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Ecological economics

Ecological economics is referred to as both a transdisciplinary and interdisciplinary field of academic research that aims to address the interdependence and coevolution of human economies and natural ecosystems over time and space.[1] It is distinguished from environmental economics, which is the mainstream economic analysis of the environment, by its treatment of the economy as a subsystem of the ecosystem and its emphasis upon preserving natural capital.[2] One survey of German economists found that ecological and environmental economics are different schools of economic thought, with ecological economists emphasizing strong sustainability and rejecting the proposition that natural capital can be substituted by human-made capital.[3]

Ecological economics was founded as a modern movement in the works of and interactions between various European and American academics (see the section on history and development below). The related field of green economics is, in general, a more politically applied form of the subject.[4][5]

According to ecological economist Malte Faber, ecological economics is defined by its focus on nature, justice, and time. Issues of intergenerational equity, irreversibility of environmental change, uncertainty of long-term outcomes, and sustainable development guide ecological economic analysis and valuation.[6] Ecological economists have questioned fundamental mainstream economic approaches such as cost-benefit analysis, and the separability of economic values from scientific research, contending that economics is unavoidably normative rather than positive (empirical).[7] Positional analysis, which attempts to incorporate time and justice issues, is proposed as an alternative.[8][9] Ecological economics shares many of its perspectives with feminist economics, including the focus on sustainability, nature, justice and care values.[10]


  • History and development 1
  • Nature and ecology 2
  • Ethics 3
  • Schools of thought 4
  • Differentiation from mainstream schools 5
  • Topics 6
    • Methodology 6.1
    • Allocation of resources 6.2
    • Weak versus strong sustainability 6.3
    • Energy economics 6.4
    • Energy accounting and balance 6.5
    • Environmental services 6.6
    • Not 'externalities', but cost shifting 6.7
    • Ecological-economic modeling 6.8
  • Criticism 7
  • See also 8
  • References 9
  • Further reading 10
  • External links 11

History and development

Early modern interest in ecology and economics dates back to the 1940s in the work of

  • New Economics Foundation (NEF)-
  • Green Economist -
  • Sustainable Prosperity -
  • Global Reserve Bank -
  • An ecological economics article about reconciling economics and its supporting ecosystem -
  • "Economics in a Full World", by Herman E. Daly -
  • Steve Charnovitz, "Living in an Ecolonomy: Environmental Cooperation and the GATT," Kennedy School of Government, April 1994.
  • Global list of Ecological Economics related Organizations on WiserEarth
  • Ecological Economics portal on WiserEarth


  • EarthTrends World Resources Institute -
  • Eco-Economy Indicators:
  • NOAA Economics of Ecosystems Data & Products –

Environmental data:

  • Gund Institute for Ecological Economics -
  • Ecological Economics at Rensselaer Polytechnic Institute -
  • Beijer International Institute for Ecological Economics -
  • Green Economics Institute -

Schools and institutes:

  • Brazilian Society for Ecological Economics
  • Earth Economics
  • Ecological Economics (journal)
  • Ecological Economics Encyclopedia
  • International Journal of Green Economics
  • International Society for Ecological Economics
  • US Society of Ecological Economics

