Relationship Between Economics And Ecology

Relationship Between Economics And Ecology


  1. Introduction
  2. Economics And Ecology: The Fundamental Differences
  3. Economic Imperialism
  4. Ecological Reductionism
  5. The Steady State Subsystem
  6. Conclusion


Since the Stockholm Conference in 1972 and a plethora of other conferences that followed, concerns for sustainable development have become more and more obvious over the past 40 years. A document titled "The Future We Want" was released by Rio 20 in 2012 and urged the promotion of an economically, socially, and environmentally sustainable future for our planet and for present and future generations. The preparation of another significant document, "Transforming Our World," which will direct our pursuit of Sustainable Development over the next 15 years, was part of the effort that also laid the groundwork for a detailed agenda for future courses of action. There are 169 targets set out in order to accomplish the 17 sustainable development goals. The draft 2030 Agenda for Sustainable Development, which was unveiled on August 3, 2015, identifies five areas of vital importance for humanity and the environment. These are the five Ps.
  • 1. People: elimination “of poverty and hunger, in all their forms and dimensions, and to ensure that all human beings can fulfil their potential in dignity and equality and in a healthy environment”. 
  • 2. Planet: protecting “the planet from degradation, including through sustainable consumption and production, sustainably managing its natural resources and taking urgent action on climate change, so that it can support the needs of the present and future generations”. 
  • 3. Prosperity : ensuring that “all human beings can enjoy prosperous and fulfilling lives and that economic, social and technological progress occurs in harmony with nature”. 
  • 4. Peace: fostering “peaceful, just and inclusive societies which are free from fear and violence (as those who framed the document firmly believe that) there can be no sustainable development without peace and no peace without sustainable development” and 
  • 5. Partnership: mobilizing “the means required to implement this Agenda through a revitalised Global Partnership for Sustainable Development, based on a spirit of strengthened global solidarity, focussed in particular on the needs of the poorest and most vulnerable and with the participation of all countries, all stakeholders and all people”.
In a nutshell, the document calls for a strategy that guarantees inclusive growth for humanity in the near future while also safeguarding the planet from rapid degradation that, if not addressed wisely from this point forward, could threaten the very existence of human life in particular and the ecosystem in general in the near future. The second concern is in the area of ecology, whereas the first concern is traditionally in the field of economics. The current section examines the apparent conflicts between the two fields of knowledge in terms of their "conceptual framework" and also follows recent efforts at an interdisciplinary approach to lessen the obvious conflicts between the two.

Economics And Ecology: The Fundamental Differences

What key distinctions exist between the fundamental beliefs that an economist and an ecologist hold?
  • An economist views people as being located outside of the ecosystem with the ability to use its components in ways that maximize their material well-being. An ecologist, on the other hand, sees humans as being a part of the ecosystem and linked to other natural resources, both living and non-living, in an integrated chain of relationships.
  • By increasing human capacity to produce and subsequently consume goods and services, which is reflected in steadily rising GDP and, more recently, the Human Development Index, economists believe that human welfare can be maximized. The earth is used as a source of resources and a sink for "bads" produced during the process but unfit for human consumption. The various elements of nature are to be utilized to facilitate movement of the economy along such a desired pathway. In doing so, economists fail to make a distinction between resources created by humans and those brought about by the natural world. A long-held belief among economists was that, as and when the need arose, technological advancements would make it easier for humans to produce the majority of natural resources. On the other hand, ecologists do hold the view that the vast majority, if not all, of the natural resources can only be used by humans but may never be produced by them, and as such, should be used sparingly. Additionally, using nature as a "bads sink" can endanger ecosystem functioning and ultimately threaten the survival of humans as one of the thousands of species found on Noah's Ark.
There have been attempts to resolve the "conceptual" conflicts because of the concern for "sustainable development" and the realization that neither economics nor ecology can pursue their disciplinary pursuits without taking into account the divergent leads emanating from one another. A recent article by Herman Daly succinctly summarizes the opposing world views of economists and ecologists as well as a potential solution. He claims that three different strategies are used to try and achieve such integration.
  • Economic imperialism
  • Ecological reductionism and
  • Steady state subsystem.

