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Ecological economics

Ecological economics or green economics is a transdisciplinary field of academic research that addresses the dynamic and spatial interdependence between human economies and natural ecosystems. Ecological economics brings together and connects different disciplines, within the natural and social sciences but especially between these broad areas.

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As the name suggests, the field is comprised of researchers with a background in economics and ecology. An important motivation for the emergence of ecological economics has been criticism on the assumptions and approaches of traditional (mainstream) environmental and resource economics. Ecological economics presents a more pluralistic approach to the study of environmental problems and policy solutions, characterized by systems perspectives, adequate physical and biological contexts, and a focus on long-term environmental sustainability. Ecological economics can be regarded as a version of environmental science with much emphasis on social, political, economic and behavioral issues. Ecological economic science establishes the interdependence between economics and ecosystems. Its conceptual founders are regarded to be economists Nicholas Georgescu-Roegen, Kenneth Boulding and Herman Daly, ecologists C.S. Holling, H.T. Odum and Robert Costanza, biologist Gretchen Daily and physicist Robert Ayres. Daly and Costanza were critical in the institutional founding of the field - resulting in the establishment of the academic journal Ecological Economics and the International Society for Ecological Economics (ISEE). The first book with the title "Ecological Economics" was published by Juan Martinez-Alier (Blackwell, Oxford, 1987) tracing the history of ecological critiques of economics since the 1880s to the 1950s. Another notable school of thought in ecological economics is the Beijer International Institute of Ecological Economics.[1]


The origination of ecological economics as a specific field per se is credited to economist Herman Daly, a professor at University of Maryland and formerly an economist for the World Bank.

Ecological economics has been popularized by ecologist and University of Vermont Professor Robert Costanza, who founded the International Society for Ecological Economics (ISEE) and carried out much of the founding research while at the University of Maryland. Economist Nicholas Georgescu-Roegen (1906-1994) who was among Daly's teachers at Vanderbilt University, provided ecological economics with a conceptual framework based on the material and energy flows of economic production and consumption. His magnum opus, The Entropy Law and the Economic Process (1971), has been highly influential.[2]

Nobel prize-winning chemist, Frederick Soddy (1877-1956), and economist Kenneth Boulding (1910-1993) are among other intellectual precursors. Furthermore, some key concepts of what is now ecological economics are evident in the writings of E.F. Schumacher, whose book Small is Beautiful - A Study of Economics as if People Mattered (1973) was published just a few years before the first edition of Daly's comprehensive and persuasive Steady-State Economics (1977).[3][4] Ecological economics' intellectual ancestry may be traced in large part to political economy, a refinement of early economic theory that includes among its earlier researchers Thomas Malthus, David Ricardo and John Stuart Mill. Mill, in particular, by hypothesizing that the "stationary state" of an economy might be something that could be considered desirable, anticipated later insights of modern ecological economists, without having had their experience of the social and ecological costs of the dramatic post-World War II industrial expansion.

CUNY geography professor David Harvey was one of the first to explicitly add ecological concerns to political economic literature. This parallel development in political economy has been continued by analysts such as sociologist John Bellamy Foster.

Topics in ecological economics


The objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the laws of thermodynamics) and in knowledge of biological systems. It accepts as a goal the improvement of human wellbeing through economic development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. It distinguishes itself from neoclassical economics (NCE) primarily by its assertion that economics is a subfield of ecology, in that ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system. In contrast, NCE has historically assumed implicitly (and, more recently, explicitly) that the environment is a subset of the human economy. In this approach, if nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc. It is largely this assertion which allows for NCE to claim theoretically that infinite economic growth is both possible and desirable. However, this belief disagrees with much of what the natural sciences have learned about the world, and, according to EE, completely ignores the contributions of natural capital to the creation of wealth. Natural capital can be considered the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and ecosystem services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, food and medicine production, pollination, protection from solar and cosmic radiation, the view of a starry night sky, etc.[5][6]

Allocation of resources

While NCE deals with the efficient allocation of resources, it ignores two other fundamental economic problems which are central to ecological economics: distribution (equity) and the scale of the economy relative to the ecosystem upon which it is reliant.[7] EE also makes a clear distinction between growth (quantitative) and development (qualitative improvement of the quality of life) while arguing that NCE confuses the two. EE challenges the common normative approach taken towards natural resources, claiming that it undervalues natural capital by displaying it as interchangeable with human capital--labor and technology. EE counters this convention by asserting that human capital is instead complementary to and dependent upon natural capital, as human capital inevitably derives from natural capital. From these premises, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that, by undervaluing the importance of natural capital, sustainable development (as opposed to growth) --which is the only solution to elevating the standard of living for citizens worldwide--will not result. Furthermore, ecological economists point out that, beyond modest levels, increased per-capita consumption (the economist's version of "standard of living") does not necessarily lead to improvements in human wellbeing, while this same consumption can have harmful effects on the environment and even on broader societal wellbeing.

