Sunday, June 26, 2011

What is Ecological Economics?

So, time for another "serialization" in the spirit of John Quiggin's Zombie Economics and my earlier serialization of my Ecological Economics Reviews article. This time I have to write an encyclopedia article on "ecological economics". I only get 2000 words. This first very rough draft of the first section is titled "What is Ecological Economics?". Please contribute your insights and criticisms even though, unfortunately, I don't get to do an acknowledgements section.

Ecological economics is a relatively new interdisciplinary field concerned with the relationship between economic systems and the biological and physical world. Opinions differ on whether ecological economics is a transdisciplinary field comparable to say international relations, a new disciplinary paradigm in economics, a new field within mainstream economics, or even a subarea within the conventional economics field of environmental economics [refs].

The most common view, which is also the position taken by the International Society for Ecological Economics and the journal Ecological Economics, is that ecological economics is a transdisciplinary field. It recognizes that practical solutions to pressing social and environmental problems require new interdisciplinary approaches that focus on the links between economic, social, and ecological systems. Neither the traditional practice of economics alone nor the natural sciences on their own are held to be sufficient for addressing these issues or explain the past history of the human-environment system either.

In this view, the starting point and central organizing principle of ecological economics is that economies are embedded and dependent upon the ecosphere – they are part of a larger system (should we have a figure here?). Study of this joint environment-economy system must take into account natural science principles from thermodynamics, ecology etc. and also principles from psychology and other social sciences. So ecological economics integrates economics and various social and natural sciences (not just ecology).

“Ecological economics” is the name given to the field because:
1. Many ecologists were involved early on in the history of ecological economics.
2. The main antecedent to ecological economics was a biophysical economics that focused on energy flows in the human ecosystem.
3. Both economics and ecology share the Greek root “oikos” meaning "house" or "place to live". Ecology is the study of how organisms interact with their environment, support themselves, and interact with each other. Economics is the same applied to people [Wonnacott and Wonnacott, 1979; Common, 1995].

In practice, more economists than non-economists have been attracted to the emerging field and so it is natural for some of these economists to see ecological economics as a new paradigm in economics alongside existing paradigms such as the mainstream neoclassical economics and the alternative Post-Keynesian, Institutional, Marxist, and other paradigms. They argue that ecological economists must reject the neoclassical approach to economics [Spash], though there is no one single school of thought that all agree on to replace the mainstream paradigm. But there are also natural scientists who believe that ecological economics can overturn and replace mainstream economics [Hall et al.]. Both these groups reject the core model of neoclassical economics – that economic theory should be primarily based on modeling the decision-making processes of individual consumers and firms with the default assumption that these agents maximize utility or profits. Røpke discusses tensions between mainstream neoclassical economists and socio-economists in ISEE [Røpke].

However, both subscribers to the transdiscipline view who otherwise practice the neoclassical economic approach and those who reject mainstream economics share a common set of assumptions and approaches. Namely that:

1. The economy is just a sub-system of the larger human-environment system.
2. Models of the economy must comply with biophysical principles and that mainstream economics is guilty of underemphasizing the role of natural science.
3. Economic policy must consider jointly the objectives of efficiency, equity, and sustainability, instead of the primary emphasis on efficiency in mainstream economics. Ecological economics has been characterized as “sustainability science” [ref].
4. That there are limits to our ability to substitute human made inputs and knowledge for natural resources and the environment in both production and consumption [Stern, 1997].

There is also a tension between ecological economics as science or as activism. This is illustrated by efforts to get ISEE and USSEE to adopt positions on zero economic growth.

By contrast, many mainstream environmental economists think of ecological economics as either a new field within mainstream economics that deals with the management of complex ecological systems or as a subfield within the field of environmental and resource economics [Røpke, 2005]. This is reflected in the code given to ecological economics by the Journal of Economic Literature as part of its classification system of the economic literature: Q57 – a subfield within environmental economics.


  1. Interesting - but mainly because it shows "ecological economics" to be devoid of substance or operative content, with zero mention of empirics and cost-benefit analysis (so strikingly absent from the very ecological MBDA Report 2010).
    Mainstream economics has always been about sustainability, of e.g. economic growth (Keynes, Hicks, Kaldor, Harrod-Domar).

    I suggest you could usefully eliminate the word "must" (3 times)although it does reveal the dictatorial tendencies of ecological economists.

    Mainstream economics has always considered equity as well as efficiency, or did when I read welfare economics at LSE, and sustainability is there as well via scarcity and pricing.

    You are right that ecological economics is primarily aimed at promoting zero growth.

  2. Thanks for your comments. It's always easy to say that mainstream economics considers all these things because some economists do some of the time. The question is one of emphasis. A lot of economists would say that from a policy perspective economics is about efficiency and distributional considerations are outside the scope of economics. Others would say that we need to analyse and think about distributional impacts but leave it to the politicians or public to make a choice, while some do take an explicit social welfare function approach. Sustainability in terms of whether resource constraints impose a constraint to growth is only considered at all in the field of environmental and resource economics or as add-on chapters about special topics in books on growth theory. I do give credit to Aghion and Howitt for considering these issues when most macroeconomists don't at all but it still isn't the core model.