Ecological economics as a clearer means of understanding the relationship between economy and environment

Jul 30, 2018 by

Sigrid Stagl’s presentation “Ecological Economics: the Environment of the Economy” argued for the necessity of change in current economics. A highly interdisciplinary science, the first assumption in ecological economics is that ecosystems are the base from which the economy flourishes, and that we do not only want the economy to flourish, but humans as well.

She pointed out problematic mindsets inherent in neoclassical economics, using the famous iceberg picture which illustrates how often only the tip of a problem is visible – the search for the invisible can be long and hard, and is in stark contrast with the often used phrase by politicians and power-holders that “there is no alternative” to whatever economic approach they are currently pursuing. She encouraged us to always assume “there are thousands of alternatives”.

Instead, neoclassical economics has adopted a set of mechanistic theoretical models based on Newtonian physics and ignores complexity. In the real economy, you never find simple action-reaction patterns, and the assumed predictability of outcomes is simply not given. Yet at the same time, efficiency is valued as the solution for everything, while justice plays only a smaller role. This illustrated the need to start at the very beginning with re-thinking economics, as is currently done in a wide field of contemporary sciences. This was placed in the context of a very short history on economic theories, from the outdated classical and neoclassical to current streams like environmental and ecological economics.

She went on to reference a study from the Stockholm Environment Institute that posited nine critical earth system processes, and delineated boundaries within which humans and the economy should remain in. Depicted as an easy-to-understand graphic, this concept is useful in showing how we have crossed, and stand to cross, certain thresholds. Related to one of these processes, climate change, she talked of how a carbon budget is essential to deciding the pathway with which to reduce emissions, and painted a picture of the enormity of the challenge by suggesting that in order to stay within budget, we would be required to decrease our emissions by 50% per decade.

Where we are at this point in our economic history is such that inequality has increased, and with top earners having seen most of the economic growth of past decades benefit themselves, while real wages have stagnated or declined for the majority. We were invited to ask ourselves, what the objective of economic growth is, whether it should be sought as an end in itself or harnessed for equitable development.

She ended on an optimistic note, by reminding us that the economy is merely an institution, and as such can be changed by humans to suit their needs more appropriately. We need to recognise the hollowness of solutions such as triple bottom line sustainability, and in doing so, move from an empty to a full world perspective, or one that accounts for rapidly depleting resources. In this regard, ecological economics has much to offer in reframing our perspectives of the relationship between economy and planet.

Written by: Steven Myburgh and Elisabeth Denner

Based on the lecture by: Sigrid Stagl (“Ecological Economics: the environment of the economy”)