External links

  • Common, M. and Stagl, S. 2005. Ecological Economics: An Introduction. New York: Cambridge University Press.
  • Costanza, R., Cumberland, J. H.,Daly, H., Goodland, R., Norgaard, R. B. (1997). An Introduction to Ecological Economics, St. Lucie Press and International Society for Ecological Economics, (e-book at the Encyclopedia of Earth)
  • Costanza, R., Stern, D. I., He, L., Ma, C. (2004). Influential publications in ecological economics: a citation analysis. Ecological Economics 50(3-4): 261-292. -
  • Daly, H. (1980). Economics, Ecology, Ethics: Essays Toward a Steady-State Economy, W.H. Freeman and Company, ISBN 0716711796.
  • Daly, H. and Townsend, K. (eds.) 1993. Valuing The Earth: Economics, Ecology, Ethics. Cambridge, Mass.; London, England: MIT Press.
  • Daly, H. (1994). “Steady-state Economics”. In: Ecology - Key Concepts in Critical Theory, edited by C. Merchant. Humanities Press, ISBN 0391037951.
  • Daly, H., and J.B. Cobb (1994). For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future. Beacon Press, ISBN 0807047058.
  • Daly, H. (1997). Beyond Growth: The Economics of Sustainable Development. Beacon Press, ISBN 0807047090.
  • Daly, H., and J. Farley (2010). Ecological Economics: Principles and Applications. Island Press, ISBN 1597266817.
  • Georgescu-Roegen, N. 1975. Energy and economic myths. Southern Economic Journal 41: 347-381.
  • Georgescu-Roegen, N. (1999). The Entropy Law and the Economic Process. iUniverse Press, ISBN 1583486003.
  • Gowdy, J., and J.D. Erickson (2005). The approach of ecological economics. Cambridge Journal of Economics 29: 207-222.
  • Huesemann, Michael H., and Joyce A. Huesemann (2011). Technofix: Why Technology Won’t Save Us or the Environment, New Society Publishers, Gabriola Island, British Columbia, Canada, ISBN 0865717044, 464 pp.
  • Jackson, Tim (2009). Prosperity without Growth - Economics for a finite Planet. London: Routledge/Earthscan. ISBN 9781849713238.
  • Krishnan R, Harris J.M., and N.R. Goodwin (1995). A Survey of Ecological Economics. Island Press. ISBN 978-1-55963-411-3.
  • Martinez-Alier, J. (1990) Ecological Economics: Energy, Environment and Society. Oxford, England: Basil Blackwell.
  • Martinez-Alier, J., Ropke, I. eds. (2008). Recent Developments in Ecological Economics, 2 vols., E. Elgar, Cheltenham, UK.
  • Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314.
  • Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290.
  • 8(4): 413-435.Environmental ValuesSpash, C. L. (1999) The development of environmental thinking in economics.
  • Shmelev S. E. (2012) Ecological Economics: Sustainability in Practice, Springer 256 pp.
  • Stern, D. I. (1997) Limits to substitution and irreversibility in production and consumption: A neoclassical interpretation of ecological economics. Ecological Economics 21(3): 197-215. -
  • Tacconi, L. (2000) Biodiversity and Ecological Economics: Participation, Values, and Resource Management. London, UK: Earthscan Publications.
  • Vatn, A. (2005) Institutions and the Environment. Cheltenham: Edward Elgar.

