Ecological Economics

At Natural Capital we believe that our environment defines our economic decisions.  It is not a moral issue.  It is a new way of thinking that places human economics within the physical constraints of the earth. 

What is Ecological Economics?

First, ecological economics (EE) is not traditional natural resource & environmental economics.  Ecological economics is a departure from the traditional ways economists view environmental issues, a new paradigm. 

Robert Costanza, President of the International Society for Ecological Economics, has a concise definition:  “Ecological Economics addresses the relationships between ecosystems and economic systems.” (Costanza1989:1). The relationships & linkages between ecosystems & economic systems are what most (if not all) of the environmental issues we face revolve around from the spotted owl to global warming.  All call for an EE approach. 

EE can be viewed as an attempt to bring together some of the insights from economics with the insights of ecology to provide a new, richer, more realistic & more relevant perspective on economic/ecological systems & interactions.

The following statement by John Proops is a good statement of the rationale for EE:  “Economists are increasingly coming to recognize that the study of human activities on a finite planet, in the long-run, requires a different set of concepts to those useful for the economic analysis of households, firms, and nation states in the short- and medium-run.”  In a complementary way, ecologists, and other natural scientists, are increasingly recognizing that economic activity is here to stay; human activities are coming to dominate the global ecosystem, and ecosystem analysis which does not explicitly include economic activities makes less and less sense.  The stage seems to be set for a coming together of these two disciplines so that problems of resource use and pollution in the global ecosystem can be discussed and assessed in a conceptual framework worthy of these problems. (Proops1989:73-74). 

There are at least 6 major themes of EE that distinguish it from conventional (neoclassical) economic approaches to natural resources and the environment: 

SUSTAINABILITY:  Traditional economic analysis focuses on the goals of allocative efficiency and growth.  Ecological economists maintain that the integrity and sustainability of the ecosystem are essential to future economic well-being, and that the criterion of sustainability should be built into economic models and policies. 

MULTIPLE VALUES, BROADER NOTIONS OF VALUE:  Economic value is limited to two narrow types:  Value in exchange (market price) and value in use (willingness to pay or willingness to accept compensation).  As someone once observed, Economic value is a species of the genus value. EE proposes a much broader theory of value that includes social, aesthetic, life support, intrinsic, and energy values, in addition to traditional economic value. 

INTERGENERATIONAL EQUITY:  In conventional economics, decisions about how to use resources over time are treated as investment questions, as if all resources belonged to the present generation.  The practice of discounting future values in economics means that a resource 10 years from now is only about half as valuable as that same resource today (depending on the discount rate).  Ecological economists believe that the future should not be so heavily discounted, and that we need to make decisions that won’t compromise the quality of life (or life itself) for future generations. 

UNCERTAINTY: Another theme of Ecological Economics is uncertainty recognition that there are fundamental uncertainties and high levels of risk surrounding large scale or irreversible changes in the environment. For example, we don’t know with any precision what the future impacts of increased concentrations of greenhouse gases in the atmosphere will be.  In the face of such uncertainty, the prudent course is to proceed with caution:  One does not run blindly through a dark landscape that may contain crevasses. One assumes they are there and goes gingerly and with eyes wide open, at least until one can see a little better. (Costanza1989:5). 

METHODOLOGICAL PLURALISM: Sole reliance on any one analytical framework or method would provide an incomplete picture of the relationships between ecosystems and economic systems.  As Christopher Stone notes, summarizing the view of Paul Feyerabend, “... the history of sciences reveals an incompleteness and even inconsistency of each framework which should be regarded as routine and inevitable, and... a pluralism of theories and metaphysical viewpoints should be nourished as a means of advancing on the truth.”

LAND ETHIC:  Utilitarianism - the philosophical doctrine that considers utility as the criterion of action and the useful as good - is the philosophical base of traditional economics and traditional forestry.  In contrast, the philosophical underpinning of EE is an environmental or land ethic:  “When we see land as a community to which we belong, we may begin to