Ecological Economics

by Naharnet Newsdesk 22 December 2015, 09:34

COWBOY or spaceman? A dilemma for a children’s party, perhaps. But also a question for economists, argued Kenneth Boulding, a British economist, in an essay published in 1966. We have run our economies, he warned, like cowboys on the open prairie: taking and using the world’s resources, confident that more lies over the horizon. But the Earth is less a prairie than a spaceship—a closed system, alone in space, carrying finite supplies. We need, said Boulding, an economics that takes seriously the idea of environmental limits. In the half century since his essay, a new movement has responded to his challenge. "Ecological economists", as they call themselves, do not want to fiddle at the margins of economics, but to revolutionize its aims and assumptions. What do they say—and will their ideas achieve lift-off?

To its practitioners, ecological economics is neither ecology nor economics, but a fusion of both. Their starting point is to recognize that the human economy is part of the natural world. Our environment, they note, is both a source of resources and a sink for wastes. But it is ignored in conventional textbooks, where neat diagrams trace the flows between firms, households and the government as though nature did not exist. That is a mistake, say ecological economists. The "natural capital" of the Earth provides important services, from water supply to pollination: in a landmark paper from 1997, researchers valued the annual supply of such "ecosystem services" at $33 trillion, or 1.8 times global GDP at the time.

There are two ways our economies can grow, ecological economists point out: through technological change, or through more intensive use of resources. Only the former, they say, is worth having. They are suspicious of GDP, a crude measure which does not take account of resource depletion, unpaid work, and countless other factors. In its place they advocate more holistic approaches, such as the Genuine Progress Indicator (GPI), a composite index that includes things like the cost of pollution, deforestation and car accidents. While GDP has kept growing, global GPI per person peaked in 1978: by destroying our environment we are making ourselves poorer, not richer. The solution, says Herman Daly, a former World Bank economist and eco-guru, is a "steady-state" economy, where the use of materials and energy is held constant.

Mainstream economists are unimpressed. The GPI, they point out, is a subjective measure. And talk of limits to growth has had a bad press since the days of Thomas Malthus, a gloomy 18th century cleric who predicted, wrongly, that overpopulation would lead to famine (similar warnings in the 1970s by the Club of Rome, a think tank, proved equally misguided). Human ingenuity finds solutions to some of the most vexing problems. But ecological economists warn against complacency. In 2009 a paper in Nature, a scientific journal, argued that human activity is already overstepping safe planetary boundaries on issues such as biodiversity and climate change. That suggests that ecological economists are at least asking some important questions, even if their answers turn out to be wrong. It may be no bad thing if economics became a little more Neil Armstrong, and a little less Jesse James.

SOURCE: www.economist.com - http://www.economist.com/blogs/economist-explains/2015/12/economist-explains-9

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