Definition
Ecological economics focuses on rebalancing human-nature interactions within a finite system of planetary boundaries. Its main field of research is the environment and sustainable development, rather than the traditional economic concepts of efficiency, market equilibria, and growth. In contrast to the latter, it views the economy as embedded in natural processes, such as biological, chemical, and physical transformations. It highlights the limitations and opportunities of an economy and society that intentionally stays within the planet’s carrying capacity.
Ecological economics regards the human economy as one subsystem embedded in a larger ecosystem, closely connected to and dependent on other systems through physical and chemical material flows. This contrasts with orthodox neoclassical economics, which focuses on markets and financial flows and views the market economy as the dominant system with a license to externalize environmental costs and exploit nature. While environmental and resource economics apply neoclassical economics to environmental problems, ecological economics uses a broader view and includes the material consequences of inputs, outputs, and waste in the analysis. In ecological economics, nature has an intrinsic value and is more than just a resource and sink for consumption and production purposes.
One key indicator ecological economics uses is the “ecological footprint”, which measures the ecological impacts of everyday activities and practices of individuals or even whole industries. Based on local empirical evidence, policymakers can decide which consumption and production activities must be curbed – and which should be supported. A second set of important indicators are instances of violations of “environmental justice”, such as the health and climate impacts of factories or mining on neighboring communities, or the fatal effects of large-scale deforestation on biodiversity as well as animal and human welfare (see Climate Justice). Intra- and intergenerational equity and fairness worldwide are further defining principles.
Ecological economics advocates for stable, steady-state economies to avoid ecological overshoot beyond the planetary boundaries. It addresses global challenges such as climate change, deforestation, overfishing, and biodiversity loss. With its focus on the interactions between human decision-making and the environment, ecological economics is a field that thrives on diverse perspectives and expertise converging in interdisciplinary and transdisciplinary work. It is a space where pluralistic frameworks and theories come together to study sustainable consumption. This inclusive and collaborative approach, which assembles researchers, students, policymakers, and prosumers who want to solve environmental problems, is at the core of the field’s mission and scope.
History
Drawing on the work of economist Nicholas Georgescu-Roegen, Herman Daly masterminded the field’s foundational models in the early 1970s. Ecological economics was institutionalized as a field of study by the end of the 1980s with the establishment of the International Society for Ecological Economics in 1988, the society’s journal Ecological Economics in 1989, and its first international conference in 1990.
Environmentally motivated critiques of consumption and consumer society emerged in the mid-1960s, reflecting the challenges of the early environmental movement that was also formative for ecological economics. Early voices – such as Herman Daly (1968) and Fred Hirsch (1976) – warned of the environmental and social costs of the dominant paradigm of maximum economic growth and the societal expectation of ever-increasing consumption. Ecological economics developed an alternative, holistic, and long-term view of what “progress” means, using a systems perspective of the individual being embedded in a natural and social environment. However, the “double dividend” promises that reducing consumption would make us better off remained a niche belief.
The Brundtland Report and the Rio Conference – the first COP – officially acclaimed the relevance of consumption for sustainable development in 1992. A decade later, UNEP launched its 10-Year Framework Programme on Sustainable Consumption and Production Patterns, which laid the base for the Sustainable Development Goals (SDG) in 2015. SDG 12 sets concrete goals for more sustainable consumption patterns by ending water, energy, material, and food wastage, staying within the planetary boundaries, and reducing the ecological footprint. Since then, science and policy increasingly embraced the view of the economy as embedded in a larger ecosystem. Climate change and extreme weather events have made our dependency on a planet in balance ever more salient. Consumers, as one major contributor to the ecological crisis, are guided toward reducing waste, adopting circular approaches (such as repairing, reusing instead of buying, repurposing, recycling, or composting), increasing material efficiency by, for example, car sharing and swapping clothes and tools, and learning how to fulfill their wishes with more sufficient, less material and energy intensive options (such as swapping beef for plant-based diets or stopping using planes) (see Sharing Economy, Protein Shift, Sustainable Mobility, Energy Consumption Behavior).
Different Perspectives
Ecological economics has primarily developed from a critique of neoclassical, environmental, and resource economics. Its beginnings were fuelled by a deep frustration with the dominant economic growth paradigm that maximized consumption measured in GDP. For some voices, however, ecological economics does not distance itself enough from the traditional approaches, since it adopts some of the same fundamental concepts and stays within the contested perspective of capitalism. For instance, some critics claim that by using economic terms such as “natural capital”, the interpretations of value and cost of nature, and the definition of the optimal scale of economic activity, ecological economics reinforces rather than breaks with dominant capitalistic values. These critical voices demand and develop explicitly anti-capitalist solutions, some within, others beyond the ecological economics paradigm. Others, however, question the value of fuzzy complex concepts such as “natural capital” or “optimal scale”, which are complex to assess and subject to value judgments, limiting their practical impact. These different perspectives reflect the usual and much-needed debates that shape an emergent field or discipline, rather than constituting a profound rejection of its key propositions.
Applications
Beyond the continuous development of the principles and models of ecological economics, the field has inspired practical applications that promote sustainable consumption and production, translating theory into practice. One example with a significant impact has been the idea of natural capital and “putting a price tag” on ecosystem services. Over the years, several Natural Capital Accounting and assessment methods have evolved. Being able to estimate the value of ecosystem services, such as pollination or carbon sequestration, has been a big step forward in convincing governments about the benefits of environmental policies in traditional cost-benefit exercises. Moreover, having a shadow price available allows landowners, farmers, forest owners, and so forth to be compensated for maintaining or restoring the biodiversity of an area. A less obvious application is making the costs and benefits of circular economy projects transparent, to support this critical approach of minimizing waste and maximizing material efficiency. Last, estimates of ecosystem services are the base of carbon offset markets that allow emitters – including private consumers – to offset their carbon impact, at least on the balance sheet.
The story of ecological economics exemplifies a trend toward the establishment of applied, transdisciplinary fields that use a systems approach, especially those crossing natural and social sciences. Considering today’s “new normal” of multiple permacrises, a field that (i) thinks the economic, social, and ecosystems together, (ii) studies feedback loops, non-linear dynamics, and interconnectedness, (iii) harnesses the knowledge of natural and social science disciplines, and (iv) views the individual as more than just a market actor is well equipped to develop solutions and policy recommendations. Orthodox economics failed to deliver viable solutions for the climate and biodiversity crises beyond internalizing externalities. Ecological economics, in contrast, has spurred innovations in consumption and production practices, promotes circular concepts, and aims to create welfare for all within the planetary boundaries (see Doughnut Economics).
The good news is that today, economics as a discipline has become broader in scope and more inclusive. Most economists today see the potential of heterodox economic approaches such as ecological economics. The complexity and escalating urgency of moving toward sustainable consumption and production patterns and the concrete threats of planetary overshoot, with all its ramifications, call ever more for an ecological economics approach.
Further Reading
Costanza, R., D’Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O’Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P., & van den Belt, M. (1997). The value of the world’s ecosystem services and natural capital. Nature, 387(6630), 253–260. https://doi.org/10.1038/387253a0.
Daly, H. (1968). On economics as a life science. Journal of Political Economy, 76, 392–406. https://doi.org/10.1086/259412.
Hirsch, F. (1976). Social limits to growth. Routledge.
Røpke, I. (2004). The early history of modern ecological economics. Ecological Economics, 50, 293–314. https://doi.org/10.1016/j.ecolecon.2004.02.012.
Røpke, I., & Reisch, L.A. (2004). The place of consumption in ecological economics. In The ecological economics of consumption. https://doi.org/10.4337/9781845423568.00007.