Abstract
This chapter reviews ecological economics, describing its differences from orthodox environmental economics and similarities with other critical approaches in economics, especially institutional economics. Through its critical and interdisciplinary practice and the integration of economic and ecological knowledge in the valuation and management of natural resources, ecological economics develops a critical assessment of the growth paradigm. The controversy between green growth and sustainable degrowth continues in science and politics. Degrowth, convincing to ecologists, is not yet widely accepted in economics and policy practice. A consequence is the experimentation with contradicting forms of resource management in the sustainability process.
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Appendices: Further Information and Material
Appendices: Further Information and Material
1.1 1. Questions and Individual Exercises
1.1.1 Learning Exercise 1: Development of an Interdisciplinary Economic Theory for Sustainability Transformation
Discuss in a group the following draft of an idea for an interdisciplinary economic theory of sustainability (Klitgaard 2013: 278ff) and answer the following questions: can the sustainability discourse solve the many problems formulated in the sustainable development goals of the UN with the help of a complex theory, as Klitgaard suggests? What else is required to achieve a sustainable economy and society?
Klitgaard summarises the requirements of sustainability transformation as follows:
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To deal with “the real world in which we live” the economy cannot be treated solely as an abstract and isolated system of exchange, but as a system of production and exchange embedded in both a finite and non-growing biophysical system and in a social and institutional context. The theory to develop must recognise the prevalence and persistence of monopoly or concentrated industry in the economy. It cannot rely on “perfect competitive” markets that result in efficient allocation and equity as outcomes. A sustainability model cannot treat the planet’s ability to support life as an externality that can be internalised by somehow finding a price for nature’s assets and services.
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The “evolution of societies must be placed in a historical context”. Human interaction with nature has changed significantly in the transition from hunters and gatherers to agriculture to industrial producers. To understand present changes, the theory to develop needs to understand prior transitions. In the long course of human history before industrialisation society had three main characteristics: (a) dependence on the solar flow as an energy source; (b) most production was for direct use, with only a small economic surplus; (c) basic needs were satisfied by production for use and reciprocity, market activity was sporadic and the global population small.
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With the industrial era the situation changed quickly through the use of fossil fuels. To achieve sustainability, energy, population and the nature of exchange must be addressed. Sustainability cannot be achieved by “fixing” one of these elements; innovation, technological change, increases in efficiency and relative decoupling of GDP from material production, or smart growth, cannot be expected to bring without further changes the requisite degrowth to live well within nature’s limits and reduce the global overshoot. The institutional context of resource use becomes part of larger changes in production and consumption. Mainstream economics does not differentiate between exchange value and use value as in the era of classical political economy. The distinction needs to be introduced again to understand the historical context, the social and institutional frameworks of the economy and of technological change in the transition to sustainability. The internal forces that create depression and stagnation need to be understood, how biophysical limits will affect the traditional internal limits to growth and how the global economy has changed since the last great depression through globalisation and financialisation, and the pressures through the global economic and ecological changes. Sustainability economics needs to understand the consequences of the rise of global finance for growth and how the limits to growth, such as peak oil and climate change, will affect the financial economy and the real economy.
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A sustainability theory needs to address many themes: including the quality of work in terms of meaningful work, not only its presence or absence. Meaningful work includes different aspects of qualification and responsibility and should be meaningful for the worker, the community and the society. In a steady-state economy, ever-expanding consumption simply cannot be the means by which people seek fulfilment. Like economic theories before, a theory of sustainability needs to deal with labour productivity to change the dysfunctional connection between increasing productivity and degradation of work in modern capitalism towards a situation where rising productivity through technological change is spreading throughout the economy to achieve a society rich in culture and community, with fewer working hours and more leisure time.
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A realistic vision of the role of energy in economic activity and growth of productivity (see Hall and Klitgaard 2012): the interactions of energy quality, technological change, the labour process, the global financial economy and the evolution of human society need to be understood better—impending absolute scarcity, the Energy Ret and the consequences of its use, especially for climate change. As with the other parts of the theory, energy analysis requires transdisciplinary efforts to understand biophysical limits, the functions of the economy and the political processes, and the domestic and international political contexts.
To discuss the vision of a sustainable society more systematically see the following learning exercise.
1.1.2 Learning Exercise 2: An Economic Vision of a Sustainable Society and Economy
Discuss in a group the following vision by Klitgaard (2013: 294) and the arguments for it critically. If you do not accept certain arguments, try to find other or further ones, but do not reduce the vison to a selective picture—try to think about all necessary changes to achieve global sustainability.