Economic imperialism

Economic imperialism's approach "seeks to widen the economic subsystem's perimeter until it encloses the entire ecosphere.". The macroeconomic system as a whole is the intended system. In a typical neo-classical worldview, subjective individual preferences are seen as the ultimate source of value. As long as the costs of the expansion, which include the cost of ecosystem degradation, are internalized, the expansion is regarded as legitimate. e. All expenses brought on by ecosystem degradation will be calculated and added to the price of the goods or services. Only those who are willing and able to pay such increased prices will be allowed to consume them, keeping everyone else out of reach.1 Dot With increased ecosystem degradation and the ensuing rise in prices of the goods and services so produced, there will be an internal control mechanism that will limit the extent of degradation before it reaches a sustainable level. The perspective is further explained in the following diagram. The utility of consuming goods and services produced by an economic system. The utility obtained from an incremental unit of a good or service will decrease as consumption increases, according to the law of diminishing marginal utility. Consuming a product will become less useful if the costs of ecosystem degradation are internalized. This includes costs related to using natural resources beyond their natural capacity for growth and using the environment as a sink for production waste. Additionally, as the consumption of the aforementioned goods or services rises, so will the incremental disutility. As a result, the marginal utility curve slopes downward and to the right, while the marginal disutility curve moves in the opposite direction. The point where these two lines converge determines the economic growth ceiling in a typical neo-classical framework. The environment may tip over into an environmental catastrophe, similar to the collapse of the ecosystem, if resources are still being depleted in order to maintain increased levels of production and consumption. Idealistically, the point at which economic growth is limited is anticipated to be to the left of the point at which environmental catastrophe occurs, giving mankind some valuable time to realize the need for the desired course of action. The diagram's far right corner has a mark that denotes the futility limit, which is the consumer's point of total satiation after which there is no further increase in overall utility. Environmental catastrophe is believed to occur well before the point of total satiation if the costs of ecosystem degradation are internalized in the processes of production and consumption.

As a result of this tactic, environmental economics emerged as a distinct field of study in economics. The strategy, however, lacks credibility. According to Herbart Simon's claim of bounded rationality, many of these costs are neither anticipated nor even envisioned. As is presumed under the condition of rationality, Simon argued, humans are not capable of making perfect predictions about all future events. Thus, full internalization of the cost of ecosystem degradation is challenging to attain in practice. Additionally, even when some of these external costs are apparent, proper enforcement mechanisms frequently take a long time and may only partially achieve the desired level of internalization. A prime example is the ongoing, contentious discussion of climate change. As a result, the process of effective internalization might not be flawless either, which puts us in a situation that is similar to the deviation from the ideal market system proposed by the neo classical school of economic thought in the form of a lack of a full set of perfect markets. As a result, there is no mechanism in place to guarantee total internalization of ecosystem degradation.

Ecological Reductionism

According to ecological reductionism, the economic subsystem should be integrated into the natural system and its boundaries should be removed in order to account for human behavior using the same sets of natural laws that govern the behavior of other elements of nature. According to Daly, it "begins with the true insight that markets and people are not immune to the laws of nature. The erroneous conclusion that human behavior can be fully explained and reduced to the laws of nature follows. When taken to its logical conclusion, this theory holds that everything can be explained by a materialist, deterministic system (of nature) devoid of the reason or free will that set humans apart from other parts of nature. " .

The Second Law of Thermodynamics is what gives the ecological reductionist argument its heft. That was N. In his 1971 book "The Entropy Law and the Economic Process," Georgescu-Roegen made the case that the phenomenon of free energy tending to disperse and becoming lost in the form of bound energy is what drives an economic process. So even though he called his new methodology "bioeconomics," he is regarded as one of the founders of ecological economics. His arguments were based on the idea that humans, like all other living things, depend on energy that is available in usable form from natural resources — also known as free energy in the literature. We often produce energy that is no longer usable after the resources are used because they are not fully recyclable and some of it is lost to nature as waste. Bound energy is what they are called. According to Georgescu-Roegen, entropy is a measurement of the unusable or bound energy produced within the natural system in which we live. According to the theory put forth by Gowdy and Mesner (Gowdy and Mesner 1998, P 147), "humanity has the distinction of currently being the most significant contributor to entropic degradation by the increasing rates of extraction of natural resources and elimination of wastes into the environment.". In order to create and maintain their intricate structures, other living things also consume low entropy energy sources, which they then release into the environment in a higher entropy state. However, compared to human beings, they make minimal contributions to the increase in entropy.

