First published on SustainabilitySpeaks
Definition: Ecological Economics is the informed management of resources and socio-environmental interactions to satisfy objective needs and subjective desires in a process that does not destroy the basis of their provision.
Does it make economic sense to cut down a rainforest? What influence should trade have on social policy? How much is the future worth? Is all value equivalent? These are all questions common to ecological economics, a cross-disciplinary science that is attempting to reclaim the field of economics from flawed models and unscientific assumptions. An important act within itself, but one made integral as mainstream economics is driving the planet’s sixth mass extinction (Wagler).
Economics is often defined as ‘the allocation of scarce resources to satisfy infinite desires’, but this seemingly impossible aim itself belies many unfounded assumptions. Why should we assume everyone’s desires are infinite, or why should we believe all economic ‘resources’ to be inherently scarce when it is often their economic allocation that creates scarcity?
Where mainstream economics is focused on the assumed rationality of individuals, ecological economics situates individuals in a web of their own biases, justifications, morality, and wider socio-economic contexts. Even where mainstream economics acknowledge the shortfalls in these outdated theoretical justifications, such as in behavioural economics, it rarely changes their fundamental macroeconomic proscriptions: higher growth, lower taxes, more consumption, and greater financialisation.
This is what ecological economics seeks to change; by situating its analysis in the things that underlie economics (ecosystems, geology, physics, society, etc.), it aims to provide systems to more wisely use and interact with the world’s socio-ecological resources. To satisfy objective needs and subjective desires in a process that does not destroy the basis of their provision.
Overview of Ecological Economics
Originally, economics was conceived by the ancient Greeks as the efficient organisation of where one lived, hence its root in the words Oikos (household) and Nomos (Management); as distinguished from the art of Numismatics¸ or the study of wealth accumulation. Likewise, the later emerging term Ecology, -Oikos (household) logia (study of)- shares the same root word, the household in this context being the environment we are embedded in (Bookchin).
Based on this etymology, we could say ecological economics is socio-environmental management informed by the scientific study of said socio-environment. This would, on the other hand, also imply economics without an ecological component was uninformed or ignorant of its own wider context.
Unlike the related discipline of environmental economics, ecological economics does not treat the environment as a problem to be managed but as the stage upon which all social and economic relations play out. Likewise, economics is a subset of societal relations and so is not free from the collection of normative, ideological, and cultural factors that make up the social sphere. Ultimately, Ecological Economics sees the economic process as a subset of society, and society as a subset of nature, they are all connected and feedback at varying levels but cannot be reduced to interchangeable units of economic value.
In neoclassical economics, an electric car is a matter of resource extraction, manufacturing costs, market prices, and not much else; save perhaps shareholder demands. In EE, even for the extraction stage, we must consider the geology of the materials used, the environmental costs of extracting them, their finitude, whether there is a more ecologically sensible substitute, and so on. All this is before we even consider the social sphere. Is it locally beneficial to extract? Is their extraction reinforcing injustice? Are we fairly compensating people for these resources? And perhaps most importantly, EE asks questions about who should have the rights to these resources.
The History of Ecological Economics
Nicholas Georgescu-Roegen was a Romanian economist who situated entropy and other fundamental physical laws at the heart of his economic thinking. He saw how productive processes invariably decayed energy into less usable states (the process of entropy), and so was one of the first economists to scientifically recognise the implications of scarcity and finitude (Georgescu-Roegen).
This was built upon by his student Herman Daly, perhaps one of the best-known ecological economists. Whilst his (ongoing) work is too broad to cover sufficiently here, he is perhaps most famous for highlighting the curiously omitted question of Scale in economics, defined as the:
“…the physical volume of [materials passing through a system], the flow of matter-energy from the environment as low-entropy raw materials, and back to the environment as high-entropy wastes.”
Prior to this, economics dealt primarily with questions of allocation and distribution to find the most efficient outcomes, without questioning how the number of resources allocated and distributed factored into the equation. His work would be important for the Degrowth movement, for acknowledging the simple fact that no matter how efficient a given economic process is, growth can always negate sustainability. This is best illustrated by the current failure of the ‘circular economy’, for whilst recycling technology and logistics have shown incredible improvement, the constant growth of the material economy has made it more wasteful than ever (Blom).
The Social Sphere
Over time, the biophysical situatedness of economics in EE was met with the other side of economic embeddedness: The Social. The traditional neoclassical answer as to why we buy or sell is that people rationally select the market option that will provide them with the greatest utility, offset against the cost of said choice. Humans are, rather charitably, treated as computers capable of incredible calculation. Any failure in this system is often ascribed to a lack of sufficient knowledge about their options, rather than systemic, cognitive, or cultural influence. EE is changing this view (Farley & Kish).
