How Logical is Ecological Economics?

When the World Economic Forum observed that without ecology there can be no economy and no society, it referred to the rapidly developing field of Ecological Economics. However, before getting started with Ecological Economics, it is necessary to grasp knowledge about Economics. In its most simple definition, Economics is the study of how society uses its limited resources. Economics deals with production, distribution, and consumption of goods and services.

Economics is split into the following two broad categories of study:

• Macroeconomics – big picture economics that studies the overall working of a national economy.
• Microeconomics – economics that deals with households and businesses at the individual level.

In (conventional) Economics, the worth of goods or services is judged on the basis of their direct or indirect utility to humans. Ecological Economics differs from Economics in attempting to value goods and services in ways they are, and not only based on their direct usefulness to humans. This means that Ecological Economics attempts to take into account the many environmental and social costs associated with the depletion of natural resources, as well as the degradation of ecological systems through pollution, extinction, and other environmental damages.

A key problem with conventional economics is that the market does not recognize the value of indirectly used ecological goods and services. Therefore, the degradation of these goods and services is also not considered as a loss in business.

Environmental issues are closely tied with the economy and the Economy is a wholly owned subsidiary of Ecology. This is the central idea of Ecological Economics. The Earth is our only source of materials and resources, and if we consume them all, economic growth will cease to exist. Thus, we must realize that economic activity is bound by ecological limits. The emphasis of the relevance of the laws of natural philosophy  to economics is at the core of this view, and is also vital to the historical foundations of Ecological Economics.

Ecological Economics assumes an inherent link between the health of ecosystems and that of human beings. It is sometimes also referred to as Green Economics. In practice, Ecological Economics focuses primarily on the key issues of economic growth and measuring well-being. It addresses the interrelation between ecosystems and economic systems in the vast sense. These relationships are the collection of many of our most pressing current problems, be it acid rain, global warming, species extinction, inequity in wealth distribution and the likes.

Ecological economics believes that there are more things that contribute to human well-being than just the amount of stuff a person owns. The other things include health and education (human capital), family and friends (social capital) and the benefits received from the earth (natural capital). The interrelated goal of Ecological Economics is to develop a deeper scientific understanding of the complex linkages between humans and the rest of nature, and to use that understanding to develop policies that are based on the principles of sustainability, fair distribution of resources, and efficiency in allocation of scarce resources including natural and social capital.

Scope of Ecological Economics

The scope of Ecological Economics is rapidly expanding. Some key applications are as follows:

• Eco-Development: It is one of the foremost scopes among all since the main purpose of Ecological Economics is to create stability between economic development and the quality of the environment. Ecological Economics is essential in achieving Eco- or Sustainable Development.
• Economic-Environment Analysis: This scope of Ecological Economics is mainly related to the actual economic activities and their impact on the quality of the environment. Development of theoretical ecological economic models are necessary to bring the shift in ongoing economic activities for making them sustainable and keeping them relevant.
• Welfare Approach: In this kind of scope, the aim is to overcome the conflicts and various environmental problems that conventional economics has brought about. The welfare approach covers market failures and protection of scarce resources as well as control of pollution using markets as a tool.
• Environmental Values: Simply, environmental values are related to economic values. It is necessary for the society to protect the finite resources such as water, forests and fisheries in the interest of economic welfare. Ecological Economics helps realize these environmental values by informing us of the real economic values of nature and natural resources.
• Clean Technology: Nowadays, the main cause of environmental deterioration is use of modern technology. Ecological economists are working with technocrats and startups in establishing new technologies that offer the most balanced use of natural resources to save the planet.

Sustainability and Ecological Economics

Ecological Economics incorporates the normative goal of achieving sustainability. Sustainability is understood to have both environmental and social components. Mostly, it is understood in terms of intra- and inter-generational justice: (1) the environment should be preserved to allow future generations to enjoy a good life; (2) within the current generation, injustice should be tackled.

Ecological economics reminds us that sustainability is a multi-faceted goal by focusing on the composite correlation between different elements of sustainability: ecological sustainability, social sustainability and economic sustainability. It reminds us of the complexity of the many interacting systems that make up the biosphere and the uncertainty that is a fundamental attribute of all complex systems.

Ecological economics also seeks true economic efficiency. Economic efficiency and good economic decision making are not possible if all of the costs and benefits are not considered or included in prices. The environmental and social costs of economic growth and development that are often excluded in prices are known as externalities.

An externality is a cost which is not included in the price of the product but is shouldered by a third party, outside the producer/seller and buyer/consumer. Incorporating these costs in the market would provide a powerful incentive to move closer to sustainability.

In conclusion, Ecological Economics is a field that is rapidly evolving in response to increasing environmental problems. It attempts to find ways for accounting for the real costs of environmental damage and incorporating that in the markets and in economic decision making. It is only when we are able to do this, can we go beyond economic growth and walk on the pathway to sustainable development.