Environmental Resources, Scarcity and the Heterodox

Production Model

Christian Spanberger

A Discussion on Resource Scarcity

• Ecological Economics (Daly, Georgescu-Roegen)– Laws of Thermodynamics, especially Entropy

• Institutional Economists (DeGregory, Khalil, [Young])– Resources as an anthropomorphic concept

Production

• Physical: Production is the transformation of matter into different matter using energy.– Production is zero-sum in terms of quantity and loss-

making in terms of quality.

• Economic: Production is the way by which society materially provisions itself.– Production is (potentially) surplus-producing.

Who is Wrong? Who is Right?

• EE is looking at the ‘natural’ system, IE at the economic system.

– Both analyses are correct for as long as they remain put at their object of analysis.

– Both (potentially) make too strong claims

• Purpose of EE analysis

– Showing that there are physical laws that all processes, including anthropomorphic ones, are subject too.

• Purpose of IE analysis

– Resources are produced means of production, not naturally given.

– Prices are not scarcity-indices.

Who is Wrong? Who is Right?

• IE cannot deny that there are real natural constraints–Absolute Limits: efficiency of heat engine, Irreversibility of economic processes, non-existence of 100 % recycling, ..–Resource constraints

• Rate of resource use > rate of resource renewal (natural processes, production of synthetic resources, recycling)

• Energy and time costs of regeneration• The limitedness of solar energy

–Technology can expand (but also contract!) boundaries; but that does not imply that these boundaries cease to exist.– DeGregory’s empirical argument is problematic.

Who is Wrong? Who is Right?

• EE cannot deny that entropy is just one characteristic defining the economic usefulness and availability of matter/entropy.– Production process often requires high entropy matter; example

of recycling– If used as metaphor for economic availability, technology can

have an absurd effect on objectivity of entropy concept.

Implications for Modelling the Productive Structure of the Economy

• The Heterodox Production Model is designed to portray production in an economic, not physical way.

• The implications of economic activity for the natural environment (and other way around, natural creation of resources) are much more productively analyzed from a physical perspective, can be integrated into an economic framework with the help of the social fabric matrix though.

Implications for Modelling the Productive Structure of the Economy

• Modelling Natural Resources:– Difficult to model ‘resources become’, since model is based on a

given state of technology. Modelling resources as produced means of production possible though.

– KS, RRS : G L → Q• RRS in all sectors?

– Resources as part of the Q vector and included in G matrix.

Implications for Modelling the Productive Structure of the Economy

• Modelling Natural Resources:– Waste as Resource

• All economic activities (production, household social activities) produce waste, which means that waste has to be included as a byproduct to these activities.

• Waste, for the purposes here, is to be considered an input into the production of economic resources as well.

• They would hence enter the G matrix for those sectors producing resources.

Conclusion and Outlook

• Both ecological and institutional discussions of scarcity are important for what they are able to show.

• The ecological implications of economic activities are more fruitfully modelled in a ‘nature as a whole’ framework.

• The institutional viewpoint on resources as produced means of production can be modelled through the heterodox production model.

• The task ahead must be to integrate economic and ecological models of production processes – the linking structure for this can potentially be the social fabric matrix.