Keep your ideas about the sustainable economy and society in the form favoured by Klitgaard: as a realistic description of the changes required to solve the social, economic and environmental problems existing today. Do not just describe a “good society” in an ideal or utopian form without thinking how it can be achieved.
Main requirements in terms of social sustainability:
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It must meet the needs of people for income, healthcare, employment and chances to increase their capabilities and provide opportunities for the next generation.
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Basic social institutions, technologies and human behaviour (lifestyles) need to change to achieve a sustainable balance with nature.
Main requirements in terms of ecological sustainability:
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To reduce the overshoot of nature’s limits it must be a non-growing society with a more equal income distribution.
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Energy problems will necessitate more local production and distribution—in the end we will be dependent once more upon the solar energy, harvesting it more effectively with modern technologies.
Main requirements of change of the economy—impossibility of sustainable capitalism:
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Entrepreneurial innovation will not lead to sustainability—it is dependent upon growth as any other form of capitalism. Financial innovation brought not much more than the complex derivative securities that caused the recent financial debacle and a rapid increase in income inequality.
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If we desire a small-scale local economy, then this economy needs to be one based upon a community of associated producers. While a few small businesses may function perfectly well in a non-growing environment, the whole capitalist system, with large-scale enterprises and global markets, does not work without growth.
Main requirements of theoretical knowledge:
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An economic theory of the sustainable economy must integrate production, consumption, work, finance, energy and policy, to name but a few characteristics.
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The theories of heterodox political economy are a starting point for a theory of sustainability—they include economic activity and policy, as well as technology, in institutional and historical contexts. Without historical and institutional analyses, we may become victims to greenwashing and technological quick fixes.
1.1.3 Learning Exercise 3: Transition to a Sustainable Economy
Discuss the following ideas of Jackson (2009: 171ff) critically—are they coherent, clear, convincing? Correct or complement them with your own ideas.
Not only a vision and contours of a theory, but a transition scenario to a non-growing society is necessary for the transition to a sustainable economy:
Consumer society seems hell-bent on disaster; but dismantling the system doesn’t look easy either. Overthrowing it completely could drive us even faster along the road to ruin. But incremental changes are unlikely to be enough. Faced with this kind of intractability it’s tempting to retrench. To cling more tightly to existing tenets. Or to resort to a kind of fatalism. A place where we accept the inevitability of a changing climate, an unequal world, perhaps even the collapse of society. And concentrate all our efforts on personal security.
Impossibility theorems are omnipresent: economies can only survive if they grow, people do not give up materialism, the state is powerless. But axiomatic truths like these dissolve under more careful scrutiny. A different kind of macroeconomics is possible. People can live well without more stuff. A new vision of governance makes sense.
The economic crisis provides an opportunity to change: sweeping away short-term thinking, replacing it with policymaking capable of addressing the challenges of climate change, delivering a lasting prosperity. There are only two possibilities for change of this order: revolution or to engage in the work of social transformation.
The ideas of revolution imply ending capitalism, rejecting globalisation, undermining corporate power, overthrowing corrupt governments, dismantling the old institutions. There are risks here too: a new barbarism lurks in the wings, a world constrained by resource scarcity, threatened with climate change, struggling for economic stability: how long could we maintain civil society in such a world?
To reject revolution is not to accept the status quo. The scale of the required transformation is massive, but concrete steps through which to build change are needed, and for this governments and those able to make or influence policy are needed. These steps open up a public and policy dialogue on the issues. It is possible already to establish some clear directions of travel: establishing the limits, fixing the economic model, changing the social logic. Clarifying these points will help to find new ideas in the transformation process.
1.2 2. Further Reading Suggested: Deepening, Thematically Specialised
Textbooks of ecological economics:
Daly, H., & Farley, J. (2004). Ecological Economics: Principles and Applications (2nd ed. 2011). Washington, Covelo, London: Island Press. This classic textbook of ecological economics is oriented to the description of ecological economics in a critical discussion of the main themes of economics as a disciplinary science and its limits and failures. Its chapters include the thematic scope and guiding ideas of ecological economics, ecosystems and resources, microeconomics, macroeconomics, international trade and policy. The authors underline that ecological economics is not an academic discipline, arguing that real problems do not respect academic boundaries (for lack of a better term they call ecological economics a “transdiscipline”).
