Last year, I wrote an article exploring the limitations of grassroots activism, and suggested that positive environmental change might be best achieved through engaging in the financial language the fossil fuel industry knows most fluently. I’ve been interested in the economics of climate change ever since attending the COP21 in Paris, and then later a talk by UK Think-Tank Carbon Tracker in early 2016, hosted by Amsterdam’s Pakhuis de Zwijger. I carried this interest forward, and was admitted to the MSc Ecological Economics programme at the University of Edinburgh, beginning in September this year.
By Dominic Stephen
Though it might easily be assumed that ‘Ecological Economics’ is a label interchangeable with ‘Environmental Economics’, the two fields are in fact quite distinct, and the space between them is rich in philosophical, political and ethical content. While both disciplines are committed to describing and proposing how society can use and distribute its limited natural resources, they also differ sharply from one another in the assumptions they make, methodologies they employ, and value-systems that they adhere to. Broadly speaking, Ecological economics, focussing on sustainability, care, and justice, can be understood as a critical offshoot of, and response to, the neoclassical mainstream of economics today.
The infinite loop
Ecological economics rejects the popular representation of the economy as a ‘circular flow diagram’, which depicts the movement of goods and services between the factories, firms, households, governments and financial markets of society. The flaw in this model, however, is that is does not account for the finite input of natural resources necessary to keep this loop in motion. In fact, not only does it assume natural resources as infinite, but it considers the environment a sub-sector of the economy – a resource interchangeable with human labour, innovation and technology, which can be drawn on whenever a boost of economic momentum is needed. Ecological economists reject and invert this model, arguing that it is in fact the economy which exists within, and dependent on, environmental services.
Ecological economics is interdisciplinary – it draws on philosophy, politics, ecology, and history to address and question mainstream economic measures of global development, such as gross domestic product (GDP). GDP is a measure of the goods and services produced and exchanged throughout society, and is generally considered to indicate the state of a country’s development. GDP, however, fails to take into account the market transactions which are not necessarily beneficial or desirable to society. Divorce, crime, natural disasters and mindless consumerism all register positively for GDP, inasmuch as they represent a greater flow of materials, labour, and transportation. The GDP metric also ignores any harmful environmental or social ‘externalities’ produced by consumption, not priced into the market value of the product, but which eventually society at large will have to pay for – either in the toxic waste from a factory, or in the stress and alienation felt from living in an atomised and competitive society. As a result, ecological economists propose alternative indicators of development, such as the genuine progress indicator (GPI), which takes into account the broader environmental and social effects of economic transactions.
Towards a Steady State
In an interview, ecological economist Robert Constanza points out that mainstream environmental economics does not acknowledge how the earth’s finite stock of natural resources undermines the drive for exponential economic growth. The economy can only grow as much as the natural resource base on which it depends. He suggests, instead, that we should aim to mimic the lifecycle of all natural systems, and establish what is known as a ‘steady state’ economy, characterised by stability rather than the crises of deregulated financial capitalism. ‘It means’, he says, ‘a shift away from a sort of brute-force competition towards more cooperative, alliance-building, stable kinds of relationships.’
Constanza’s general point is that, rather than using the economy to promote human and environmental flourishing, it is instead human and environmental wellbeing which is sacrificed to the goal of economic growth. Ecological economics unifies diverse fields of knowledge; holds the truths of natural science as fundamental; and addresses questions of value, progress, and wellbeing central to societal flourishing. In doing so, the discipline represents a rich, powerful and holistic approach to understanding the economics of climate change today.