The dynamics of ecologic-economic systems and the social value of the environment.
The mainstay of the paper is formed by an analysis of the heterodox foundations of ecological economics, the perception of environmental policy, the role of efficiency in environmental economics, the development of innovative environmental technologies, and the interactions between economic and ecological systems. The purpose of this article is to gain a deeper understanding of the relationship between economics and the environment, the meaning and content of ecological economics, the role of all ecosystem components in providing useful services, and complex feedbacks between ecological and economic systems. The paper generates insights about the manifold pressures of ecological scarcity, representations of ecological reality, actual deliberative processes of environmental decision-making, and the nature and causes of economic progress.
2. The Meaning and Content of Ecological Economics
Spash contends that there is a dynamic and evolving interaction between human activity and the environment: ecological economics includes "the limits to wealth creation, the meaning of the "good life," how to achieve well-being individually and socially, ethics and behavior, the epistemology of value, and the psychological and social impact of ostentatious consumption." (1) As Spash puts it,
Financial institutions can seize opportunities related to biodiversity and ecosystems services in different ways: early movers can bolster their organization's reputation and create value for marketing practices; building capacity in-house can be beneficial in terms of advisory services for corporate clients; advising clients how to integrate biodiversity and ecosystems services in supply-chain management can lead to cost reductions for clients; and last but not least, financial institutions that understand the new and expanding environmental markets can profit through offering brokerage services, registries, or specialized funds. (2)
Xepapadeas points out that given the institutional structure of the economies, the rate at which economic agents exploit ecosystems services (3) exceeds a desirable level from society's point of view: the challenge of designing economic policy is to develop a system of regulatory instruments or incentive schemes that will affect the behavior of economic agents. (4) Baumgartner et al. develop a unifying methodology for ecological economics which integrates philosophical considerations on the foundations of ecological economics with operationalization: (5) the subject matter of ecological economics is the relationship between the economic and the ecological system, aiming is to provide knowledge for a sustainable management of this relationship. (6)
3. The Interactions between Economic and Ecological Systems
According to Zografos and Howarth, ecological economics seeks to understand and manage the links between the economy, the biosphere, and the social structures that support and sustain human flourishing. 7) Ophuls claims that ecological exploitation has degenerated into the systematic and ruthless abuse of nature, the drive to dominate nature has generated a vicious circle of ecological self-destruction, (8) and to understand ecology is to see that the goal of domination is impossible, and that some of the most vaunted achievements of modern life are castles built on ecological sand that cannot be sustained over the long term (ecology contains an intrinsic wisdom and an implied ethic that will make it possible to preserve the best of civilization's achievements for many generations to come, and will have to be the master science and guiding metaphor of any future civilization). On Ophuls's view, ecology suggests optimization as the proper strategy for long-term survival and well-being (humility is the essence of ecological wisdom and the foundation of an ecological ethic). The new physics is fundamentally ecological, the wisdom and ethic of ecology emerge equally from physics, and physics and ecology are alike in the challenge they pose to human pretensions. (9) Farber et al. say that economic efficiency is an important criterion for measuring impacts on social welfare, economic valuation tools provide monetary measures of service values, (10) whereas aggregated individual service valuations are problematic where ecological and economic interconnections require ecological-economic modeling (the primary value of biodiversity may lie in its role of protecting ecosystems from dramatic changes). "Alterations of ecosystems change the mix of services through changes in ecosystem structures and processes. [...] Full ecological-economic models may be the gold standard for establishing the full range of ecosystem service possibilities and management options." (11)
4. The Role of Moral Principles in Justifying Environmental Policies
Common and Stagl state that environmental economics concerns itself with the economy's insertions into the environment, and with problems of environmental pollution: ecological economics is about the interactions between economic systems and ecological systems, (12) treating individual preferences neither as sovereign, nor as the only source of normative criteria (there can be an ethical basis for comparing, evaluating and seeking to change tastes). Common and Stagl assert that economics and ecology are disciplines whose subject matters overlap (ecological economics is where they overlap). The economy and the environment are interdependent and a joint system (economic activity takes place within the environment). Sustainability requirements are a source of normative criteria.
Ecological economics is based on the idea that the proper study of 'how humans make their living' has to include the study of the relations of the human animal to its 'organic and inorganic environment'. [...] On the one hand, many judge that the current scale of global economic activity threatens sustainability: threatens to reduce the future capacity to satisfy human needs and desires. On the other hand, many argue that it is necessary to increase the scale of economic activity to alleviate poverty. Dealing with poverty now is going to create future economic problems, via the environmental impacts arising from increasing the scale of current economic activity. (13)
Wiesmeth emphasizes that the role of environmental economics is straightforwardly determined by the concept of environmental commodities (environmental commodities are scarce due to physical scarcity or due to an increasing environmental awareness). Environmental issues constitute an essential part of most economic systems with perceived scarcity of environmental commodities.