Further reading

  1. ^ Anastasios Xepapadeas (2008). "Ecological economics".  
  2. ^ Jeroen C.J.M. van den Bergh (2001). "Ecological Economics: Themes, Approaches, and Differences with Environmental Economics," Regional Environmental Change, 2(1), pp. 13-23 (press +).
  3. ^ Illge L, Schwarze R. (2006). A Matter of Opinion: How Ecological and Neoclassical Environmental Economists Think about Sustainability and Economics . German Institute for Economic Research.
  4. ^ Paehlke R. (1995). Conservation and Environmentalism: An Encyclopedia, p. 315. Taylor & Francis.
  5. ^ Scott Cato, M. (2009). Green Economics. Earthscan, London. ISBN 978-1-84407-571-3.
  6. ^ Malte Faber. (2008). How to be an ecological economist. Ecological Economics 66(1):1-7. Preprint.
  7. ^ Peter Victor. (2008). Book Review: Frontiers in Ecological Economic Theory and Application. Ecological Economics 66(2-3).
  8. ^ Mattson L. (1975). Book Review: Positional Analysis for Decision-Making and Planning by Peter Soderbaum. The Swedish Journal of Economics.
  9. ^ Soderbaum, P. 2008. Understanding Sustainability Economics. Earthscan, London. ISBN 978-1-84407-627-7. pp.109-110, 113-117.
  10. ^  
  11. ^ Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314.
  12. ^ a b Costanza R. (2003). Early History of Ecological Economics and ISEE. Internet Encyclopaedia of Ecological Economics.
  13. ^ Kapp, K. W. (1950) The Social Costs of Private Enterprise. New York: Shocken.
  14. ^ Polanyi, K. (1944) The Great Transformation. New York/Toronto: Rinehart & Company Inc.
  15. ^ Schumacher, E.F. 1973. Small Is Beautiful: A Study of Economics as if People Mattered. London: Blond and Briggs.
  16. ^ Daly, H. 1991. Steady-State Economics (2nd ed.). Washington, D.C.: Island Press.
  17. ^ , p. WK9.New York TimesZencey, Eric. (2009, April 12). Op-ed. Accessed: December 23, 2012.
  18. ^ Georgescu-Roegen, N. 1971. The Entropy Law and the Economic Process. Cambridge, Mass.: Harvard University Press.
  19. ^ Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314. Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290.
  20. ^ "Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435." (PDF). Retrieved 2012-12-23. 
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  22. ^ Spash, C. L. (2013) Influencing the perception of what and who is important in ecological economics. Ecological Economics 89: 204-209.
  23. ^ Spash, C. L. (2013) The Shallow or the Deep Ecological Economics Movement? Ecological Economics 93:351-362.
  24. ^ Anderson, B., M'Gonigle, M., 2012. Does ecological economics have a future?: contradiction and reinvention in the age of climate change. Ecological Economics 84, 37–48.
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  26. ^ Costanza R et al. (1998). "The value of the world's ecosystem services and natural capital1". Ecological Economics 25 (1): 3–15.  
  27. ^ Knapp G, Roheim CA and Anderson JL (2007) The Great Salmon Run: Competition Between Wild And Farmed Salmon World Wildlife Fund. ISBN 0-89164-175-0
  28. ^ Washington Post. Salmon Farming May Doom Wild Populations, Study Says.
  29. ^ Soil Association. UK Organic Group Exposes Myth that Genetically Engineered Crops Have Higher Yields. Organic Consumers Association.
  30. ^ Soderbaum P. (2004). Politics and Ideology in Ecological Economics. Internet Encyclopaedia of Ecological Economics.
  31. ^ "Spash, C.L. (2009) The new environmental pragmatists, pluralism and sustainability. Environmental Values 18, 253-256" (PDF). Retrieved 2014-01-07. 
  32. ^ "Spash, C.L. (2011) Social ecological economics: Understanding the past to see the future. American Journal of Economics and Sociology 70, 340-375" (PDF). Retrieved 2014-01-07. 
  33. ^ Jacqui Lagrue (2012-07-30). "Spash, C.L., Ryan, A. (2012) Economic schools of thought on the environment: Investigating unity and division. Cambridge Journal of Economics 36, 1091-1121". Retrieved 2014-01-07. 
  34. ^ Costanza R. (1989). What is ecological economics? Ecological Economics 1:1-7. [1].
  35. ^ Martinez-Alier, J., 1994. Ecological economics and ecosocialism, in: O'Connor, M. (Ed.), Is Capitalism Sustainable? Guilford Press, New York, pp. 23-36
  36. ^ Spash, C.L., Clayton, A.M.H., 1997. The maintenance of natural capital: Motivations and methods, in: Light, A., Smith, J.M. (Eds.), Space, Place and Environmental Ethics. Rowman & Littlefield Publishers, Inc., Lanham, pp. 143-173
  37. ^ Toman, M., 1998. Why not to calculate the value of the world's ecosystem services and natural capital. Ecological Economics 25, 57-60
  38. ^ O'Neill, J.F., 1993. Ecology, Policy and Politics: Human Well-Being and the Natural World. Routledge, London
  39. ^ O'Neill, J.F. (1997) Managing without prices: On the monetary valuation of biodiversity. Ambio 26, 546-550
  40. ^ Vatn, A., 2000. The environment as commodity. Environmental Values 9, 493-509
  41. ^ Norgaard, R. B. (1994) Development Betrayed: The End of Progress and a Coevolutionary Revisioning of the Future. London: Routledge
  42. ^ Daily, G.C. 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Washington, D.C.: Island Press.
  43. ^ Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-Being: Biodiversity Synthesis. Washington, D.C.: World Resources Institute.
  44. ^ McCauley, D. J. (2006) Selling out on nature. Nature 443(7): 27-28
  45. ^ Daly, H. and Farley, J. 2004. Ecological Economics: Principles and Applications. Washington: Island Press.
  46. ^ Ayres, R.U. 2007. On the practical limits of substitution. Ecological Economics 61: 115-128.
  47. ^ Shmelev, S.E. 2012. Ecological Economics. Sustainability in Practice, Springer
  48. ^ Hall, Charles A.S.; Cleveland, Cutler J.; Kaufmann, Robert (1992). Energy and Resource Quality: The ecology of the Economic Process. Niwot, Colorado: University Press of colorado. 
  49. ^ Peter A. Corning 1 *, Stephen J. Kline. (2000). Thermodynamics, information and life revisited, Part II: Thermoeconomics and Control information Systems Research and Behavioral Science, Apr. 07, Volume 15, Issue 6 , Pages 453 – 482
  50. ^ Corning, P. (2002). “Thermoeconomics – Beyond the Second Law” – source:
  51. ^ Wall, Göran. "Exergy - a useful concept". Retrieved 2012-12-23. 
  52. ^ "Environmental Decision making, Science and Technology". Retrieved 2012-12-23. 
  53. ^ Stabile, Donald R. "Veblen and the Political Economy of the Engineer: the radical thinker and engineering leaders came to technocratic ideas at the same time," American Journal of Economics and Sociology (45:1) 1986, 43-44.
  54. ^ Costanza, R., d'Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Naeem, S., Limburg, K., Paruelo, J., O'Neill, R.V., Raskin, R., Sutton, P., and van den Belt, M. (1997). "The value of the world's ecosystem services and natural capital". Nature 387 (6630): 253–260.  
  55. ^ Norgaard, R.B. and Bode, C. (1998). "Next, the value of God, and other reactions". Ecological Economics 25: 37–39.  
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  62. ^ Emmott, Bill (April 17, 2008). "GM crops can save us from food shortages". The Daily Telegraph (London). 
  63. ^ Costanza, Robert; Segura,Olman; Olsen, Juan Martinez-Alier (1996). Getting Down to Earth: Practical Applications of Ecological Economics. Washington, D.C.: Island Press.  
  64. ^ Pearce, Fred "Blueprint for a Greener Economy"
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  66. ^ Hawken, Paul (1994) "The Ecology of Commerce" (Collins)
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See also

