Gross National Product and measuring welfare
Sustainable growth and Smart growth
Economics The branch of social science that deals with the production and distribution and consumption of goods and services and their management (Princeton University ftp://clarity.princeton.edu/pub/wordnet/wn1.6unix.tar.gz). Eco in both ecology and economics is derived from the Greek word for house.
Sustainability A level of human consumption and population that is in balance with the earth’s carrying capacity.
Sustainability requires that our emphasis shift from ‘managing resources’ to managing ourselves, that we learn to live as a part of nature. Economics at last becomes human ecology (Our Ecological Footprint: Reducing Human Impact on the Earth, 4).
Some major goals to achieve sustainability in ecological economics are 1. a steady-state economy, 2. just distribution of resources with the poor, future generations and the diverse species, and 3. well functioning markets within the context of the previous two goals.
Ecosystem services are the benefits of natural resources as systems, as distinct from extracted resources such as copper, lumber, oil and water. Local examples are pollination by insects, and water purification and flood prevention by woods and wetlands. A global example is vegetation for oxygen production and for controlling the planet’s climate.
Biodiversity The variety of life in all its forms, levels and combinations. Includes ecosystem diversity, species diversity, and genetic diversity (World Conservation Union according to Our Ecological Footprint: Reducing Human Impact on the Earth). Biodiversity is vital to the integrity of the global ecosystem, which is humanity’s life support system.
Ecological economics The union of economics and ecology, with the economy conceived as a subsystem of the earth ecosystem that is sustained by a metabolic flow or “throughput” from and back to the larger system. See “throughput.” (Ecological Economics: Principles and Applications). Steady-state economy is the core facet of ecological economics.
Steady-state economy The economy viewed as a subsystem in dynamic equilibrium with the parent ecosystem/biosphere that sustains it. Quantitative growth is replaced with qualitative development or improvement as the basic goal. (Ecological Economics: Principles and Applications).
Sustainable development Sustainable development means economic activity that improves human well-being without economic growth in physical scale. However, this definition is qualified because, as Center for the Advancement of the Steady State Economy notes, economic growth in nations with much poverty is appropriate for the time being (section #9 www.steadystate.org/ PositiononEG. html). Of course sustainable development supports a steady-state economy. Sustainable development is distinct from its conventional meaning in that it does not mean continual growth in physical scale nor does it only mean more efficient use of resources or environmental friendliness; after all, it is conceived that economic growth exceeds the Earth’s carrying capacity.
Throughput The flow of raw materials and energy from the global ecosystem’s sources of low entropy (mines, wells, fisheries, croplands) through the economy, and back to the global ecosystem’s sinks for high entropy wastes (atmosphere, oceans, dumps) (Ecological Economics: Principles and Applications).
Sink That part of the environment that receives the waste flow of the throughput and may, if not overwhelmed, be able to regenerate the waste through biogeochemical cycles back to usable sources. (Ecological Economics: Principles and Applications).
Thermodynamics The branch of physics that tells us that matter and energy can be neither created nor destroyed, and that the entropy in the total system always increases (Ecological Economics: Principles and Applications).
Neoclassical economics The currently dominant school of economics, characterized by its marginal utility theory of value, its devotion to the general equilibrium model stated mathematically, its individualism and reliance on free markets and the invisible hand as the best means of allocating resources, with a consequent downplaying of the role of government (Ecological Economics: Principles and Applications).
Environmental economics The branch of neoclassical economics that addresses environmental problems such as pollution, negative externalities, and valuation of nonmarket environmental services. In general, environmental economics focuses almost exclusively on efficient allocation and accepts the assumption of neoclassical economics that the economic system is the whole and not a subsystem of the global ecosystem (Ecological Economics: Principles and Applications).
Growth Economic growth is an increase in the production and consumption of goods and services. It entails increasing population, per capita consumption, or both. Economic growth leaves a larger ecological footprint, causing civil strife and bringing nations into conflict (http://www.steadystate.org/FAQ.html).