From the above it becomes clear that many environmental commodities have properties of public commodities, which may be characterized by "bundles" of external effects (environmental commodities affect the well-being of economic agents). Wiesmeth argues that many regional environmental issues acquire an international dimension through international trade: environmental awareness depends on the level of economic well-being, (14) there are differences in the perception of the environment and environmental pollution (differences in the perception of the environment lead to different attitudes towards the environment), command-and-control policies play a dominant role in applied environmental economics, environmental resources are often exploited in production processes in an inefficient, non-economical way, environmental effects are "external" to the regular production and consumption activities, whereas environmental policy gains independence from general economic policy. "From an economic point of view the ultimate goal of environmental economics is then to attain an optimal solution of the allocation problems with environmental commodities taken into account. In principle, this can be achieved by applying appropriate allocation mechanisms. The market mechanism, however, has to be augmented in this context due to missing markets resulting from externalities." (15)
Pindyck notes that environmental policy design must contend with highly nonlinear benefit and cost functions, irreversibilities, and long time horizons, bringing human exploitation of environmental assets (16) closer to socially optimal levels. As Pindyck puts it, uncertainty can affect policy because of nonlinear cost or benefit functions, or discount rate uncertainty: uncertainties over benefits and costs can affect the optimal choice of policy instrument, the optimal policy intensity, and the optimal timing of policy implementation. Pindyck reasons that irreversibilities can interact with uncertainty to affect current policy, both environmental damage and policy costs are often irreversible, and the irreversibilities associated with environmental damage and policy costs work in opposite directions. With long time horizons, policy costs depend on technological change, and environmental problems involve uncertainties that crucial to policy design and evaluation. (17)
The results of the current study converge with prior research on the emergence of ecological scarcity, the role of moral principles in justifying environmental policies, the irreversibility of environmental damage, the relationship between the ecosystem and the economic system, and the human challenge of ecology. The overall results provide strong evidence for the factors and the circumstances leading to environmental pollution, the increasing role of global environmental issues, the complexity of ecosystem dynamics, and the changes in ecological services resulting from management decisions. The implications of the developments outlined in the preceding sections of this paper suggest a growing need for a research agenda on the practice of environmental cost-benefit analysis, the political ideologies of orthodox economics, life-supporting ecosystems and their functioning, and the increasing geographical scope of pollution threats.
(1.) Spash, Clive L. (2011), "Social Ecological Economics: Understanding the Past to See the Future," American Journal of Economics and Sociology 70(2): 345.
(2.) Spash, Clive L. (2011), "Terrible Economics, Ecosystems and Banking," Environmental Values 20: 142.
(3.) Peters, Michael A. (2011), "Greening the Knowledge Economy: Ecosophy, Ecology and Economy," Economics, Management, and Financial Markets 6(2): 11-38.
(4.) Xepapadeas, Anastasios (2009), "Ecological Economics: Principles of Economic Policy Design for Ecosystem Management", in Simon A. Levin (ed.), The Princeton Guide to Ecology. Princeton, NJ: Princeton University Press.
(5.) Ulrich, Peter (2010), "Civilizing the Market Economy: The Approach of Integrative Economic Ethics to Sustainable Development," Economics, Management, and Financial Markets 5(1): 99-112.
(6.) Baumg?rtner, Stefan, Christian Becker, Karin Frank, Birgit Muller, and Martin Quaas (2008), "Relating the Philosophy and Practice of Ecological Economics: The Role of Concepts, Models, and Case Studies in Inter-and Transdisciplinary Sustainability Research," Ecological Economics 67(3): 384-393.
(7.) Zografos, Christos, and Richard B. Howarth (2010), "Deliberative Ecological Economics for Sustainability Governance," Sustainability 2: 3399-3417.
(8.) Feldhoff, Thomas (2011), "Japan's Energy Future: Challenges and Opportunities in a Changing Geopolitical Environment," Geopolitics, History, and International Relations 3(2): 34-47.
(9.) Ophuls, William (2011), Plato's Revenge: Politics in the Age of Ecology. Cambridge, MA-London: MIT Press.
(10.) Paraschiv, Elena (2011), "The Liberal State and Its System of Secular Law," Analysis and Metaphysics 10: 118.
(11.) Farber, Stephen, Robert Costanza, Daniel L. Childers, Jon Erickson, Katherine Gross, Morgan Grove, Charles S. Hopkinson, James Kahn, Stephanie Pincetl, Austin Troy, Paige Warren, and Matthew Wilson (2006), "Linking Ecology and Economics for Ecosystem Management," Bioscience 56(2): 118.
(12.) Yunfeng, Yan, Yang Laike, and Jan Priewe (2011), "The Impact of China-EU Trade on Climate Change," Geopolitics, History, and International Relations 3(2): 122-138.
(13.) Common, Mick, and Sigrid Stagl (2005), Ecological Economics: An Introduction. New York: Cambridge University Press, 4, 8.
(14.) Seelanatha, Senarath Lalithananda (2010), "Determinants of Capital Structure: Further Evidence from China," Economics, Management, and Financial Markets 5(4): 106-126.
(15.) Wiesmeth, Hans (2012), Environmental Economics: Theory and Policy in Equilibrium. Heidelberg-Dordrecht-London-New York: Springer, 3.
(16.) Paraschiv, Elena (2011), "Law and Government in Medieval Europe," Contemporary Readings in Law and Social Justice 3(2): 242-247.
(17.) Pindyck, Robert S. (2007), "Uncertainty in Environmental Economics," Review of Environmental Economics and Policy 1(1): 45-65.
[C] Constantin Zaharia, Ioana zaharia
University of Craiova
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|Publication:||Economics, Management, and Financial Markets|
|Date:||Mar 1, 2012|
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