![]() Why do people think they need a bigger house? It's not because they really need a bigger house to satisfy their housing needs. Maybe the simplest example would be the run- up of house sizes and house expenses that led to the housing bubble. Q: You mentioned natural and social externalities. ![]() I'm involved with a company called Trucost that works on just that, quantifying the external environmental cost of a company and using that information to inform investors and the companies themselves about how they can reduce their external cost. How do we fix that? Well, part of it is internalizing those externalities-pricing carbon, pricing impacts on other natural resources and ecosystem services. In that situation, you can't expect the market to efficiently allocate resources. We're finding that the natural and social externalities are actually larger than the internalities of what's going on in the market. But to think that the market is efficient at allocating resources requires a long list of assumptions that are seeming less and less realistic-not the least of which being that there has have to be no externalities. We may not always have more to spread around.Īllocation is important within mainstream economics. But I think we're getting into a time where we have to worry about distribution. It just focuses on having more, the idea being that the more we have the more we can spread around. So distribution has a lot of direct and indirect feedbacks on how the society is actually functioning that the conventional view tends to ignore. There is actually research to show that more unequal societies are less productive in the end because they spend a lot of their energy trying to maintain that gap. We find that if the distribution of income is too big, that creates competing groups within society. All three of these contribute to human well-being and sustainability.ĭistribution has many different impacts, not the least of which is its impact on social capital and on quality of life. The three interrelated goals of ecological economics are sustainable scale, fair distribution, and efficient allocation. Elsewhere you have talked about distribution and allocation as key parts of ecological economics. But we have to recognize that the environment creates certain limits and constraints on that, and we can define a safe operating space within which we can do the best we can. It’s not that we can't continue to improve the human situation. The mainstream view doesn’t recognize those limits or thinks that technology can solve any resource constraint problems. ![]() Ecological economics tries to study everything outside the market as well as everything inside the market and bring the two together.Ĭonventional economics doesn't really recognize the importance of scale-the fact that we live on a finite planet, or that the economy, as a subsystem, cannot grow indefinitely into this larger, containing system. Mainstream economics, I think, is focused largely on markets and while it recognizes that there are externalities, they are external-they're out there. Q: How does it differ from environmental economics?Įnvironmental economics is a subdiscipline of economics, so it's applying standard economic thinking to the environment. It also has some design elements, in the sense of how do we design a sustainable future.? It’s not just analysis of the past but applies that analysis to create something new and better. It’s an attempt to look at humans embedded in their ecological life-support system, not separate from the environment. That's what’s necessary to get a more integrated picture of how humans have interacted with their environment in the past and how they might interact in the future. It's not trying to be a subdiscipline of economics or a subdiscipline of ecology, but really it's a bridge across not only ecology and economics but also psychology, anthropology, archaeology, and history. Ecological economics is a trans-disciplinary field.
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