainability. Bottom line is understood as either "profit," "net worth," or "how much money you make"- the scores tells us whether we win or lose6. To understand the probable reason behind our tendency to prioritize profit, we can think in terms of economist Adam Smith's "invisible hand" idea, which states that self-interest drives consumers to choose freely what they want and drives producers to sell and produce what they want. We might need a change in this perspective and think about the future-oriented, and less selfish Triple Bottom Line approach. To build an economic system that supports a sustainable future, we need to look beyond the traditional framework of development and instead demand that corporate responsibility and societal sustainability be driven by stakeholders, and not left solely in the hands of shareholders.
References
1. O'Neill, J., & Spash, C. (2000). Appendix: Policy Research Brief Conceptions of Value in Environmental Decision-Making. Environmental Values, 9, 521-36.
2. Planetary Boundary. (n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Planetary_boundaries
3. Ayres, R. U., Bergh, J. C., & Gowdy, J. M. (2001). Strong versus Weak Sustainability: Economics, natural sciences, and "consilience". Environmental Ethics.
4. Ekins, P., Simon, S., Deutsch, L., Folke, C., & De Groot, R. (n.d.). A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecological Economics, 44, 165-185.
5. Daly, H. E., & Cobb, J. B. (1989). For the Common Good: Redirecting The Economy Toward Community, the Environment, and a Sustainable Future. Boston.
6. Daly, H. E. (2009). Incorporating Values in a Bottom-Line Ecological Economy. Bulletin of Science, Technology & Society, 29(5), 349-357.
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Comments
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Emily Nastase 6 years ago
I second Matthew's suggestion about how the three spheres (economy, society, and environment) shouldn't be separate from each other. As is, the spheres appear to be independent entities that can only interact in a limited capacity. I find this generalization to be a shortcoming of the economic (and other) approach(es).
Despite this, I think there are many strengths to this approach which you've identified in this blog. The upsides to a value-based system for decision-making, the need for stakeholder involvement, and the decisions that need to be made ("profit or sustainability") to begin to address this issue.
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Brian Scott 6 years ago
I really love the FULL world figure - very much speaks to me. It occurs to me that the reason we have been able to substitute economic services for ecosystem services is that we have tapped into a finite supply of energy in the form of fossil fuels. Our food supply (fertilizer) and distribution (transportation) relies on fossil fuels. Most of our technology relies on fossil fuels.
I want to say something positive about how I believe we will gracefully transition out of our fossil fuel dependence once that resource does run out. I got nothin'.
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Shannon Hood 6 years ago
Great summary Srishti! And not an easy week for it, with our critiques due!
I really like that you included the part about pollution as externalities. I think this is an important concept and something we need to address if we are to encourage industries to adopt more efficient, clean processes. I further found the concept of economic pollution to be entirely new. Certainly, in thinking it through, it makes sense that pollution would be considered in this way by economists, but I had never truly thought of how the decisions are made as to what level of pollution causes a need for regulation.
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Morgan Ross 6 years ago
Srishti, I really enjoyed your blog summary. I especially like that you included the part of our class discussion about GDP. I thought that was the most interesting part of the class because I could really understand how GDP is not a valid measure of well-being. It would be interesting to look at the Happiness Index used by some European countries and compare it to the measure of GDP.
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Tan Zou 6 years ago
Thank you Srishti for your great summary of the readings and discussions. I like how you combine all of them into a complete and attractive story. You make a very good point of the limitations of GDP as a goodness index by saying “it can treat crime, divorce, and other elements of social breakdown as economic gains”. In addition, I think we may not always need to choose between profit and sustainability, because sustainability could also include profit. There are reasons why economic development is still the priority. By further understanding those reasons, we may find a solution.
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Alana Todd-Rodriguez 6 years ago
Your statement: "We need to decide what we want- profit or sustainability," is a decision I think we will continue to grapple with over at least the next decade, at least until the decision is inevitably made for us. I think you are right absolutely right in that the stakeholders, us, need to pressure sustainable management. There also needs to be a push from the corporate sector, which we can see more and more of nowadays. I wonder what the final push from the people will look like... Great blog post!
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Jessie Todd 6 years ago
I really liked your link to FriendsofEarth because it is a real world example of people and communities who are trying to solve environmental issues related to welfare and comparing it to GDP, which was a large part of our discussion in class.
I think your line was interesting, that we need to decide what we need, profit or sustainability? In regards to Ecological Modernization, it might argue we don't have to choose. That we could have both increased profit and industrialization,as well as sustainability.
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Natalie 6 years ago
Your graphics are great and really help the message, especially the first venn diagram - we can't reach sustainability without social, environmental and economic overlap. If I was in this field, I would feel both optimistic and incredibly pessimistic at the same time.
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Matthew Wilfong 6 years ago
Really good explanation of, at least in my opinion as a scientist, a very difficult theory to grasp and fully understand. I think your last line really sums up the ideas of ecological economics; however, this goal will definitely be much easier said than done.
I think that the three sphere of sustainability, shown in the first image, is better seen as three overlapping spheres where the economy is nested within society and society is nested within the environment. This presentation really drives how the idea that the environment is the basis for society and society is the basis for the economy.
Overall, really good overview of the class and ecological economics. Looking forwards to seeing everyone critiques in class this week.
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Brendan Campbell 6 years ago
It is unfortunate that nature is an undervalued resource. I am curious whether that is an intentional practice or due to lack of knowledge in the subject. I do believe there needs to be more research done to accurately quantify the value of nature as difficult as it might be.
Secondly, I too thought that conversation regarding the contributions to GPD on something as rudimentary as the drive to work was an interesting way to approach this subject. Especially when the progression of events took a rather bleak tone once hospital bills and insurance came into play. It is not something that is traditionally thought of so adding that conversation added a new layer of depth to my perception of GDP.
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Michael Paolisso 6 years ago
Great summary and very clear presentation of core ideas!
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Alex Sahi 6 years ago
Learning about economic approaches to sustainability and proper valuation of natural resources is always fascinating. It is interesting to understand the economists viewpoint regarding profit maximization and pollution of the environment, especially because in this viewpoint net zero pollution is not the primary goal. We learned that optimal pollution still has pollution, just at a level that can be managed, and coming from an environmentalist perspective this is difficult swallow. Learning economic perspectives also shows just how powerful neoclassical models can be in controlling the market as seen in 70% of pollution coming from the producers and not the consumers. It will be difficult to change this model, and I am wondering what economists can do to further long term profit for companies which requires maintaining the health and longevity of natural resources.