Energy economics

It rejects the view of energy economics that growth in the energy supply is related directly to well being, focusing instead on biodiversity and creativity - or natural capital and individual capital, in the terminology sometimes adopted to describe these economically. In practice, ecological economics focuses primarily on the key issues of uneconomic growth and quality of life. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests an interdisciplinary approach combining social and natural sciences as a means to address this.

Services provided by the environment

A study was carried out by a number of leading ecological economists to determine the price of the services provided by the environment. This was determined by looking at the price to filter water and other such services provided by the environment. The total was determined to be 33 trillion dollars (in 1997 US dollars), more than twice the total GDP of the world at the time of the study.[8] However, the study was criticized by both mainstream environmental economists - for being inconsistent with assumptions of monetary valuation - and ecological economists - for being inconsistent with an ecological economics focus on biological and physical indicators.[9]

The Externalities Problem

Ecological economics is founded upon the view that the NCE assumption that environmental and community costs and benefits are mutually cancelling "externalities" is not warranted. Juan Martinez Alier [10], for instance shows that the bulk of consumers are automatically excluded from having an impact upon the prices of commodities, as these consumers are future generations who have not been born yet. The assumptions behind future discounting, whereby which it is assumed that future goods will be cheaper than present goods, has been criticised by Fred Pearce[11] and by the recent Stern Report. Concerning these externatilies, Paul Hawken argues that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to a hidden subsidy, paid by the non monetarised more than human environment, community or future generations[12]. These arguments are developed further by Hawken, Amory and Hunter Lovins in "Natural Capitalism: Creating the Next Industrial Revolution"[13].

See also

  • Human ecology
  • Inclusive Democracy
  • Natural capital
  • Sustainability


  1. ^ Masood, E. and Garwin, L. 1998. Costing the Earth: when ecology meets economics. Science 395: 426-427. Green Economics is one of the fastest growing branches of Ecological Economics, and its main writers are Miriam Kennet and Volker Heinemann,at the Green Economics Institute.(GEI), and their article Green Economics Setting the Scene,(2006) in the academic Journal, International Journal of Green Economics,Inderscience.(2006)(2007).
  2. ^ Georgescu-Roegen, N. 1971. The Entropy Law and the Economic Process. Cambridge, Mass.: Harvard University Press.
  3. ^ Schumacher, E.F. 1973. Small is Beautiful: A Study of Economics as if People Mattered. London: Blond and Briggs.
  4. ^ Daly, H. 1991. Steady-State Economics (2nd ed.). Washington, D.C.: Island Press.
  5. ^ Daily, G.C. 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Washington, D.C.: Island Press.
  6. ^ Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-Being: Biodiversity Synthesis. Washington, D.C.: World Resources Institute.
  7. ^ Daly, H. and Farley, J. 2004. Ecological Economics: Principles and Applications. Washington: Island Press.
  8. ^ Costanza, R., d'Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Naeem, S., Limburg, K., Paruelo, J., O'Neill, R.V., Raskin, R., Sutton, P., and van den Belt, M. 1997. The value of the world's ecosystem services and natural capital. Nature 387: 253-260.
  9. ^ Norgaard, R.B. and Bode, C. 1998. Next, the value of God, and other reactions. Ecological Economics 25: 37-39.
  10. ^ Jose Maria Figueres Olson (Foreword), Robert Costanza (Editor), Olman Segura (Editor), Juan Martinez-Alier (Editor), Juan Martinez Alier (Author) (1996) "Getting Down to Earth: Practical Applications Of Ecological Economics" (Intl Society for Ecological Economics) (Island Press)
  11. ^ Pearce, Fred "Blueprint for a Greener Economy"
  12. ^ Hawken, Paul (1994) "The Ecology of Commerce" (Collins)
  13. ^ Hawken, Paul; Amory and Hunter Lovins (2000) "Natural Capitalism: Creating the Next Industrial Revolution" (Back Bay Books)

Further reading

  • Common, M. and Stagl, S. 2005. Ecological Economics: An Introduction. New York: Cambridge University Press.
  • Daly, H. and Townsend, K. (eds.) 1993. Valuing The Earth: Economics, Ecology, Ethics. Cambridge, Mass.; London, England: MIT Press.
  • Georgescu-Roegen, N. 1975. Energy and economic myths. Southern Economic Journal 41: 347-381.
This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Ecological_economics". A list of authors is available in Wikipedia.
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