Ecological Economics

Although there are other alternatives to neoclassical economic, it is hard not to talk about the economy without referring to this model in some form or another. Understanding neoclassical economics is important for gaining insight into our current financial crisis to understand how markets operate. Neoclassical economics offers a very simple and elegant model for understanding markets. As I've indicated before, the problemwith neoclassical economics is believing these models are natural systems or laws that provide us guidance into how our economic system must be run. I want to talk about neoclassical economics to give some insight into our economic system and why we are in a crisis and what restructuring has to take place if we are going to put ourselves on a sustainable path. But first I want to talk about some alternatives to neoclassical economics.

There have been many proposed alternatives to neoclassical economics. Critics of neoclassical economics often criticize from these alternative positions. Marxists are the most well-known example. My contention is that Marxists and neoclassical economists suffer from the same affliction. They are both based upon scientific thought and what economics needs more than anything is an ethic that goes beyond objective valuation – which is the key ingredient for and economics school of thought to be labeled scientific. One of the latest alternative schools of thought to neoclassical economics is ecological economics and two of its founders and leaders are Herman Daly and Robert Costanza.

According to Herman Daly, Ecological Economics “seeks to ground economic thinking in the dual realities and constraints of our biophysical and moral environments” while promoting “truly transdisciplinary research in which practitioners accept that disciplinary boundaries are academic constructs irrelevant outside of the university.” With Robert Costanza and others, Daly has launched this bold new discipline seeking to displace the standard economic theory known as neoclassical economics. Although well-intentioned, Daly and Costanza are only the latest in a long line of academics attempting to make economics a more exact science.

Costanza’s contention that economists versed in the natural sciences would have a greater appreciation of the biosphere is correct, but ecologists should be wary about versing themselves in the seductive jargon of neoclassical economics which treats the biosphere as a commodity. Costanza’s 1997 $33 trillion estimate of the values of environmental services is one example of the folly of linking ecology with economics.

In the history of economics there have been many attempts at creating a theory that is rational and objective emulating the standards set in the natural sciences. Philip Mirowski has thoroughly documented these attempts and trends in his two seminal works More Heat than Light and Machine Dreams: Economics Becomes a Cyborg Science. Mirowski describes three waves of immigrants from the natural sciences during the 200 year history of economics. The first wave occurred during the mechanistic era of physics from 1870 to the turn of the century. The second phase of immigrants occurred during the operation management era of the cold war. The final phase is happening right now and is characterized under the heading of inter- or trans-disciplinary studies. Mirowski says in Machine Dreams:

The ubiquitous contraction of physics and the continuing expansion of molecular
biology has not only caused sharp redirections in careers, but also redirection
of cultural images of what it means to be a successful science of epochal
import. In many ways, the rise of the cyborg sciences is yet another
manifestation of these mundane considerations of funding and support;
interdisciplinary research has become more akin to a necessary condition of
survival in our brave new world than merely the province of a few dilettantes or
renaissance men; and the transformations of economic concepts…is as much an
artifact of a newer generation of physicists, engineers, and other natural
scientists coming to terms with the traditions established by a previous
generation of scientific interlopers dating from the depression and World War
II, as it is an entirely new direction in intellectual discourse.”

Ecological economics is part of the latest interdisciplinary push that has united the natural sciences and economics within the confines and constructs of neoclassical economics. Daly demonstrates his devotion to the “scientific method” as the only means for reforming neoclassical economics by offering objective valuation criteria for our resources at the expense of all other intellectual pursuits with his admonishment to other thinkers using alternative methods to “keep silent.” He states in his Ecological Economics textbook:

“…many members of the intelligentsia deny either nondeterminism, nonnihilism, or
both, yet they engage in a policy dialogue. It is not just that we
disagree on exactly what our alternatives are in particular instances, or about
what our value criterion implies for a concrete case—that’s part of reasonable
dialogue. The point is that determinists who deny the effective existence
of alternatives, and nihilists or relativists who deny the existence of a value
criterion beyond the level of subjective personal tastes, have no logical basis
for engaging in policy dialogue—and yet they do! We cordially and
respectfully invite them to remember and reflect deeply upon their option to
remain silent—at least about policy.”

