Ecological Economics and Sustainability Joshua Farley Community Development and Applied Economics Gund Institute for Ecological Economics University of Vermont

Economies as Evolutionary Systems Hunter gatherer economy (Pleistocene) Hunter gatherer economy (Pleistocene) Egalitarian cooperation Egalitarian cooperation Agricultural economy (Holocene) Agricultural economy (Holocene) Private property rights (limited) Private property rights (limited) Capture of surplus, hierarchy structures Capture of surplus, hierarchy structures Industrial economy (Anthropocene) Industrial economy (Anthropocene) Fossil fuels and competition Fossil fuels and competition Scarcity of natural capital Scarcity of natural capital

Economy in the Anthropocene Steffen, W., Grinevald, J., Crutzen, P., McNeill, J., The Anthropocene: conceptual and historical perspectives. Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences 369,

Economy in the Anthropocene

Nature in the Anthropocene

Societal Challenges in the Anthropocene Just and sustainable degrowth

Transition to Sustainability

Marginal market costs (Market supply curve) Poor people have no demand

Limits to throughput Limits to throughput Just distribution Just distribution Incentives to produce necessary technologies Incentives to produce necessary technologies Transition to Sustainability

Changing the Paradigm

Conventional Economics Exponential Growth Ecosystem as part Scarcity, markets and feedback loops Substitutability Energy and resources? Production functions Circular economy

Weak Sustainability Schelling (Nobel Memorial Prize in 2005): “Agriculture and Forestry are less than 3% of total output, and little else is much affected. Even if agricultural productivity declined by a third over the next half century, the per capita GNP we might have achieved by 2050 we would still achieve in 2051.” Schelling (Nobel Memorial Prize in 2005): “Agriculture and Forestry are less than 3% of total output, and little else is much affected. Even if agricultural productivity declined by a third over the next half century, the per capita GNP we might have achieved by 2050 we would still achieve in 2051.”

Ecological Economic View Economy is sustained and contained by global ecosystem Economy is sustained and contained by global ecosystem Relative scarcity has changed dramatically Relative scarcity has changed dramatically Economic institutions must adapt Economic institutions must adapt

Laws of Physics Can’t make something from nothing or vice versa Can’t make something from nothing or vice versa Can’t do work without energy Can’t do work without energy Disorder increases Disorder increases

Laws of ecology Conversion of ecosystem structure into economic products and waste degrades and destroys ecosystem services Conversion of ecosystem structure into economic products and waste degrades and destroys ecosystem services Time lags common Time lags common Both economic products and ecosystem services essential to civilization Both economic products and ecosystem services essential to civilization

Strong Sustainability “If the biota, in the course of aeons, has built something we like but do not understand, then who but a fool would discard seemingly useless parts? To keep every cog and wheel is the first precaution of intelligent tinkering.” Aldo Leopold “If the biota, in the course of aeons, has built something we like but do not understand, then who but a fool would discard seemingly useless parts? To keep every cog and wheel is the first precaution of intelligent tinkering.” Aldo Leopold

Price Mechanism Fails Ecosystem Services: can’t be owned Ecosystem Services: can’t be owned Information: value maximized when free Information: value maximized when free

Changing the Goals

From micro-allocation and maximizing monetary value Micro-allocation: Micro-allocation: How do we allocate natural capital among the production of different economic goods and services? How do we allocate natural capital among the production of different economic goods and services? Satisfaction of subjective preferences Satisfaction of subjective preferences Preferences weighted by purchasing power Preferences weighted by purchasing power Maximize monetary value Maximize monetary value Food and eflornithine Food and eflornithine

…To macroallocation and Sustainable Scale How much ecosystem structure should be: How much ecosystem structure should be: converted to economic production converted to economic production conserved to generate essential ecosystem services? conserved to generate essential ecosystem services? How large an economy and how many people can our ecosystems sustain? How large an economy and how many people can our ecosystems sustain?

…Just Distribution Between species Between species How much of the planet’s net primary productivity should we take for ourselves? How much of the planet’s net primary productivity should we take for ourselves? Between generations Between generations What are our obligations to future generations? What are our obligations to future generations? Within a generation Within a generation Who is entitled to resources created by nature and society as a whole? Who is entitled to resources created by nature and society as a whole?

