Module 4: Ecological economics Meaning: a new paradigm Transdisciplinarity Fundaments: limits to physical growth, ignorance and precautionary principle, multicriteria analysis

Module 4: From neoclassical economics to environmental economics…. $ market Many people believe that the conceptual foundations of conventional economics analysis are erroneous and that we now need a new economics –an ecological economics (Diesendorf and Hamilton) Externalities (mkt failure) Cost-Benefit Analysis Total Economic Value CV, TC, Hedonic pricing... Clear product Unclear process Environmental taxes... “forcing” externalities into the mkt (pricing them) “Let them eat pollution”

...to ecological economics: a new paradigm View point of neoclassical economicsView point of ecological economics Strong comparabilityof values Weak comparability of values implies Strong commensurability or weak commensurabilityIncommensurability applies Monocriterion evaluationMulticriteria evaluation “The best solution”“A best solution” Weak sustainabilityStrong sustainability

Differences in emphasis between EE and ERE View point of neoclassical economicsView point of ecological economics Optimal allocation of externalitiesOptimal scale Priority to efficiencyPriority to sustainability Optimal welfare or Pareto efficiencyNeeds fulfilled and equitable distribution Sustainable growth in abstract modelsSustainable dvpm, globally and North/South Growth optimism and “win-win” optionsGrowth pessimis and difficult choices Deterministic optimisation of intertemporal welfareUnpredictable co-evolution Shotr to meium-term focusLong-term focus Partial, monodisciplinary and analyticalComplete, integrtive and descriptive Abstract and generalConcrete and specific Monetary indicatorsPhysical and bioogical indicators External costs and economic valuationSystems analysis CBAMultidimensional evaluation Applied general equilibrim models with external costsIntegrated models with cause-effect relationships Max of utility or profitBounded individual rationality and uncertainty Global market and isolated individualsLocal communities Utilitarianism and functionalismEnvironmentla ethics from van de Bergh: “Ecological economics: themes, approaches and differences with environmental economics”

Fundaments and issues Based on open system economics within a closed system: limits to physical growth The precautionary principle: "The recognition that in the analysis of complex systems like the earth at all space and time scales, fundamental uncertainty is large and irreducible and certain processes are irreversible, requir[es] a fundamentally precautionary stance." (Getting Down to Earth, p.2) “If we matter and then it doesn´t matter, it doesn´t matter; if we don’t matter, and then it matters, it matters” (Human Ecology, Human Economy) Future generations: how to discount the future? >i  resource use (and pollution) today implications on irreversibility and uncertainty/ignorance (precaution) Exercise on nuclear energy waste Multicriteria analysis in decision making (example: weighted goal programming; NAIADE)

Readings Barbier, E.: “Environmental valuation in developing countries” in Yearbook of environmental and resource economics Dieendorf and Hamilton (eds.): “Foundations of ecological economics” (chapter 2) + “The precautionary principle” (in chapter 3 of the book) Edward Jones, Davies, Hussain: Ecological Economics, an introduction. See “The ecological approah to environmental evaluation (Chapter 7) Giampietro, Mario. 2002: The Precautionary Principle and Ecological Hazards of Genetically Modified Organisms. AMBIO: A Journal of the Human Environment: Vol. 31, No. 6, pp. 466–470 Hanley, N.: “Cost-benefit analysis of envronmental policy and management” in van de Bergh, ch. 57 Janssen and Munda: “Multi-criteria methids for quantitative, qualitative and fuzzy evaluation problems” in van de Bergh, chapter 58. Martinez-Alier, Munda and O’Neill: Weak comparability of values as a foundation of ecological economics. Ecological economics (electonic journal) issue 26, pag Munda, G.: Conceptualising and responding to complexity. Munda, G.: Environmental Economics, Ecological Economics and the Concept of Sustainable Development The Economist, February 8th, 1992: “Let them eat pollution” pag.82 Spash, C.: “The development of environmental thinking in economics” Van de Bergh, J.: “Ecological economics: themes, approaches and differences with environmental economics” Regional Environmental Change, 2001, vol.2 (1): 13-23