McCauley argues that, for these reasons, trying to convince decision-makers to conserve nature for monetary reasons is not the path to be followed, and instead appealing to morality is the ultimate way to campaign for the protection of nature.

Lastly, it should not be assumed that conserving ecosystems is always financially beneficial as opposed to alteration. In the case of the introduction of the Nile perch to Lake Victoria, the ecological consequence was decimation of native fauna. However, this same event is praised by the local communities as they gain significant financial benefits from trading the fish.

Thirdly, conservation programmes for the sake of financial benefit underestimate human ingenuity to invent and replace ecosystem services by artificial means. McCauley argues that such proposals are deemed to have a short lifespan as the history of technology is about how Humanity developed artificial alternatives to nature’s services and with time passing the cost of such services tend to decrease. This would also lead to the devaluation of ecosystem services.

Secondly, allocating monetary value to nature would make its conservation reliant on markets that fluctuate. This can lead to devaluation of services that were previously considered financially beneficial. Such is the case of the bees in a forest near former coffee plantations in Finca Santa Fe, Costa Rica. The pollination services were valued to over US$60,000 a year, but soon after the study, coffee prices dropped and the fields were replanted with pineapple.[82] Pineapple does not require bees to be pollinated, so the value of their service dropped to zero.

Firstly, it seems to be assumed that all ecosystem services are financially beneficial. This is undermined by a basic characteristic of ecosystems: they do not act specifically in favour of any single species. While certain services might be very useful to us, such as coastal protection from hurricanes by mangroves for example, others might cause financial or personal harm, such as wolves hunting cattle.[81]

McCauley argues that ecological economics and the resulting ecosystem service based conservation can be harmful.[80] He describes four main problems with this approach:

Assigning monetary value to natural resources such as biodiversity, and the emergent ecosystem services is often viewed as a key process in influencing economic practices, policy, and decision-making. [78][79] While this idea is becoming more and more accepted among ecologists and conservationist, some argue that it is inherently false.


Mathematical modeling is a powerful tool that is used in ecological economic analysis. Various approaches and techniques include:[73][74] evolutionary, input-output, neo-Austrian modeling, entropy and thermodynamic models, multi-criteria, and agent-based modeling, the environmental Kuznets curve. System dynamics and GIS are techniques applied, among other, to spatial dynamic landscape simulation modeling.[75][76] The Matrix accounting methods of Christian Felber provide a more sophisticated method for identifying "the common good"[77]