Shmelev, S.E. (2012). Ecological Economics. Sustainability in Practice. New York et al.: Springer. This interdisciplinary textbook is for students with some knowledge of economics and environmental science, focusing on sustainability. Its chapters cover a variety of themes relevant to economics (economic valuation and decision-making, market failures and externalities, economic models and input-output analysis) and sustainable development (measuring progress of sustainable development, climate change and renewable energy, biodiversity loss, sustainable cities, regional waste management, business and sustainable development).
Costanza, R., Cumberland, J.H., Goodland, R., Norgaard, R., Kubiszewski, I., & Franco, C. (2015). An Introduction to Ecological Economics (2nd ed.). Boca Raton, FL: CRC Press. This textbook from mainly US-American authors of the founding generation of ecological economics is a revised version of the 1997 first edition. Differing from other textbooks mentioned here it keeps a thematic focus on economics and economic knowledge from a historical perspective, with chapters on humanity’s current dilemma, the historical development of economics and ecology, the principles and objectives of ecological economics, environmental institutions, instruments and policies. This book shows how knowledge of environmental problems developed from partial and inadequate knowledge to improved knowledge of global problems that need to be dealt with in sustainable development.
Common, M., & Stagl, S. (2016). Ecological Economics. Cambridge et al.: Cambridge University Press. This introductory textbook provides a systematic overview of ecological economics from an interdisciplinary perspective, including economic and ecological sciences. It describes the interdependence of the modern economy and its environment, the environmental and sustainability discourse in economics, the national policy processes and instruments, the international institutions and the interaction between economy and sustainability with regard to climate change and biodiversity.
Handbooks of ecological economics:
Martinez-Alier, J., & Muradian, R. (Eds.). (2015). The Handbook of Ecological Economics. Cheltenham, UK and Northampton, MA: Edward Elgar. This handbook (from mainly European authors) offers a more advanced and differentiated analysis of the state of the discourse in ecological economics than the textbooks described above. It includes chapters on the economic core themes of ecological economics (philosophical sources, value deliberation, macroeconomic policies, degrowth, consumption, economic instruments), chapters on ecological core themes (social metabolism, ecosystem services, traditional ecological knowledge, common pool resources, water) and chapters on policy (global environmental governance, policy instruments). The chapters are exemplary for the development of the transdisciplinary field, but the history and current scholarship in ecological economics is not systematically reviewed.
Spash, C.L. (2018). Routledge Handbook of Ecological Economics: Nature and Society. Abingdon and New York: Routledge. This handbook describes the advanced state of the development of ecological economics since its beginnings in the 1980s. The early critique of mainstream economics and the discussion of environmental degradation and limits to growth developed into a rich interdisciplinary subject with a polyphony of critical voices, approaches and theories in a variety of research themes. Two salient perspectives include the broadening of the thematic scope of ecological economics to “social ecological economics”, and the transformation to another future economy and society as a guiding perspective for which the development of ideas about a post-growth society is the signpost. The subject develops through interdisciplinary knowledge gathering and integration, with knowledge from social- and natural-scientific disciplines and interdisciplinary approaches, especially heterodox economics and political ecology. This provides a continuously improved understanding of biophysical and social reality and their interrelations.
Victor, P.A., & Dolter, B. (Eds.). (2017). Handbook on Growth and Sustainability. Cheltenham, UK and Northampton, MA: Edward Elgar.
Scientific journals (international, peer-reviewed) with research relevant for the themes of ecological economics: “Ecological Economics”, “Ecology and Society”, “Environmental Sustainability”, “Environment, Development, Sustainability”, “Feminist Economics”, “Global Environmental Change”, “International Journal of Ecological Economics and Statistics”, “International Journal of Sustainable Development and World Ecology”, “International Journal of Environment and Sustainability”, “International Journal of Social Ecology and Sustainable Development”, “Journal of Development Economics”, “Journal of Environmental Sustainability”, “Journal of Cleaner Production”, “Journal of Political Ecology”, “Resource and Energy Economics”, “Society and Natural Resources”, “The Journal of Economic Issues” (institutional economics), “The Journal of Institutional and Theoretical Economics”, “GAIA”, “Natures, Sciences, Sociétés”, “Sustainability Science”, “Sustainability”.
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Bruckmeier, K. (2020). Ecological Economics: Critical Perspectives. In: Economics and Sustainability. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-56627-2_6
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