Ecological Economics and Sustainability
Joshua Farley
Community Development and Applied Economics
Gund Institute for Ecological Economics
University of Vermont
Economies as Evolutionary
Systems
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Hunter gatherer economy (Pleistocene)
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Agricultural economy (Holocene)
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Egalitarian cooperation
Private property rights (limited)
Capture of surplus, hierarchy structures
Industrial economy (Anthropocene)
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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
Transition to Sustainability
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Limits to throughput
Just distribution
Incentives to produce necessary
technologies
Changing the
Paradigm
Conventional Economics
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Exponential Growth
Ecosystem as part
Scarcity, markets and
feedback loops
Substitutability
Energy and
resources?
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Production functions
Circular economy
Weak Sustainability
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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
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Economy is
sustained and
contained by
global ecosystem
Relative scarcity
has changed
dramatically
Economic
institutions must
adapt
Laws of Physics
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Can’t make something from
nothing or vice versa
Can’t do work without
energy
Disorder increases
Laws of ecology
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Conversion of ecosystem structure into
economic products and waste degrades and
destroys ecosystem services
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Time lags common
Both economic products and ecosystem
services essential to civilization
Strong Sustainability
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“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
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Ecosystem Services: can’t be owned
Information: value maximized when free
Changing the
Goals
From micro-allocation and
maximizing monetary value
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Micro-allocation:
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Satisfaction of subjective preferences
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How do we allocate natural capital among the
production of different economic goods and
services?
Preferences weighted by purchasing power
Maximize monetary value
Food and eflornithine
…To macroallocation and
Sustainable Scale
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How much ecosystem structure should be:
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converted to economic production
conserved to generate essential ecosystem
services?
How large an economy and how many
people can our ecosystems sustain?
…Just Distribution
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Between species
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Between generations
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How much of the planet’s net primary
productivity should we take for ourselves?
What are our obligations to future
generations?
Within a generation
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Who is entitled to resources created by nature
and society as a whole?
… and Efficient Allocation
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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
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Extract renewable resources no faster than
they can regenerate
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Extract essential non-renewable resources no
faster than we develop renewable substitute
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Restore depleted stocks
Energy sector invests .3% of revenue in R&D
Emit waste no faster than it can be absorbed
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Emissions below absorption rates when waste
stocks are excessive, e.g. CO2
Rules for Sustainability
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Neither extraction nor emission can
threaten critical ecosystem services
Steady state population
Rules for Justice
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We cannot grow our way out of poverty
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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
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How we allocate depends on desirable
ends, characteristics of scarce resources
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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
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Global Climate Change
Natural resource depletion/biodiversity loss
Green technology
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Minimize cost of producing information
Maximize value once it exists
Cooperation is necessary
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Mathematical biology, behavioral economics,
political theory, anthropology, evolution all agree
Institutions for Cooperation
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Institutions can make generous people
act selfishly, or selfish people act
generously
Reciprocity or payments?
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Market economy makes people selfish
Social economy promotes reciprocity
Mixing the two fails
Social norms: glorify greed or punish it?
Conclusions
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Markets emerged simultaneously with fossil
fuels
Nature of ‘scarce’ resources has changed from
rival, excludable to non-rival and/or nonexcludable
Cannot transform physical characteristics of
resources to fit market model
Must adapt economic system to resource
characteristics, human behavior
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Prisoner’s dilemmas
Physiological necessities
Cooperation and common ownership for
sustainability
Evolution of Cooperation
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Genetic
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Multi-level selection
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Distribution of pro-social behavior
Bacteria, slime-molds, insects, fish, humans
(super cooperators)
Oxytocin
Detecting cheaters
Cultural
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Altruistic punishment
Punishing non-punishers
Group identity