Ecological-economic modeling

In contrast, ecological economists, like Joan Martinez-Alier, appeal to a different line of reasoning.[68] Rather than assuming some (new) form of capitalism is the best way forward, an older ecological economic critique questions the very idea of internalizing externalities as providing some corrective to the current system. The work by Karl William Kapp explains why the concept of "externality" is a misnomer.[69] In fact the modern business enterprise operates on the basis of shifting costs onto others as normal practice to make profits.[70] Charles Einsentein has argued that this method of privatising profits while socialising the costs through externalities, passing the costs to the community, to the natural environment or to future generations is inherently destructive[71] As social ecological economist Clive Spash has noted, externality theory fallaciously assumes environmental and social problems are minor aberrations in an otherwise perfectly functioning efficient economic system.[72] Internalizing the odd externality does nothing to address the structural systemic problem and fails to recognize the all pervasive nature of these supposed 'externalities'.

Concerning these externalities, some like the eco-businessman Paul Hawken argue an orthodox economic line that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to a hidden subsidy, paid by the non-monetized human environment, community or future generations.[66] These arguments are developed further by Hawken, Amory and Hunter Lovins to promote their vision of an environmental capitalist utopia in Natural Capitalism: Creating the Next Industrial Revolution.[67]

Ecological economics is founded upon the view that the neoclassical economics (NCE) assumption that environmental and community costs and benefits are mutually canceling "externalities" is not warranted. Joan Martinez Alier,[63] for instance shows that the bulk of consumers are automatically excluded from having an impact upon the prices of commodities, as these consumers are future generations who have not been born yet. The assumptions behind future discounting, which assume that future goods will be cheaper than present goods, has been criticized by Fred Pearce[64] and by the recent Stern Report (although the Stern report itself does employ discounting and has been criticized for this and other reasons by ecological economists such as Clive Spash).[65]

Not 'externalities', but cost shifting

[62]" agreements that facilitate their own control of the world transport network: The US, UK, Canada and trade and promote "GMOs were the only practical way out of a food crisis. The holdouts were all English-speaking countries that export permaculture that such payments directly valuing ecosystem preservation and encouraging [61] Commodification of other ecological relations as in

Despite these issues, many ecologists and conservation biologists are pursuing ecosystem valuation. Biodiversity measures in particular appear to be the most promising way to reconcile financial and ecological values, and there are many active efforts in this regard. The growing field of biodiversity finance[56] began to emerge in 2008 in response to many specific proposals such as the Ecuadoran Yasuni proposal[57][58] or similar ones in the Congo. US news outlets treated the stories as a "threat"[59] to "drill a park"[60] reflecting a previously dominant view that NGOs and governments had the primary responsibility to protect ecosystems. However Peter Barnes and other commentators have recently argued that a guardianship/trustee/commons model is far more effective and takes the decisions out of the political realm.

The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains controversial. A common objection is that life is precious or priceless, but this demonstrably degrades to it being worthless under the assumptions of any branch of economics. Reducing human bodies to financial values is a necessary part of every branch of economics and not always in the direct terms of insurance or wages. Economics, in principle, assumes that conflict is reduced by agreeing on voluntary contractual relations and prices instead of simply fighting or coercing or tricking others into providing goods or services. In doing so, a provider agrees to surrender time and take bodily risks and other (reputation, financial) risks. Ecosystems are no different from other bodies economically except insofar as they are far less replaceable than typical labour or commodities.

A study was carried out by Costanza and colleagues[54] to determine the 'price' of the services provided by the environment. This was determined by averaging values obtained from a range of studies conducted in very specific context and then transferring these without regard to that context. Dollar figures were averaged to a per hectare number for different types of ecosystem e.g. wetlands, oceans. A total was then produced which came out at 33 trillion US dollars (1997 values), more than twice the total GDP of the world at the time of the study. This study was criticized by pre-ecological and even some environmental economists - for being inconsistent with assumptions of financial capital valuation - and ecological economists - for being inconsistent with an ecological economics focus on biological and physical indicators.[55]

See also: Ecosystem valuation and price of life

Environmental services

Scientists have written and speculated on different aspects of energy accounting.[53]

An energy balance can be used to track energy through a system, and is a very useful tool for determining resource use and environmental impacts, using the First and Second laws of thermodynamics, to determine how much energy is needed at each point in a system, and in what form that energy is a cost in various environmental issues. The energy accounting system keeps track of energy in, energy out, and non-useful energy versus work done, and transformations within the system.[52]

Energy accounting and balance

Exergy analysis is performed in the field of industrial ecology to use energy more efficiently.[51] The term exergy, was coined by Zoran Rant in 1956, but the concept was developed by J. Willard Gibbs. In recent decades, utilization of exergy has spread outside of physics and engineering to the fields of industrial ecology, ecological economics, systems ecology, and energetics.

Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood through the second law of thermodynamics, but also in terms of such economic criteria as productivity, efficiency, and especially the costs and benefits (or profitability) of the various mechanisms for capturing and utilizing available energy to build biomass and do work.[49][50] As a result, thermoeconomics is often discussed in the field of ecological economics, which itself is related to the fields of sustainability and sustainable development.

Ecological economics generally rejects the view of energy economics that growth in the energy supply is related directly to well being, focusing instead on biodiversity and creativity - or natural capital and individual capital, in the terminology sometimes adopted to describe these economically. In practice, ecological economics focuses primarily on the key issues of uneconomic growth and quality of life. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests an interdisciplinary approach combining social and natural sciences as a means to address this.

A key concept of energy economics is net energy gain, which recognizes that all energy requires energy to produce. To be useful the energy return on energy invested (EROEI) has to be greater than one. The net energy gain from production coal, oil and gas has declined over time as the easiest to produce sources have been most heavily depleted.[48]

Energy economics

Recently, Stanislav Shmelev developed a new methodology for the assessment of progress at the macro scale based on multi-criteria methods, which allows consideration of different perspectives, including strong and weak sustainability or conservationists vs industrialists and aims to search for a 'middle way' by providing a strong neo-Keynsian economic push without putting excessive pressure on the natural resources, including water or producing emissions, both directly and indirectly.[47]

At the other extreme, the strong sustainability view argues that the stock of natural resources and ecological functions are irreplaceable. From the premises of strong sustainability, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that sustainable development must therefore take a different approach to valuing natural resources and ecological functions.

Neoclassical economists tend to maintain that man-made capital can, in principle, replace all types of natural capital. This is known as the weak sustainability view, essentially that every technology can be improved upon or replaced by innovation, and that there is a substitute for any and all scarce materials.

The potential for the substitution of man-made capital for natural capital is an important debate in ecological economics and the economics of sustainability. There is a continuum of views among economists between the strongly neoclassical positions of Herman Daly, at the other.[46]

The impending depletion of natural resources and increase of climate-changing greenhouse gasses should motivate us to examine how political, economic and social policies can benefit from alternative energy. Interestingly enough, shifting our dependence on fossil fuels with specific interest within just one of the above-mentioned factors easily benefits at least one other. For instance, photo voltaic (or solar) panels have a 15% efficiency when absorbing the sun's energy, but its construction demand has increased 120% within both commercial and residential properties. Additionally, this construction has led to a roughly 30% increase in work demands (Chen).

Ecological economics challenges the conventional approach towards natural resources, claiming that it undervalues natural capital by considering it as interchangeable with human-made capital—labor and technology.

The three nested systems of sustainability - the economy wholly contained by society, wholly contained by the biophysical environment. Clickable.

Weak versus strong sustainability

Resource and neoclassical economics focus primarily on the efficient allocation of resources, and less on two other fundamental economic problems which are central to ecological economics: distribution (equity) and the scale of the economy relative to the ecosystems upon which it is reliant.[45] Ecological Economics also makes a clear distinction between growth (quantitative increase in economic output) and development (qualitative improvement of the quality of life) while arguing that neoclassical economics confuses the two. Ecological economists point out that, beyond modest levels, increased per-capita consumption (the typical economic measure of "standard of living") does not necessarily lead to improvement in human well-being, while this same consumption can have harmful effects on the environment and broader societal well-being.

Allocation of resources

There has then been a move to regard such things as natural capital and ecosystems functions as goods and services.[42][43] However, this is far from uncontroversial within ecology or ecological economics due to the potential for narrowing down values to those found in mainstream economics and the danger of merely regarding Nature as a commodity. This has been referred to as ecologists 'selling out on Nature'.[44] There is then a concern that ecological economics has failed to learn from the extensive literature in environmental ethics about how to structure a plural value system.

The neoclassical view ignores much of what the natural sciences have taught us about the contributions of nature to the creation of wealth e.g., the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and ecosystem services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, food and medicine production, pollination, protection from solar and cosmic radiation, the view of a starry night sky, etc.

