Ecological Economics

Abstract

Ecological economics takes a different approach from standard environmental economic analysis based on markets. It emphasizes the dependence of the human economy on natural ecosystems and gives special emphasis to the concept of natural capital. While much of standard economics is concerned with the accumulation and productivity of human-made capital, ecological economics focuses on the maintenance of the natural systems that support life and economic activity. Natural capital includes all the natural resources, oceans, atmosphere, and ecosystems of the planet. These must be accounted for and should be managed according to sustainable principles, so that their functions are not degraded over time. In this perspective, economic systems cannot grow without limit but must achieve a sustainable scale for economic activity at which the planet’s ecosystems are not subjected to undue stress. Significant evidence indicates that current economic activity exceeds these limits or badly strains them. One measure of this is the proportion of photosynthetic energy appropriated for human use, now about 25% of photosynthesis, with much higher proportions in agricultural and densely populated areas. Significant further growth in human demand would thus leave little room for other living systems of the earth. The concept of sustainability, although important to managing natural capital, is difficult to define. A “weak” definition relies on the possibility of replacing natural ecosystem functions with human-made substitutes. A “strong” definition assumes that humans have limited ability to replace natural system functions and that a 245sustainable society must, therefore, maintain most of its natural systems without significant depletion or degradation. Long-term sustainability involves issues of discounting the future and the question of our responsibility to provide for future generations. Economic incentives and property rights systems affect decisions regarding resource use, as does public policy on resource management. A precautionary principle is appropriate in cases in which irreversible effects may result from damage to complex ecosystems. Resource conservation for future generations requires social judgment in addition to economic calculation. A special focus on energy in the economic system emphasizes the principle of entropy: available energy is limited, and its use governs all physical processes, including ecological and economic systems. This places a special importance on the use of solar energy and the negative impacts of fossil-fuel energy. In general, an entropy analysis shows the limits of economic activity and the ecological price to be paid for exceeding these limits. The principles of ecological and standard economics are both relevant to resource management issues. Sometimes the principles will conflict, but it is important to consider how best to apply both to specific resource and environmental issues, as well as to the measurement of economic output, human well-being, and ecosystem health.