Ecological threshold and ecological economic threshold: Implications from an ecological economic model with adaptation

Abstract

This paper investigates ecological threshold and ecological economic threshold by developing an ecological economic model—an extension of a population–resource dynamics model developed by Brander and Taylor (1998). The model reflects three critical issues regarding an ecological economic system: system boundary, non-convexity, and adaptation. The paper elucidates six main findings: ecological economic threshold may come before ecological threshold; the ecological economic threshold may exhibit a highly context-dependent and dynamic nature, which suggests the precautionary principle; markets do not respond sufficiently to maintain resiliency under an external shock as prices do not reflect thresholds; the system can be restored by intervention, even after crossing the ecological economic threshold; various transitional paths are possible in restoring the system; and adaptation affects resilience to a somewhat significant effect which suggests the importance of better information and education. Because of the complexity of the model, I adopt a system dynamics approach for the development and analysis of the model.