… and Efficient Allocation Once we’ve achieved a sustainable and just economy, how can we maximize human well-being from available resources? Once we’ve achieved a sustainable and just economy, how can we maximize human well-being from available resources? Solving prisoner’s dilemmas Solving prisoner’s dilemmas

Changing the Rules

Rules for Sustainability Extract renewable resources no faster than they can regenerate Extract renewable resources no faster than they can regenerate Restore depleted stocks Restore depleted stocks Extract essential non-renewable resources no faster than we develop renewable substitute Extract essential non-renewable resources no faster than we develop renewable substitute Energy sector invests.3% of revenue in R&D Energy sector invests.3% of revenue in R&D Emit waste no faster than it can be absorbed Emit waste no faster than it can be absorbed Emissions below absorption rates when waste stocks are excessive, e.g. CO2 Emissions below absorption rates when waste stocks are excessive, e.g. CO2

Rules for Sustainability Neither extraction nor emission can threaten critical ecosystem services Neither extraction nor emission can threaten critical ecosystem services Steady state population Steady state population

Rules for Justice We cannot grow our way out of poverty We cannot grow our way out of poverty Poverty is higher now than in 1969, when per capita GNP was ½ of today’s Poverty is higher now than in 1969, when per capita GNP was ½ of today’s Resources created by nature and society as a whole should be shared Resources created by nature and society as a whole should be shared Basic needs must trump luxury Basic needs must trump luxury

Rules for Efficiency How we allocate depends on desirable ends, characteristics of scarce resources How we allocate depends on desirable ends, characteristics of scarce resources Economics cannot be faith-based Economics cannot be faith-based Non-excludable: markets cannot work, cooperation required Non-excludable: markets cannot work, cooperation required Non-rival: markets inefficient, cooperation required Non-rival: markets inefficient, cooperation required Most ecosystem services are non-rival Most ecosystem services are non-rival

Efficiency: Prisoner’s Dilemmas Global Climate Change Global Climate Change Natural resource depletion/biodiversity loss Natural resource depletion/biodiversity loss Green technology Green technology Minimize cost of producing information Minimize cost of producing information Maximize value once it exists Maximize value once it exists Cooperation is necessary Cooperation is necessary Mathematical biology, behavioral economics, political theory, anthropology, evolution all agree Mathematical biology, behavioral economics, political theory, anthropology, evolution all agree

Institutions for Cooperation Institutions can make generous people act selfishly, or selfish people act generously Institutions can make generous people act selfishly, or selfish people act generously Reciprocity or payments? Reciprocity or payments? Market economy makes people selfish Market economy makes people selfish Social economy promotes reciprocity Social economy promotes reciprocity Mixing the two fails Mixing the two fails Social norms: glorify greed or punish it? Social norms: glorify greed or punish it?

Conclusions Markets emerged simultaneously with fossil fuels Markets emerged simultaneously with fossil fuels Nature of ‘scarce’ resources has changed from rival, excludable to non-rival and/or non- excludable Nature of ‘scarce’ resources has changed from rival, excludable to non-rival and/or non- excludable Cannot transform physical characteristics of resources to fit market model Cannot transform physical characteristics of resources to fit market model Must adapt economic system to resource characteristics, human behavior Must adapt economic system to resource characteristics, human behavior Prisoner’s dilemmas Prisoner’s dilemmas Physiological necessities Physiological necessities Cooperation and common ownership for sustainability Cooperation and common ownership for sustainability

Evolution of Cooperation Genetic Genetic Multi-level selection Multi-level selection Distribution of pro-social behavior Distribution of pro-social behavior Bacteria, slime-molds, insects, fish, humans (super cooperators) Bacteria, slime-molds, insects, fish, humans (super cooperators) Oxytocin Oxytocin Detecting cheaters Detecting cheaters Cultural Cultural Altruistic punishment Altruistic punishment Punishing non-punishers Punishing non-punishers Group identity Group identity