The literature that is currently available is replete with evidence that humans are contributing to the ecosystem's alarmingly rising entropy. Numerous manifestations of increased entropy have an impact on human life and welfare. Direct and indirect communication are both used by some of them. With regard to the direct effects, we have already mentioned Berbier's (2014) finding that the share of natural resource depletion in the countries' adjusted GNIs was quite high. Increasing temperatures are already having some effects, according to a document posted on the National Geographic website.
  • Ice is melting worldwide, especially at the Earth’s poles. This includes mountain glaciers, ice sheets covering West Antarctica and Greenland, and Arctic sea ice. 
  • Researcher Bill Fraser has tracked the decline of the Adélie penguins on Antarctica, where their numbers have fallen from 32,000 breeding pairs to 11,000 in 30 years. 
  • Sea level rise became faster over the last century. 
  • Some butterflies, foxes, and alpine plants have moved farther north or to higher, cooler areas. 
  •  Precipitation (rain and snowfall) has increased across the globe, on average. 
  • Spruce bark beetles have boomed in Alaska thanks to 20 years of warm summers. The insects have chewed up 4 million acres of spruce trees. It also notes that if warming continues. 
  • Sea levels are expected to rise between 7 and 23 inches (18 and 59 centimeters) by the end of the century, and continued melting at the poles could add between 4 and 8 inches (10 to 20 centimeters).
    Hurricanes and other storms are likely to become stronger. 
  • Species that depend on one another may become out of sync. For example, plants could bloom earlier than their pollinating insects become active. 
  • Floods and droughts will become more common. Rainfall in Ethiopia, where droughts are already common, could decline by 10 percent over the next 50 years. 
  • Less fresh water will be available. If the Quelccaya ice cap in Peru continues to melt at its current rate, it will be gone by 2100, leaving thousands of people who rely on it for drinking water and electricity without a source of either. 
  • Some diseases will spread, such as malaria carried by mosquitoes. 
  • Ecosystems will change—some species will move farther north or become more successful; others won’t be able to move and could become extinct. Wildlife research scientist Martyn Obbard has found that since the mid-1980s, with less ice on which to live and fish for food, polar bears have gotten considerably skinnier. Polar bear biologist Ian Stirling has found a similar pattern in Hudson Bay. He fears that if sea ice disappears, the polar bears will as well.
Let's move on to the side effects. According to Bartoloni's 2003 thesis, human societies' economic development is facilitated by two types of negative externalities. Positional externalities include human desires to climb the social ladder and environmental externalities that limit the amount of free goods that are available to people. Positional externalities also include human desires to acquire a higher relative social position. For instance, economic development ensures that today's price of pure drinking water, which was previously free everywhere in the world even a few decades ago. Theodore F. As potential causes of violent intergroup conflict, Homer-Dixon (1994) identified six categories of environmental change:
  • greenhouse-induced climate change; 
  • stratospheric ozone depletion; 
  • degradation and loss of good agricultural land; 
  • degradation and removal of forests; 
  • depletion and pollution of fresh water supplies; and 
  • depletion of fisheries.
He put three theories to the test and found that they were both correct and that these changes were related to violent conflict. "First, declining supplies of physically controllable environmental resources, such as fresh water and fertile land for farming, would lead to interstate "simple-scarcity" conflicts or resource wars. Furthermore, significant population shifts brought on by environmental stress would result in "group-identity" conflicts, particularly ethnic conflicts. Third, extreme environmental scarcity would simultaneously worsen economic hardship and upend fundamental social institutions, which would in turn lead to "deprivation" conflicts like insurgency and civil unrest.

The proponents of ecological reductionism firmly believe that in addition to the "tragedy of the commons" developed by Garrett Hardin in 1968, we are also about to experience the "tragedy of entropy". It is impossible to stop the increase in entropy. Daly disagrees and asserts that in order to defeat the "tragedy of entropy," a group effort similar to that which was used to successfully avoid the tragedy of the commons is required. It is not advisable to give up and profess a method that calls for erasing the distinction between the ecosystem and the human economic system. The literature on the relationship between social and ecological systems and the problem of their resilience [Holling 2001; Berkes and Folke, 1998] also emphasizes the significance of group effort and social mechanisms for building resilience in controlling the increasing entropy.

We could bring up some of the current discussions in India about development vs. conservation. We can start by building on an article published recently in Economic and Political Weekly by Nagarajan and others titled "The Debate on Biodiversity Conservation in the Western Ghats" [July 25, 2015, pp. 49–56]. The study contrasts the findings of the K. High Level Working Group and the Western Ghats Ecology Experts Panel, both of which are led by Madhav Gadgil. Kasturirangan. In response to the same set of criteria, the former suggested that the entire Western Ghats be classified as ecologically sensitive, which is similar to the ecological reductionist school of thought, while the latter said that only 37% of the region was ecologically sensitive, which is more in line with the economic imperialism school of thought. The two studies used entirely different methodologies and sets of data, reflecting their own respective worldviews. It's also interesting to note that none of them gave any thought to the local political contexts that would define potential collective actions in an effort to find a consensus that would be acceptable to both parties.

