Opening the black box of economic processes: Ecological Economics from its biophysical foundation to a sustainable economic institution

Abstract

The roots of Ecological Economics can be found at the very beginning of Classical Economics, where physical wellbeing was the object of research, instead of the allocation of resources. Although Neoclassical Economics abandoned this objective early on, other efforts to study the biophysical foundations of the economic processes persisted and were inherited by modern Ecological economists. The fundamental difference between Ecological Economic theory and Neoclassical Economic theory is that, Ecological economists attempt to open the black box of economic processes with modern scientific tools, while Neoclassical economists expand the black box without interest in the mechanisms inside. However, in the current Ecological Economics framework, the social sphere of discussion is dominated by translated mainstream versions of Ecological Economics, rather than its original biophysical form. In the next stage of its evolution, Ecological Economics must address such inconsistencies to provide institutional insights based on the biophysical foundations of the subject, to fully open the black box of how human society extracts material and energy from the ecosystem, transforms them into physical wealth, and distributes that physical wealth. Also it must provide policy implications on how to carve out a sustainable economic institution.