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Ecological Economics and Sustainability
Joshua FarleyCommunity Development and Applied
EconomicsGund Institute for Ecological Economics
University of Vermont
Economies as Evolutionary Systems
Hunter gatherer economy (Pleistocene) Egalitarian cooperation
Agricultural economy (Holocene) Private property rights (limited) Capture of surplus, hierarchy structures
Industrial economy (Anthropocene) Fossil fuels and competition Scarcity of natural capital
Economy in the Anthropocene
Steffen, W., Grinevald, J., Crutzen, P., McNeill, J., 2011. The Anthropocene: conceptual and historical perspectives. Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences 369, 842-867.
Economy in the Anthropocene
Nature in the Anthropocene
Nature in the Anthropocene
Societal Challenges in the Anthropocene
Just and sustainable degrowth
Transition to Sustainability
Transition to Sustainability
Marginal market costs(Market supply curve)
Poor people have no demand
Limits to throughput Just distribution 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.”
Ecological Economic View
Economy is sustained and contained by global ecosystem
Relative scarcity has changed dramatically
Economic institutions must adapt
Laws of Physics Can’t make something
from nothing or vice versa
Can’t do work without energy
Disorder increases
Laws of ecology Conversion of ecosystem structure into
economic products and waste degrades and destroys ecosystem services Time lags common
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
Price Mechanism Fails
Ecosystem Services: can’t be owned Information: value maximized when
free
Changing the Goals
From micro-allocation and maximizing monetary value
Micro-allocation: How do we allocate natural capital among the
production of different economic goods and services?
Satisfaction of subjective preferences Preferences weighted by purchasing power Maximize monetary value
Food and eflornithine
…To macroallocation and Sustainable Scale
How much ecosystem structure should be: converted to economic production conserved to generate essential
ecosystem services? How large an economy and how
many people can our ecosystems sustain?
…Just Distribution
Between species How much of the planet’s net primary
productivity should we take for ourselves? Between generations
What are our obligations to future generations?
Within a generation 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?
Solving prisoner’s dilemmas
Changing the Rules
Rules for Sustainability
Extract renewable resources no faster than they can regenerate Restore depleted stocks
Extract essential non-renewable resources no faster than we develop renewable substitute Energy sector invests .3% of revenue in R&D
Emit waste no faster than it can be absorbed Emissions below absorption rates when
waste stocks are excessive, e.g. CO2
Rules for Sustainability
Neither extraction nor emission can threaten critical ecosystem services
Steady state population
Rules for Justice
We cannot grow our way out of poverty 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 Basic needs must trump luxury
Rules for Efficiency
How we allocate depends on desirable ends, characteristics of scarce resources Economics cannot be faith-based
Non-excludable: markets cannot work, cooperation required
Non-rival: markets inefficient, cooperation required
Most ecosystem services are non-rival
Efficiency: Prisoner’s Dilemmas
Global Climate Change Natural resource
depletion/biodiversity loss Green technology
Minimize cost of producing information Maximize value once it exists
Cooperation is necessary 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
Reciprocity or payments? Market economy makes people selfish Social economy promotes reciprocity Mixing the two fails
Social norms: glorify greed or punish it?
Conclusions Markets emerged simultaneously with fossil
fuels 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
Must adapt economic system to resource characteristics, human behavior Prisoner’s dilemmas Physiological necessities
Cooperation and common ownership for sustainability
Evolution of Cooperation
Genetic Multi-level selection
Distribution of pro-social behavior Bacteria, slime-molds, insects, fish, humans
(super cooperators) Oxytocin Detecting cheaters
Cultural Altruistic punishment Punishing non-punishers Group identity