The Nature of Resources, and the Resources of Nature: Framing an Ecological Economics Approach to Problem-Solving Jon D. Erickson Rubenstein School of Environment and Natural Resources and Natural Resources University of Vermont Burlington, Vermont, USA

Allocation of scarce resources toward alternative desirable ends 1. What are the desirable ends? 2. What scarce resources are needed to obtain those ends? 3. What ends get priority? (How do we allocate?)

Where do you stand?  Economic growth and environmental protection are fundamentally in conflict with one another.  There should be no limit to the amount of money that an individual can earn in today’s society.  Technology and human ingenuity will solve our environmental problems.

Allocation of scarce resources toward alternative desirable ends MEANSENDSALLOCATION f (N, L, K) f (L, K) f (K) f ($)

Household Firms (production Factor services Goods I n v e s t m e n t ( 3 ) P e r s o n alcons ump tio n ( 4 ) S a v i n g s ( 3 ) I m p o r t s ( 5 ) E x p o r t s ( 5 ) ( 2 )G o v e r n m e n t S p e n d i n g T a x e s ( 2 ) Government Financial markets Other countries W a g e s, r e n t s, i n t e r e s t, p r o f i t s ( 1 ) What’s Wrong with this Picture?

The Epoch of Fossil Fuel Exploitation (after Hubbert, 1969) Iron in Middle East Stonehenge Built Parthenon completed Pyramids constructed Mayan culture Inquisition Black Death Magellan's Circumnavigation Steam Engine Trillion kwh per year

Composition of U.S. Energy Use (Cleveland)

K Allocated to Humans the Rest of Nature Time Low entropy matter & energy

Ecosystem GoodsEcosystem Servicesvs. Knowledge CertaintyRiskUncertaintyIgnorance

Allocation of scarce resources toward alternative desirable ends 1. What are the desirable ends? 2. What scarce resources are needed to obtain those ends? 3. What ends get priority? (How do we allocate?)

Desirable Ends: 1. Sustainable Scale MB >= MC 2. Just Distribution 3. Efficient Allocation Driving Questions: 1. Growth and the Environment? 2. Limits on income? 3. Technology and ingenuity?

1. Sustainable Scale

Energy per Capita vs. Happiness (worldvaluessurvey.org)

Is Qualitative Development Possible without US-style Energy Use? (Source: UNDP, 2002, WRI, 2002)

Income 82.7% 11.7% 2.3% 1.9% 1.4% Population 20% Global Income Distribution 2. Just Distribution

Overconsumers 1.3 billion > US$7,500 per capita Sustainers 3.5 billion US$700-7,500 per capita Excluded 1.3 billion < US$700 per capita Travel by car and air Travel by bicycle and public surface transport Travel by foot or donkey Eat high-fat, high- calorie, meat-based diets Eat healthy diets of grains, vegetables & some meat Eat nutritionally inadequate diets Drink bottled water and soft drinks Drink clean water plus some tea and coffee Drink contaminated water Use throwaway products & discard substantial wastes Use unpackaged goods and recycled wastes Use local biomass and produce negligible wastes Live in spacious, climate-controlled, 1- family homes Live in modest, vented, multiple- family homes Live in rudimentary shelters or in the open Maintain image- conscious wardrobes Wear functional clothing Wear secondhand clothing or scraps

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3. Efficient Allocation HouseholdsFirms Maximize Utility Maximize Profit P Q G1 G2 CS PS

What are the characteristics of resources relevant to the allocation question?  Goods vs. Services (Flows vs. Funds)  Substitutability  Irreversibility  Renewability  Uncertainty  Externality  Rivalness  Excludability Supply Side f (N, L, K; r)

ExcludableNon-Excludable Rival Non- Rival Market Goods Open Access (tragedy of the commons) Tragedy of the Non-commons Pure Public Goods Privatization ~ Externalities ~

Demand Side

Abandoning Homo Economicus  Insights from Game Theory  Insights from Neuroeconomics

Functional MRI of Dopamine Activation

Cognitive Load Theory

Thinking Discount vs. Emotional Discount Rates

 A long time ago The discovery of energy in fossil fuels has exponentially increased our ‘grab-bag’ of unexpected returns Rave clubs, scuba diving, NASCAR, etc Bread, butter and ale A visit from a cousin Riding a horse Expected vs. Unexpected Rewards

Abandoning Homo Economicus  Insights from Game Theory  Insights from Neuroeconomics  Insights from Sociobiology  Insights from Integrated Human and Environment Histories  Insights from our Evolutionary Hangovers

Ecological Economics  Get the scale right through science-informed democracy,  Get distribution right through social processes that are fair,  Recognize who we are and where we came from, and then …  Make the economy our servant, instead of our master.