My take on the philosophy of Ecological Economics

This post aims to pull together some of my more recent “green” posts and outline my take on the philosophy behind “Ecological Economics” – what I mean by the term will hopefully become clear soon enough. I’ve just finished working my way through the excellent collection of essays Valuing the Earth, co-edited by economists Herman Daly and Kenneth Townsend. The subject of these essays is alternative systems of economics, ones that seek to recognise explicitly the importance of Earth’s ecosystems, both in of themselves and for the well-being of the human economy.

In the book’s introduction, Daly contrasts such a “steady-state” view of the economy with the conventional “neo-classical” view:

“To put it starkly, in the neo-classical view the economy contains the ecosystem; in the steady-state view the ecosystem contains the economy, to which it supplies a throughput of matter-energy taken form in natura uses according to some rule of sustainable yield rather than according to “individual willingness to pay.”

What is the origin of “some rule of sustainable yield”? Fundamentally, it must derive from the laws of thermodynamics. As chemist turned economist Frederick Soddy put it:

“The principles and ethics of human convention must not run counter to those of thermodynamics.”

So, one could say that the laws of thermodynamics set the boundaries for how Earth’s collective ecosystem, the biosphere, can behave and the dynamics of the biosphere set the limits for what we can do within our human economies. This is my take on the philosophy of Ecological Economics – which I’ve pictorially represented in the left hand image at the end of the post. I argued for this philosophy of life, one based on the laws of thermodynamics, in the first half of this post.

At one end of this Ecological Economics “means-ends spectrum”, as Daly terms it, is the laws of thermodynamics. These Daly calls our “ultimate means” – the physical foundation of any human economy. At the other end of the spectrum is our system of ethics, which Daly terms “ultimate ends”. How shall we marshal our ultimate means to best achieve our ultimate ends? Daly and Townsend decide to split this problem into three parts – allocation, distribution and scale. Quoting directly from their book:

Allocation refers to the relative division of the resource flow among alternative product uses – how much goes to production of cars, to shoes, to plows, to teapots etc … Scale refers to the physical volume of the flow of matter-energy from the environment as low-entropy raw materials and back to the environment as high entropy wastes … Distribution refers to the relative division of the resource flow, as embodied in the final goods and services among alternative people: how much goes to you, to me, to others, to future generations, and how much is reserved for other species with whom we share the planet.” [My emphasis in bold]

Along with many others, I find that it clarifies our use of language immensely to define economic growth as a quantitative increase in scale and to reserve the word development for qualitative increases in positive human experiences. Growth used in this sense may or may not facilitate development, and growth beyond a certain “threshold” may potentially harm it, as I discussed in this post.

Classical economics essentially ignored the problem of scale by implicitly assuming that environmental sources and sinks were infinite relative to the human economy. At least it had the excuse of being approximately correct – pre-industrial revolution economies did exert limited feedbacks on the biosphere. Post-industrial revolution neo-classical economics has no such excuse and ought to know better than to retain this implicit assumption.

If we want to put limits on scale, the problems of allocation and distribution must be addressed more satisfactorily. As I argued in the second half of this post, there is a limited stock of low-entropy inputs to our economies, vital for things like future global food production, so this must not be squandered any more on the production of poor durability goods, or goods for which demand is artificially stimulated by the calculated exploitation of human psychology. This concerns allocation.

At the same time, if we have reached or passed the safe limits of scale for our global economy, as I suspect we have, it will not do any longer to simply “make the pie bigger” in order to postpone “sharing the pie more fairly”. It will not be remotely physically possible for 7 billion people to live sustainably at US levels of resource through-puts. This concerns distribution. I say economies such as the US will need to pursue a “de-growth” strategy to make room for developing economies to grow in scale. This will secure a more equitable distribution, insuring both that the pie does not become too large and that everybody gets enough to eat. Such a strategy is probably only viable with monetary reform, for reasons I discussed in the penultimate paragraph of this post.

To summarise then, I regard neo-classical economics as a non-viable approach for 21st century societies, since it ignores completely the problem of scale, and in doing so pursues means of allocation and distribution that will soon serve to move scale beyond bio-physical limits, if indeed they have not already done this. Neo-classical economics is a system that stands reality on its head, by implicitly regarding the bio-sphere, and even perhaps the laws of thermodynamics, as subservient to the infinite demands and infinite creative potential of “the market”. I caricature this tendency below:

In contrast, I feel that the philosophy underlying Ecological Economics can inspire viable economic systems for 21st century societies, since it acknowledges explicitly the problem of scale and seeks means of allocation and distribution which maintain this at, or reduce it to, a sustainable level.

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~ by freedomthistime on July 7, 2011.

One Response to “My take on the philosophy of Ecological Economics”

  1. Hi David

    This is a nice clear explanation.

    A few months ago I came across an excellent summary of the history of Ecological Economics:

    http://www1.kamakuranet.ne.jp/oilpeak/opinions/EROI_Biophysical.pdf

    It makes you wonder why these theories have been ignored for so long by mainstream economics.

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