Announcements Bookstore has ordered more copies of blue book (F&B) Two copies available on reserve later today (different cover, same content) s to me must have cdae 61 in subject, not cdae 061, cdae61, etc. etc. The only HW to be turned in via is biographical statement, sent to me. Too many students in class to make exceptions. I won't reply to s asking questions on syllabus

Why Ecological Economics?

Back to the roots

Oikos “the household” Study of nature’s household = ecology Managing the human household = economics Production of real goods and services: bounded and natural Ecological economics = management of human household based on knowledge of nature

Chrematistiké- study of numbers Retail trade, finance, speculation, how money begets money Not bounded or natural –E.g. International financial flows dwarf the trade in real goods and services

Coevolutionary economics Hunter-gatherer economics –Accumulation = death Economics of early agricultural societies –Depended on technological advance –Advent of property rights Industrial market economics –Use of non-renewable resources Ecological economics –Driven by the growing scarcity of natural capital

From Empty World to Full World

What is scarce? In agriculture? –Not enough tractors and pesticides, or not enough water, arable land, and climate stability? In natural resources? –Not enough boats, or not enough fish? –Not enough chain saws, or not enough forests? In community development? –Too few roads and houses, or too few social connections? –Too little food, or inadequate distribution?

So what distinguishes ecological economics from conventional (neoclassical) economics? Pre-analytic vision, Physics, Ecology, Ethics and Practice

The pre-analytic vision of ecological economics

The sustaining and containing system

The Ecological-Economic System is Extremely Complex Feedback loops Highly non-linear change Emergent phenomena Surprise Chaotic behavior Uncertainty and ignorance more common than risk

Negative Feedback Loops

The Pre-analytic Vision of Neoclassical Economics

The Economic System is Simple Human behavior is very simple The market system is simple We can model the system mathematically, and solve for an optimal equilibrium Risk dominates uncertainty and ignorance

Physics: The Laws of Thermodynamics

1rst Law: Matter energy cannot be created or destroyed We can’t make something from nothing, and we can’t make nothing from something Natural resources are essential to economic production Natural resources also provide vital economics services The opportunity cost of economic growth is a reduction in the flow of goods and services from nature

2 nd Law: Entropy increases in the universe All economic production becomes waste One way flow from natural resource-> human made economic service-> waste IRREVERSIBILITY Economic production degrades the environment Opportunity cost of economic growth: waste emissions further reduce the flow of goods and services from nature Throughputs, not inputs

Economic Implications of the EE vision Diminishing marginal returns, opportunity costs, and uneconomic growth

So What? Sustainable growth is an oxymoron Ever continuing growth in material consumption is an impossible goal BUT welfare is a psychic flux, not a physical flux. Economic development is possible, but not continuous economic growth

Ethics: the desirable ends

The desirable ends How do we provide a high quality of life for this and future generations? Consumption is only one narrow component of human needs

Sustainable Scale Ethical assumption: Future generations matter Scale= the size of the economic system relative to the ecosystem that contains and sustains it There is a finite limit to the physical size of the economic system The limits to economic growth are determined by ecological constraints. Macro level opportunity costs of economic growth do not provide economic signals

Just Distribution Ethical assumption: current generations matter –Does it make sense to care about the well-being of people not yet born and ignore the well-being of those alive today? Is sustainability possible without more equal distribution? –Do hungry people care about the future? –Can Americans continue to consume 25% of the Earth’s resources? Is depleting the earth’s resources fair to future generations? How do we decide on a ‘Just’ distribution?

Efficient Allocation Instrumental ends, not an end in itself