A fundamental question regarding the entropy literature is brought up by the discussion surrounding the Western Ghats conservation issue. Even though human activities on a large scale contribute to the ecosystem's increasing entropy, some communities coexist peacefully with nature and don't significantly aggravate the process of upsetting the ecosystem's balance. They don't produce waste that is largely bionon-degradable and, therefore, beyond the capacity of nature to absorb on its own, nor do they use natural resources at a rate that exceeds their natural growth rate. These tiny entities, however, lack the influence necessary to shape the conversation about the steps that should be taken to achieve a sustainable balance between economics and ecology. They are thus held captive by both the ideologies of ecological reductionism and economic imperialism, and frequently cut off from the close connection to nature that they have been upholding since the dawn of time. In order to effectively include them in the dialogue process, one could argue that collective action is required.

The Steady State Subsystem

According to John Stuart Mill (1857), a stationary state is one in which both the rate of population growth and the rate of capital accumulation are zero. This is when the idea of a steady state subsystem first emerged. Equal birth and death rates would indicate a population growth rate of zero, whereas equal production and depreciation would indicate a growth rate of zero for the capital stock. However, in such a state, the rates would have to be equal at a lower level, indicating high human longevity and the durability of the goods and services produced, provided that there are enough stocks to maintain a high standard of living.

The economic subsystem's boundary no longer needs to be eliminated through either expansion or contraction under such a steady state. Daly contends that such a boundary needs to be understood and drawn appropriately. The acceptance of the qualitative differences between the human economy and the natural ecosystem would also be emphasized by such an exercise. According to Daly, "The human subsystem has an optimum scale defined by the boundary, and the throughput by which the ecosphere physically maintains and replenishes the economic subsystem must be ecologically sustainable.". That throughput is entropic, but the economy's objective is to minimize the amount of low entropy use required to maintain a sufficient standard of living by sifting low entropy slowly and carefully through effective technologies intended for significant goals, as opposed to maximizing low entropy use. The economy shouldn't be seen as a stupid machine whose only goal is to generate as much waste as possible. Maintaining and enjoying life is its ultimate cause rather than maximization of waste.


The disparity between the worldviews of mainstream ecology and economics was discussed in an earlier section. The current discussion has made it clear that a working bridge must be constructed in order to resolve these fundamental differences. The divergence in the methodological toolkits available to economists and ecologists to resolve the sustainable development issue is also a result of the different approaches. Recent initiatives to create "green national accounts" are a step in the right direction. The "Inclusive Wealth Report 2014," which was put together by a team of experts under the direction of Partha Dagupta, also aimed to close some of the data gaps with a thorough conceptualization of inclusive wealth that would help us move toward sustainable development while also thriving to guarantee both intra-generational equity and inter-generational equity.

To identify the desired pathways in settling a reconciliation between economics and ecology, however, there are some methodological obstacles to be overcome. Today, there is an urgent need for a conceptual framework that makes it easier to comprehend the connections between people and the natural world at the micro level while also having the ability to detonate at the macro level. Otherwise, in our pursuit of sustainable development, we risk falling victim to arguments that promote measures that provide the greatest social and environmental benefits. It goes without saying that a method like this would be unable to distinguish between the effects of macro policies on numerous species and human communities at the micro level. In addition, a welfare economics framework that includes nature as a significant stakeholder is required. The conceptual challenge will be quite challenging given the numerous non-convexities and non-linearities present in nature's production and consumption behavior as well as that of the rest of her non-human species.


  1. Anant, T. C. A., et al. (2013). Green National Accounts in India: A Framework. A Report by an Expert Group Convened by the National Statistical Organization, Ministry of Statistics and Programme Implementation, Government of India; Last accessed on 17 August 2015 from onal_Accouts_in_India_1may13.pdf .
  2. Arrow, K. J., Dasgupta, P., Goulder, L. H., Mumford, K. J., & Oleson, K. (2012). Sustainability and the measurement of wealth. Environment and Development Economics, 17(03), 317-353.
  3.  Avery, J S (2012). Entropy and Economics. Cadmus 1, no. 4(2012): 166-179.


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