Even if you agree with Daly that we should do more to protect our resources and opt out of a consumerist and materialist culture, he wishes for you to remain silent if you are unable to adhere to a nondeterminist program for discovering real and objective valuation criteria. Daly, like most scientists, believes we cannot act until we frame our arguments within objective, scientific rhetoric. It is as if we cannot trust our senses and argue for the nonproliferation of nuclear armaments, the reduction of CO2 emissions and the preservation of our air, water and wilderness areas because we just think (or God help us, believe) that this is the best course for the future of humanity. If we cannot come up with a reasonable valuation criterion demonstrating irrefutably that clean water is better than a high GDP and job growth, we should remove ourselves from the discussion. If we cannot play the economist game then Daly wishes we would all just shut up—respectfully, of course.

The determinists and nihilists Daly is referring to are the poets, novelists, artists, philosophers, and others in our society creating a culture valuing aesthetic beauty, peace, clean air, wilderness, and solitude over a consumer and materialist culture. Many of these individuals value inter-subjective agreement over discovering an objective valuation measure existing in its own right.
Daly has a strong attachment to the theology of “universal truth” and feels economics is tainted by its devotion to determinist Darwinism, which believes that historical contingencies play a greater role in the evolution of human society than the ultimate design by some universal entity. He misplaces the faults in neoclassical thinking by noting that this leads one to believe that “the natural world is just a pile of instrumental accidental stuff to be used up in the arbitrary projects of a purposeless species.”

A belief in ultimate ends does not guarantee one will also hold a belief in the importance of the stewardship over our environmental resources. Perhaps believing in a creator of this Earth will help one develop an environmental ethic and perhaps not. Regardless, Daly’s diatribe against determinists and nihilists needlessly isolates allies in a liberal agenda for preserving our planet from the excesses of modern consumerist culture.

One can believe that there is no purpose to human existence and still advocate a future for protecting the environment over a future of material gain and a buying culture. Environmental destruction and an accelerated pace towards extinction for the human race is as likely a future as one promoting stewardship and solving the many large environmental catastrophes currently facing us. The only way to ensure the latter choice is by changing culture through persuasive argument and convincing the majority of humans on our planet that a culture promoting wanton destruction of our planet in order to support a materialistic culture for a minority of inhabitants will lead to misery for the rest of us. I believe a search for an “ultimate truth” revealing the “real value” of our environmental resources is a fruitless and ultimately wasteful endeavor.

The problem with Daly and most ecological economists is not that they don’t feel strongly about the need to change the direction of our economy through reforming how economists think about valuation. The problem is they think, like scientists about truth, that a valuation criterion still exists out there in the real world somewhere and the economist’s job is to discover what this objective measure is and where it is at. In addition, ecological economists follow the example of others in scientific circles believing truth is discovered and not made through inter-subjective agreement among humans. This is a problem because, instead of using all means of persuasion available for changing culture around the world from aims toward consumerism and rising GDPs to one promoting an ethic of stewardship, ecological economists wish to replace neoclassical economics as the only game in town by discovering the one and only ultimate end which they propose falls under the rubric called ecological economics.

We would be better served if we realized price is a human creation but value is unknowable. Value defies scientific thought and is impossible to model accurately no matter what economic system we create. We need to rely on ethics and morality as the means for valuing natural resources. Accounting for them in a national accounting system will never provide the protections we need for the world we live in. Such an accounting system may have some desirable effects, but it is bound to have flaws which can be exploited by savvy entrepreneurs in search of profits.

What we should be striving for is not an amalgamation of economics with ecology, but rather the reduction of the role economists play in policy making and a greater emphasis upon the role ecologists, artists, novelist, poets and communities make in policy decisions. Both ecologists and economists need to open up their ears to the opinions and arguments of all members of the human race, rather than beseeching some to “remain silent.”