Ecological Economics and Sustainability

Joshua FarleyCommunity Development and Applied

EconomicsGund Institute for Ecological Economics

University of Vermont

Economies as Evolutionary Systems

Hunter gatherer economy (Pleistocene) Egalitarian cooperation

Agricultural economy (Holocene) Private property rights (limited) Capture of surplus, hierarchy structures

Industrial economy (Anthropocene) Fossil fuels and competition Scarcity of natural capital

Economy in the Anthropocene

Steffen, W., Grinevald, J., Crutzen, P., McNeill, J., 2011. The Anthropocene: conceptual and historical perspectives. Philosophical Transactions of the Royal Society A: Mathematical, Physical and Engineering Sciences 369, 842-867.

Economy in the Anthropocene

Nature in the Anthropocene

Nature in the Anthropocene

Societal Challenges in the Anthropocene

Just and sustainable degrowth

Transition to Sustainability

Transition to Sustainability

Marginal market costs(Market supply curve)

Poor people have no demand

Limits to throughput Just distribution Incentives to produce necessary

technologies

Transition to Sustainability

Changing the Paradigm

Conventional Economics

Exponential Growth Ecosystem as part Scarcity, markets

and feedback loops Substitutability Energy and

resources? Production

functions Circular economy

Weak Sustainability Schelling (Nobel Memorial Prize in 2005):

“Agriculture and Forestry are less than 3% of total output, and little else is much affected. Even if agricultural productivity declined by a third over the next half century, the per capita GNP we might have achieved by 2050 we would still achieve in 2051.”

Ecological Economic View

Economy is sustained and contained by global ecosystem

Relative scarcity has changed dramatically

Economic institutions must adapt

Laws of Physics Can’t make something

from nothing or vice versa

Can’t do work without energy

Disorder increases

Laws of ecology Conversion of ecosystem structure into

economic products and waste degrades and destroys ecosystem services Time lags common

Both economic products and ecosystem services essential to civilization

Strong Sustainability

“If the biota, in the course of aeons, has built something we like but do not understand, then who but a fool would discard seemingly useless parts? To keep every cog and wheel is the first precaution of intelligent tinkering.”

Aldo Leopold

Price Mechanism Fails

Ecosystem Services: can’t be owned Information: value maximized when

free

Changing the Goals

From micro-allocation and maximizing monetary value

Micro-allocation: How do we allocate natural capital among the

production of different economic goods and services?

Satisfaction of subjective preferences Preferences weighted by purchasing power Maximize monetary value

Food and eflornithine

…To macroallocation and Sustainable Scale

How much ecosystem structure should be: converted to economic production conserved to generate essential

ecosystem services? How large an economy and how

many people can our ecosystems sustain?

…Just Distribution

Between species How much of the planet’s net primary

productivity should we take for ourselves? Between generations

What are our obligations to future generations?

Within a generation Who is entitled to resources created by

nature and society as a whole?

… and Efficient Allocation

Once we’ve achieved a sustainable and just economy, how can we maximize human well-being from available resources?

Solving prisoner’s dilemmas

Changing the Rules

Rules for Sustainability

Extract renewable resources no faster than they can regenerate Restore depleted stocks

Extract essential non-renewable resources no faster than we develop renewable substitute Energy sector invests .3% of revenue in R&D

Emit waste no faster than it can be absorbed Emissions below absorption rates when

waste stocks are excessive, e.g. CO2

Rules for Sustainability

Neither extraction nor emission can threaten critical ecosystem services

Steady state population

Rules for Justice

We cannot grow our way out of poverty Poverty is higher now than in 1969,

when per capita GNP was ½ of today’s Resources created by nature and

society as a whole should be shared Basic needs must trump luxury

Rules for Efficiency

How we allocate depends on desirable ends, characteristics of scarce resources Economics cannot be faith-based

Non-excludable: markets cannot work, cooperation required

Non-rival: markets inefficient, cooperation required

Most ecosystem services are non-rival

Efficiency: Prisoner’s Dilemmas

Global Climate Change Natural resource

depletion/biodiversity loss Green technology

Minimize cost of producing information Maximize value once it exists

Cooperation is necessary Mathematical biology, behavioral

economics, political theory, anthropology, evolution all agree

Institutions for Cooperation

Institutions can make generous people act selfishly, or selfish people act generously

Reciprocity or payments? Market economy makes people selfish Social economy promotes reciprocity Mixing the two fails

Social norms: glorify greed or punish it?

Conclusions Markets emerged simultaneously with fossil

fuels Nature of ‘scarce’ resources has changed

from rival, excludable to non-rival and/or non-excludable

Cannot transform physical characteristics of resources to fit market model

Must adapt economic system to resource characteristics, human behavior Prisoner’s dilemmas Physiological necessities

Cooperation and common ownership for sustainability

Evolution of Cooperation

Genetic Multi-level selection

Distribution of pro-social behavior Bacteria, slime-molds, insects, fish, humans

(super cooperators) Oxytocin Detecting cheaters

Cultural Altruistic punishment Punishing non-punishers Group identity