Cognitive biases, the effects of culture, and social status are all being increasingly recognised as integral components of economic desire. Furthermore, they are recognized as foundational, rather than aberrations in ‘normal’ economic thinking. As Kate Raworth points out, most economic psychology is based on data from W.E.I.R.D (Western, Educated, Industrialised, Rich, and Democratic) study subjects, who form a tiny global minority (Raworth). This all suggests that the assumptions of mainstream economics are not only biophysically tenuous but based on essentially abnormal social data.
This socio-cultural approach in EE is important for highlighting another overlooked fact: that most economics is constructed entirely through a western lens, and that many of the axioms it takes as self-evident are culturally and historically specific biases that do not translate into other socio-ecological contexts. For example, many ecological economic movements emerging from the global south question, or reject, the idea that they need to economically ‘develop’ in order to solve their socio-economic and environmental issues. These post-growth scholars such as Shrivastava (2012) point out that, by and large, many of the problems aimed to be solved by this western-defined vision of development are the result of said development. Furthermore, the primary beneficiaries of such economic reorientations are the already developed nations able to leverage their historical advantages (Hickel, et al). This global south voice in ecological economics is often overlooked, but incredibly important for understanding how wider macro-economic trends also relate to geographical, climatic, and geopolitical factors.
It is from the global south that we see perhaps the starkest example of the shortcomings of classic economic analysis, and of the necessity of an ecological economic one: Indonesian Palm oil.
The Ecological Economics of palm oil
Whilst wrapped up in superficially anti-colonial language by Indonesian ministers such as Siti Nurbaya Bakar (Murray Li), the development of Indonesian palm oil and its immense socio-ecological destruction is the outcome of classic economic theory. The mode of production is more or less a direct descendant of the colonial system, where politically connected corporations are deployed to create palm oil plantations on land that was previously rainforest or smallholder farmland. Theoretically, the jobs, tax revenue, and investment this brings to the plantation regions will improve standards of living over time, offsetting the initial effects of their ecological and social dislocation. However, this is where theory diverges from reality, and when studied through an EE lens, it becomes clear that much of the poverty they are intended to minimize, is an outcome of the plantation economy itself. Furthermore, the infrastructure they bring (almost 90% used exclusively for plantation access) comes at the loss of the region’s ecological infrastructure; clean water, forest products, fertile soil, and the environmental bedrock of many rural cultures (Jong). Immense profits are made, but the balance sheet can only come out positive if one’s economic accounting systematically excludes the costs to society, ecology, and culture. It is precisely this ability to so poorly account for the true costs in orthodox economics that necessitates an ecological economic analysis, where a holistic accounting of palm oil can demonstrate its costs are greater than its profits.
Ecological Economics is thus less a school within the broader science, but a revolt against the cloistered and all too often unscientific world of the contemporary ‘dismal science’. It gives us the intellectual and scientific frameworks to identify the coherence between economic development and its socio-ecological costs; or as Eric Pineault puts it, to recognize the “ghosts of progress” (Pineault). Its scientific insights can sophisticate our political projects for delivering climate justice by not just criticising, but actively disproving, many of the maladaptive policies of contemporary economics. In a global economic climate where not a single nation meets the needs of its citizens whilst remaining within ecological boundaries, the informed management of resources and socio-environmental interactions, to satisfy objective needs and subjective desires, has significance far beyond academic correction.
Blom, Marieke . Rethinking the road to the circular economy. ING Economics Department. 2020
Bookchin, Murray. The ecology of freedom: The emergence and dissolution of hierarchy. Cheshire Books 1982
Farley, Joshua, and Kaitlin Kish. Ecological economics: The next 30 years. Ecological Economics 190. 2021
Georgescu-Roegen, Nicholas. The entropy law and the economic process in retrospect. Eastern Economic Journal 12.1 1986
Hickel, J., Dorninger, C., Wieland, H., & Suwandi, I.”Imperialist appropriation in the world economy: Drain from the global South through unequal exchange, 1990–2015.” Global Environmental Change 73 2022
Jong, Hans Nicholas. Indonesia’s flip-flop on zero-deforestation pledge portends greater forest loss. Mongabay. 2021
Murray Li, Tania. Deforestation and development: A decolonial perspective from Indonesia Decolonising Geography 2022
Pineault, Eric. The ghosts of progress: contradictory materialities of the capitalist Golden Age. Anthropological Theory 21.3. 2021
Raworth, Kate. Doughnut economics: seven ways to think like a 21st-century economist. Chelsea Green Publishing, 2017.
Shrivastava, Aseem. Churning the earth: The making of global India. Penguin UK, 2012.
Wagler, Ron. “The anthropocene mass extinction: An emerging curriculum theme for science educators.” The American Biology Teacher 73.2. 2011
Teaser photo credit: The Sky Garden Wildflower Roof topping the Kanes Salad Factory, Evesham. By Sky Garden Ltd – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=39236395