Ecological economics is distinguishable from neoclassical economics primarily by its assertion that the economy is embedded within an environmental system. Ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system. Ecological economists argue that neoclassical economics has ignored the environment, at best considering it to be a subset of the human economy.

Well-being in ecological economics is also differentiated from welfare as found in mainstream economics and the 'new welfare economics' from the 1930s which informs resource and environmental economics. This entails a limited preference utilitarian conception of value i.e., Nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc.

[41] A primary objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the


Among the topics addressed by ecological economics are methodology, allocation of resources, weak versus strong sustainability, energy economics, energy accounting and balance, environmental services, cost shifting, and modeling.


While this natural capital and ecosystems services approach has proven popular amongst many it has also been contested as failing to address the underlying problems with mainstream economics, growth, market capitalism and monetary valuation of the environment.[35][36][37] Critiques concern the need to create a more meaningful relationship with Nature and the non-human world than evident in the instrumentalism of shallow ecology and the environmental economists commodification of everything external to the market system.[38][39][40]

The most cogent example of how the different theories treat similar assets is tropical rainforest ecosystems, most obviously the Yasuni region of Ecuador. While this area has substantial deposits of bitumen it is also one of the most diverse ecosystems on Earth and some estimates establish it has over 200 undiscovered medical substances in its genomes - most of which would be destroyed by logging the forest or mining the bitumen. Effectively, the instructional capital of the genomes is undervalued by analyses which view the rainforest primarily as a source of wood, oil/tar and perhaps food. Increasingly the carbon credit for leaving the extremely carbon-intensive ("dirty") bitumen in the ground is also valued - the government of Ecuador set a price of US$350M for an oil lease with the intent of selling it to someone committed to never exercising it at all and instead preserving the rainforest.

Some ecological economists prioritise adding natural capital to the typical capital asset analysis of land, labor, and financial capital. These ecological economists then use tools from mathematical economics as in mainstream economics, but may apply them more closely to the natural world. Whereas mainstream economists tend to be technological optimists, ecological economists are inclined to be technological sceptics. They reason that the natural world has a limited carrying capacity and that its resources may run out. Since destruction of important environmental resources could be practically irreversible and catastrophic, ecological economists are inclined to justify cautionary measures based on the precautionary principle.[34]

Differentiation from mainstream schools

Various competing schools of thought exist in the field. Some are close to resource and environmental economics while others are far more heterodox in outlook. An example of the latter is the European Society for Ecological Economics. An example of the former is the Swedish Beijer International Institute of Ecological Economics. Clive Spash has argued for the classification of the ecological economics movement, and more generally work by different economic schools on the environment, into three main categories. These are the mainstream new resource economists, the new environmental pragmatists,[31] and the more radical social ecological economists.[32] International survey work comparing the relevance of the categories for mainstream and heterodox economists shows some clear divisions between environmental and ecological economists.[33]

Schools of thought

Mainstream economics has attempted to become a value-free 'hard science', but ecological economists argue that value-free economics is generally not realistic. Ecological economics is more willing to entertain alternative conceptions of utility, efficiency, and cost-benefits such as positional analysis or multi-criteria analysis. Ecological economics is typically viewed as economics for sustainable development,[30] and may have goals similar to green politics.

Renewable energy
The Bonneville Dam in the Pacific Northwest, USA
Solar energyTidal power
Topics by country
Wave powerWind power


Global warming is now widely acknowledged as a major issue, with all national scientific academies expressing agreement on the importance of the issue. As the population growth intensifies and energy demand increases, the world faces an energy crisis. Some economists and scientists forecast a global ecological crisis if energy use is not contained – the Stern report is an example. The disagreement has sparked a vigorous debate on issue of discounting and intergenerational equity.