Uneconomic growth Growth of the macroeconomy that costs us more than it is worth. A situation in which further expansion entails lost ecosystem services that are worth far more than the extra production benefits of the expanded economy (Ecological Economics: Principles and Applications).
Gross National Product and measuring welfare According to Earth Economics: The gross national product (GNP) is the market value of the aggregate production of goods and services in a country during a year. GNP is a measure of economic growth and is often interpreted as an indicator of welfare. For instance, it is often assumed that a society is becoming better off if its GNP is growing.
However, as ecological economists point out, the GNP does not distinguish between economic transactions that increase welfare and those that make us worse off. If the groundwater is polluted leading people [to] buy bottled water, the GNP goes up even though we are all poorer because water is no longer as cheap as it used to be. If people get cancer from exposure to toxic chemicals and have to pay hospital costs, the GNP goes up while welfare decreases.
Ecological economists instead argue for measures of economic activity that distinguish costs from benefits. In addition, ecological economists are also looking at more sophisticated assessments of human welfare, such as measures that consider factors other than consumption (Central Concepts of Ecological Economics http://www.eartheconomics.org/ ecolecon/ee_ centralconcepts.html). Such assessments of costs and benefits are distinct from the cost-benefit analyses used to justify unsustainable governmental and commercial policies. Many scientists and environmental activists are wary of such assessments.
Sustainable growth and smart growth Sustainable growth and typical smart growth are problematic because it is biologically and physically impossible for the Earth to sustain infinite growth. Moreover, the Earth’s carrying capacity is full. At best typical smart growth in wealthy nations might slow economic growth, but typical smart growth does not solve the problem.
An instance in which growth can be considered smart is noted in the Position on Economic Growth, which says “For many nations with widespread poverty, increasing per capita consumption (or, alternatively, more equitable distributions of wealth) remains an appropriate goal for the time being” (www.steadystate.org/PositiononEG.html, #9).
Externalities The costs (negative externalities) and benefits (positive externalities) external to the transacting parties.
Typically when an ecosystem service is damaged from economic activity such costs are passed on or externalized to outside parties (a negative externality). These parties include individuals, communities and any future generations.
Negative externalities mean different things to different types of economists. It would not be unusual for a traditional neoclassical economist to promote a project’s benefits (internal and external), while overlooking and downplaying the various negative externalities. On the other hand, ecological economists are careful to consider negative externalities (real and possible) in the scope of their work.
Precautionary principle In the face of uncertainty and ignorance… we should avoid decisions that risk catastrophic and or irreversible outcomes, even when we perceive the risk of such outcomes as low. Rather than trying to maximize probable net benefits, for example, it may instead be better to minimize regrets (Ecological Economics: A Workbook for Problem-Based Learning, 7).
The workbook’s authors use this maxim on precaution to explain the science of ecological economics. Given our capacity to change humanity’s finite life support system in catastrophic ways (some of which might not even be anticipatable) the precautionary principle is appropriate for economic policy.
Precaution is nothing new. The City of San Francisco’s government and the European Union use the precautionary principle to set standards for certain products. Moreover, the insurance industry uses it to estimate risk so that it pays out less than it takes in, including by setting rates in light of rapid climate destabilization. It is reasonable to assume that the whole of society also stands to benefit by avoiding substantial risks.
More on vocabulary and concepts
Key concepts http://www.eartheconomics.org/ecolecon/ee_centralconcepts.html
Definitions http://www.eartheconomics.org/ecolecon/ee_definitions.html
Online Encyclopedia of Ecological Economics http://www.ecoeco.org/publica/encyc.htmContact Information Please feel free to contact us at our post office box in Indianapolis or via email
Campaign for Sustainable Economics
% Greg Buck
537 Fletcher Avenue #2
Indianapolis, Indiana 46203