Friday, October 13, 2006

Environmental divide: Ecological vrs Environmental Economics

Continuing the "Ecological vrs environmental economics" debate the "How the World Works" blog has done an excellent job of summarising the article we referenced here a while ago called "How Ecological and Neoclassical Environmental Economists Think about Sustainability and Economics"

With the title "Environmental Divide" a number of paragraphs are worth pulling out but I recommend reading it in its entirety.

How can economists best make Gaia happy? By "getting the prices right" on environmental issues like pollution, deforestation, resource depletion and species extinction, thus ensuring sustainable growth in a resolutely market economy? Or by concluding that economic growth as we know it may not actually be sustainable, and humans must radically rework existing socioeconomic structures?

Very roughly speaking, these two poles of thought represent two schools within the sphere of all economists who focus on environmental issues: environmental economics and ecological economics. I am chagrined to note that until last week I didn't even realize that this division formally existed. But then a pair of environmental blogs that I've been following of late referenced a study by two German economists who surveyed German environmental and ecological economists to find out what their areas of commonality and difference were on the all-important issue of sustainability.

A couple of decent defintions:

Ecological economists believe that the economy is "dependent for its existence on the ecosystem" and that the value of nature can't be monetized. Humans aren't the center of the universe, they contend, and human values need to change: "ethical dimensions should be part of economic thinking about sustainability." Achieving sustainability means recognizing that the ecosystem can't handle endless, unlimited growth, and that people must live within its means.

Environmental economists reject "fundamental changes of the economic system and restrictions on material consumption." If the right prices are set for environmental goods, i.e., if such things as the climate-change costs of carbon emissions are incorporated into the corporate bottom line, then growth can continue merrily along. Environmental economists fit squarely into the neoclassical economic tradition -- markets know best.

I like this penultimate paragraph.

From a distance then, ecological economics looks like something of a grab bag, a place where long-standing political critiques of how human society is organized merge with idealized conceptions of the proper human place in the natural ecosystem. But there is a fundamental worldview: For ecological economists, pollution and species extinction and climate change are consequences of capitalism. For environmental economists they are bugs in the system that can be fixed with some clever tinkering.

A well written and well observed article. I hope Andrew Leonard continues to post in this area.

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