2 Ecological economists’ views of the world

Ecological economics is not a single school of thought, but its proponents are united in seeing the economy as being embedded in a wider biophysical system. Ecological economists also unite in rejecting the core neoclassical tenets that unlimited economic growth is feasible and that human wellbeing is dependent on such growth.

The environment is now contemplated in the United Nation’s sustainable development goals (SDGs). These are a suite of 17 high-level goals that most countries of the world signed up to in 2015 (UN, 2015) with the aim of achieving them by 2030.

Click on the question mark beside each goal for more detail on what it entails.

However, the UN SDGs fall far short of the perspective of ecological economists and their views on what needs to be done to tackle climate change and other forms of environmental degradation.

Ecological economists usually subscribe to strong sustainability. There are variations in how this is interpreted but one definition is as follows:

The implication is that each generation should aim to preserve (or enhance) the quantity and quality of the planet’s stock of natural capital and pass this on to future generations. This means using natural capital at no more than the rate at which it can be renewed, which directly challenges the idea that unlimited economic growth can be sustainable.

Fundamental to this view is that most ecological economists do not see externalities as exceptional examples of market failure. Rather, adverse spill-over effects are inherent in all production and consumption (Kapp, 1950, cited in Spash and Asara, 2018). The foundation of this viewpoint lies in the relevance to economic processes of the laws of thermodynamics from physical science (Georgescu-Roegen, 1971).

The first law of thermodynamics concerns the conservation of matter and energy: within a closed system, matter and energy cannot be created or destroyed, only converted from one state to another (a qualitative change). The second law asserts that energy cannot be converted entirely into work, with some typically escaping as heat, and that this process is irreversible since energy always flows from hotter to colder regions not vice versa. The implication is that economic activity starts by using materials and accessible energy (such as that stored in a lump of coal) and ends with a different (useful) material but in the process has inevitably converted some of the energy into a form that is no longer usable. This inexorable conversion of energy from usable states to unusable also takes place in nature but at a slower rate than during human economic processes. It is described as a shifting from a state of low entropy (usable matter and energy) to high entropy (unusable states). The second law asserts that a closed system will tend towards an equilibrium where entropy is maximised.

Figure 4: The Earth is not a closed system

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A photograph taken from the upper atmosphere of the sun rising over the rim of the Earth.

Figure 4: The Earth is not a closed system

However, the Earth is not an entirely closed system. Energy from the sun comes into our biophysical system to some extent replenishing the usable energy and natural materials available. Hence, this creates the possibility of achieving a sustainable level of economic activity at which the rate of use of natural resources is balanced by the rate at which the system replaces them.

Therefore, ecological economists are concerned about reducing the throughputs of the economy – the flow of inputs from nature and the flow of (adverse) outputs that degrade nature. However, different groups of ecological economists draw different conclusions about the policies and actions that might achieve a sustainable level of economic activity.

Some ecological economists focus on aspects of what has become popularly known as the circular economy (CE). The CE approach has tended to grow organically through government and business action rather than having a rigorous theoretical base (Korhonen et al, 2018). The neoclassical approach can be viewed as a linear economy: resources are extracted from nature, used and the waste products dumped. In contrast, CE ‘is a system where materials never become waste products and materials are kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling, and composting’ (Ellen MacArthur Foundation, n.d.). In CE, current activities are redesigned, so that, for example:

• consumers reuse, repair, recycle and share products,
• businesses create durable and repairable products, reduce waste in their processes, offer recycling schemes and shift to leasing rather than ownership models and second-hand rather than new; and
• renewable energy sources (such as wind and solar) displace fossil fuels.

Nevertheless, the CE viewpoint is close to the neoclassical approach in that it aims to make markets more efficient (in terms of their material and energy use) and looks to similar policy tools, such as taxes and subsidies to incentivise the required changes, bolstered by regulation as required.

While CE is still subject to the laws of entropy, it is possible ‒ in theory at least ‒ that the lower energy loss in a CE can be brought into balance with the renewing input of energy from the sun. However, critics of CE point to the unlikelihood of this happening because of the ‘Jevons paradox’ (Korhonen et al, 2018). This was first raised by William Stanley Jevons, a British economist (1835-1882) who was, in the nineteenth century, concerned about the sustainability of the nation’s stocks of coal. The essence of the paradox is that, as technology improves, the cost of a resource (such as coal) falls, stimulating extra demand, and so the gains in efficiency are offset by increased use (Jevons, 1865). Applied to the CE, the concern is that the gains in efficient use of energy and resources may be overwhelmed by a rising scale of use.

The degrowth perspective is more radical. Like the CE approach it advocates using resources more efficiently through reuse, recycling and a shift away from built-in obsolescence to durable, repairable products. However, degrowth theory rejects the neoclassical model of production simply responding to consumer demand. Instead, it sees firms as identifying profit-making opportunities and then using marketing and behavioural techniques to create demand, leading to wasteful over-consumption. This leads degrowth advocates to call for a re-evaluation of what matters for human well-being and a whole reconceptualization of how economic activity is organised with a reversion to more localised production and more equal redistribution of wealth and power (Latouche, 2009). The term ‘degrowth’ is not meant to imply that economies must stop growing (though that could be a result); rather it refers to the displacement of economic growth as the primary goal of economic activity in favour of other goals that more directly target human and planetary wellbeing (Kallis, 2018).

The interaction of the economic, social and power dimensions of human activity is fundamental to the social ecological economics (SEE) perspective ‒ of which the degrowth movement is part. SEE recognises the importance of, for example:

• the role of power in perpetuating the current dominant neoclassical organisation of economic activity,
• detriment from high levels of inequality that have resulted from market-based systems, and
• the injustice of imposing detrimental market side-effects on innocent bystanders, be they citizens of the Global South or future generations.

Social ecological economics proposes that the starting point should be: ‘to define economics as the study of social provisioning to meet human needs within an ethical framework of care and justice for others, both human and non-human’ (Spash and Guisan, 2021).

In a popular representation of this approach, Raworth (2017) envisages a sustainable economy as being like a doughnut. The outer ring of the doughnut describes the planetary constraint; the inner ring of the doughnut describes the social constraints if everyone is to be afforded the basics of life. Between the two rings is the doughnut, the ‘safe space’ for human activity.

The aims of social ecological economics hardly seem controversial: a just society that lives within the planet’s biophysical limits. However, its argument is that these goals cannot be achieved through the current neoclassical order.