2.2.3 Ecological economics
Ecological economics, which formally came to prominence in the mid-1980s, represents a departure from reliance on the use of mainstream economic modelling. Instead, it branches out to actively engage with and incorporate the ethical, social and behavioural dimensions of environmental issues. In short, ecological economics attempts to provide an interdisciplinary approach to environmental issues, whereas environmental economics maintains the primacy of economic modelling.
Mark Sagoff, a US philosopher and public policy expert, and Clive Spash, a UK economist, are leading critics of environmental economics. They argue for a more explicit ethical and political dimension to guide economics. Sagoff is not an ecological economist, but he does express the ethical concern shared by many of the proponents of ecological economics. His concern over the use of ‘willingness to pay’ (WTP) as a substitute for environmental values is summarised as follows (2000, p. 1430):
Environmental economics fails as a normative science because it cannot tell us why or in what sense a more efficient allocation is better than a less efficient one. That people are willing to pay more for one outcome than another, in other words, tells us nothing beyond that fact – nothing further and therefore nothing whatever about the relative value of that outcome. The only reason economists can give for measuring WTP is that it correlates with welfare or well-being. This correlation holds, however, only if the terms welfare and well-being serve as mere proxies or stand-ins for WTP and otherwise are meaningless. Lacking all content, these terms cannot move environmental economics from the ‘is’ of WTP to the ‘ought’ of valuation.
From an economic perspective, Spash (1999) points out the well-established limitations of market prices as indicators of social costs and benefits, given firstly the skewed influences of subsidies and tax regimes on prices, and secondly the prevalence of non-competitive market structures presented by oligarchies and monopolies. Putting proxy market values on non-commodified resources, in Spash’s opinion, only reinforces these limitations. What’s more, this has the political effect of accentuating existing power relations in trade – a point increasingly made in criticisms of the World Trade Organization and its promotion of environmental economics through the Kyoto Protocol.
As an economist, Spash is concerned with the risks of his discipline becoming alienated from the environmental movement by retaining a neoclassical economic approach that is based on utilitarianism. Many environmentalists, Spash maintains, choose to operate on a basis of ‘rights’ rather than utility. Use of WTP (willingness to pay) and WTA (willingness to accept compensation) in contingent valuation actually constrains individual respondents to adopt a utilitarian stance.
While Sagoff argues that the discipline of economics is simply unable to address ethical issues, Spash is more optimistic in attempting to define an alternative interdisciplinary subject, arising from economics, that might give priority to ethical concerns and be both socially and politically aware. The distinguishing features of this radical version of ecological economics are summarised in Box 10.
Box 10 Features of Spash’s radical ecological economics
Ecology as a discipline cannot be simply included in, or added on to, the existing dominant paradigm or mindset of economics. They simply have different and incompatible ways of viewing the environment.
Ecological economics can evolve meaningfully only as a separate interdisciplinary approach to environmental problems.
An interdisciplinary approach must be informed by ecological concepts reflecting ecosystems as uncertain, non-equilibrium, non-stable states that change unpredictably in an episodic, non-linear way.
Ethics and politics must not be kept separate from ecological economics. This is in direct contrast to traditional environmental economics, where it is claimed that issues of ethics and politics can be addressed only by the ‘decision makers’, not the economists.
Ethics and politics must dominate the direction of discourse. If economics dominates, only the ethical values associated with human utility will be expressed. Ethical values associated with ‘rights’ (human and non-human) will be marginalised.
A key focus for ecological economics is the macroeconomic issues of institutional dynamics – that is, the relationships between the institutions involved with environmental management – rather than the microeconomic issues of refining existing economic models for better use.
The institutional approach is needed in order to resolve, and not necessarily solve, environmental conflicts.
(Source: summarised from Spash, 1999)
Spash has been particularly active in promoting a radically different orientation of the economics discipline. He envisages the development of ecological economics as providing an academic linchpin for the type of ethical approach called for by Sagoff: that is, ‘reintroducing the ethical element as an integral part of economics’ (Spash, 1999, p. 430). The ethical tradition invites an interdisciplinary approach to environmental issues, and radical ecological economics falls into this tradition. The radical side comes from the need to engage with wider political debate as a means of incorporating the natural.
Economic growth is sometimes referred to as the bottom line of business management. Corporate responsibility has in more recent times expanded the moral community to include society and the environment – making up, as mentioned earlier, the triple bottom line. With respect to valuing nature from a societal perspective, trends in conversation between ‘consumers’ and nature might be described in progressive terms of an evolving ‘green consumerism’. But economic activity is just one part of social activity. What might be the trends in the wider social valuation of nature? What might be the trends in conversation between ‘citizens’ and nature?