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Ecological Economics

Goods and services from the natural world are vital components of the human economy. Ecosystem processes provide energy and regulate wastes, and natural resources are used for a variety of goods and services, including food, medicine, and recreation. Ecological economics is a transdisciplinary field that studies the allocation of natural resources, with emphasis on the view of the human economy as a subset of the ecological world. Drawing on expertise from the natural and social sciences, physics, and other fields, ecological economists seek to include natural resources in the traditional economic view of capital and promote limitations of growth in favor of sustainable development. The field further redefines traditional ideas of sustainability to include responsible use of resources that does not preclude future generations from enjoying standards of living comparable with those of citizens living today.

The field's conceptual basis was anticipated as early as the 1800s, when scholars began to express concern over limitless population growth and economic expansion. These ideas became joined with concepts from the physical sciences that highlighted energetic and material limits to growth to form discussions on resource use that include considerations from ecology, conservation biology, geography, and economics. To date, thousands of scientists and practitioners are organized in regional and international societies for ecological economics, and several degree programs have been established worldwide in ecological economics.

A Break from Neoclassical Economics

Although ecological economics shares many of the fundamental principles of neoclassical economics and environmental economics, its evolution represented a significant paradigm shift that drew natural resources into the concept of capital from which they had traditionally been excluded.

Economy as a Subset of the Environment

Ecological economics differentiates itself from neoclassical economics in its philosophical stance on the relationship between the environment and the economy. In the neoclassical purview, the economy exists as a system separate from its environment and with the potential for infinite expansion. It concentrates on the monetary exchanges among producers and consumers, whereby the optimal allocation of goods among alternative uses is determined primarily by market forces. Value can be generated irrespective of the natural resource base as long as beneficial technological change occurs rapidly enough.

In contrast, ecological economics applies laws from the physical sciences to present the human economy as a part contained within a larger ecosystem filled with finite resources. Growth of the economy necessarily depletes the base of natural resources, many of which are nonrenewable, and technology itself—however rapidly changing—cannot function without a minimum of materials and energy flow. In this view, economic growth is inherently limited. Thus, growth over time results in a shift from an “empty world” (i.e., many natural resources available) to a “full world” (i.e., most natural resources have been depleted or nearly depleted). During this transition, there is a point of economic growth beyond which human welfare is in fact reduced rather than increased, becoming uneconomic growth.

Consideration of Natural Resources as Capital

Ecological economics emerged in part from criticisms of the view of natural resources in traditional economics as fully substitutable with other standard input factors to production, such as capital and labor. In contrast, ecological economics stresses the relationship between resource flows and human-made production funds as complementary and not substitutable.

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