The Nature of Resources and the Resources of Nature Chapter 4: Ecological Economics By Herman Daly and Joshua Farley

Chapter Overview A finite planet The Laws of Thermodynamics Stock Resources and Fund Service Resources Excludability and Rivalness Goods and Services provided by the sustaining System

Finite Planet The economic system is A subsystem of the Planet’s Ecosystems. A big question For Ecological Economics is When is the economic System too big? When is Enough enough? What Policies will be effective in keeping the economy within Its optimal size? This requires a clear understanding of Specific attributes of goods and services that the economic system must allocate among alternative ends.

We can’t grow on like this… Finite supply of fossil fuels, soil, minerals, and water. Let’s face it – The earth is essentially a finite chunk of matter. Steady influx of sunlight. Proposition: Economic growth cleans the environment and preserves ecosystems. (true or false?) Evidence: As U.S. economy developed over last 30 years out water is cleaner and forest extent has expanded. Proposition: The economy cannot continue to grow indefinitely. (true or false?) Evidence: At a continuous annual 1% growth rate the human population would have a mass greater than the entire planet in just over 3,000 years? (let’s do a cocktail napkin calculation)

Key Question: When does economic growth become uneconomic? “We have finite supplies of energy, finite supplies of raw materials, finite absorption capacities for out wastes, and poorly understood but finite capacities for ecosystems to provide a host of goods and services essential for our survival. And evidence suggests that we are reaching the limits with respect to these resources. With continued growth in production, the economic subsystem must eventually overwhelm the capacity of the global ecosystem to sustain it.” Can economic development grow indefinitely?

The Laws of Thermodynamics