Since animals are higher on the trophic level, they are less efficient sources of food energy. Reduced consumption of meat would reduce the demand for food, but as nations develop, they tend to adopt high-meat diets similar to that of the United States. Genetically modified food (GMF) a conventional solution to the problem, presents numerous problems – Bt corn produces its own Bacillus thuringiensis toxin/protein, but the pest resistance is believed to be only a matter of time.[25]:31 The overall effect of GMF on yields is contentious, with the USDA and FAO acknowledging that GMFs do not necessarily have higher yields and may even have reduced yields.[29]

Global wild fisheries are believed to have peaked and begun a decline, with valuable habitat such as estuaries in critical condition.[25]:28 The aquaculture or farming of piscivorous fish, like salmon, does not help solve the problem because they need to be fed products from other fish. Studies have shown that salmon farming has major negative impacts on wild salmon, as well as the forage fish that need to be caught to feed them.[27][28]

:26[25] The Earth's

The economic value of natural capital and ecosystem services is accepted by mainstream environmental economics, but is emphasized as especially important in ecological economics. Ecological economists may begin by estimating how to maintain a stable environment before assessing the cost in dollar terms.[25]:9 Ecological economist Robert Costanza led an attempted valuation of the global ecosystem in 1997. Initially published in Nature, the article concluded on $33 trillion with a range from $16 trillion to $54 trillion (in 1997, total global GDP was $27 trillion).[26] Half of the value went to nutrient cycling. The open oceans, continental shelves, and estuaries had the highest total value, and the highest per-hectare values went to estuaries, swamps/floodplains, and seagrass/algae beds. The work was criticized by articles in Ecological Economics Volume 25, Issue 1, but the critics acknowledged the positive potential for economic valuation of the global ecosystem.[25]:129

A simple [25]:28 Pollutants affect human health and the health of the climate.

Environmental scientist sampling water.

Nature and ecology

Articles by Inge Ropke (2004, 2005)[19] and Clive Spash (1999)[20] cover the development and modern history of ecological economics and explain its differentiation from resource and environmental economics, as well as some of the controversy between American and European schools of thought. An article by Robert Costanza, David Stern, Lining He, and Chunbo Ma[21] responded to a call by Mick Common to determine the foundational literature of ecological economics by using citation analysis to examine which books and articles have had the most influence on the development of the field. However, citations analysis has itself proven controversial and similar work has been criticized by Clive Spash for attempting to pre-determine what is regarded as influential in ecological economics through study design and data manipulation.[22] In addition, the journal Ecological Economics has itself been criticized for swamping the field with mainstream economics.[23] [24]

The Romanian economist Vanderbilt University, provided ecological economics with a modern conceptual framework based on the material and energy flows of economic production and consumption. His magnum opus, The Entropy Law and the Economic Process (1971), has been highly influential.[18]

The antecedents can be traced back to the Romantics of the 19th century as well as some Enlightenment political economists of that era. Concerns over population were expressed by Thomas Malthus, while John Stuart Mill hypothesized that the "stationary state" of an economy was desirable, anticipating later insights of modern ecological economists, without having had their experience of the social and ecological costs of the dramatic post-World War II industrial expansion. As Martinez-Alier explores in his book the debate on energy in economic systems can also be traced into the 19th century e.g. Nobel prize-winning chemist, Frederick Soddy (1877–1956). Soddy criticized the prevailing belief of the economy as a perpetual motion machine, capable of generating infinite wealth—a criticism echoed by his intellectual heirs in the now emergent field of ecological economics.[17]

European conceptual founders include K. William Kapp (1950)[13] and Karl Polanyi (1944).[14] Some key concepts of what is now ecological economics are evident in the writings of E.F. Schumacher, whose book Small Is Beautiful – A Study of Economics as if People Mattered (1973) was published just a few years before the first edition of Herman Daly's comprehensive and persuasive Steady-State Economics (1977).[15][16] Other figures include ecologists C.S. Holling, H.T. Odum and Robert Costanza, biologist Gretchen Daily and physicist Robert Ayres. CUNY geography professor David Harvey explicitly added ecological concerns to political economic literature. This parallel development in political economy has been continued by analysts such as sociologist John Bellamy Foster.

was the first president of the society and first editor of the journal, currently edited by Richard Howarth. Robert Costanza. Elsevier, by Ecological Economics and publication of its journal, International Society for Ecological Economics 1989 saw the foundation of the [12], was published later that year.Juan Martinez-Alier, by Ecological Economics to test the waters. A book entitled Ecological Modeling Most were ecosystem ecologists or mainstream environmental economists, with the exception of Daly. In 1987, Daly and Costanza edited an issue of [12], and David Pimentel).H.T. Odum, Bruce Hannon, Charles Hall, Herman Daly, Robert Costanza with a meeting held in Sweden(including [11]

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