The Emergence of new Economic Paradigms: Specifically Ecological Economics
Introduction:
Starting from the prehistoric ages of primitive tool-making to our era of complex technology, humanity has used the earth and its resources to ensure its survival and provide itself with a sense of well-being and comfort through material means. However, as our capacity for technological development continues to advance, so does our ability to exploit and harness the planet’s natural resources to satisfy our growing social and economic demands. This trend has been going on for centuries and even millenniums but in the recent years has it begun to jeopardize our livelihood; and if uncontrolled it is likely to threaten our very existence. The environmental and natural sciences have long ago revealed the potential vulnerability of our planet and forewarned us of the dire consequences of the burdens we continue to subject the earth to with our reckless pursuit of economic growth. Today the planet seems to be validating claims of a limit to its resilience and a threshold after which irreversible natural events may come into manifestation. While ignorance of the extent of the burden we subject the planet to has hitherto provided leeway for our actions to persist. The escalation in frequency and magnitude of natural disasters such as tsunamis, hurricanes and earth quakes, as well as the alarming rate at which arctic glaciers are melting, testify to the immediacy of the environmental crisis that looms upon us. Faced with this global exigency, neoclassical economists have been forced to reevaluate their original models representing the economy’s relationship with the ecosystem. Indeed, in light of our realization of the detrimental effects that human activities can have on the environment, a new economic paradigm has also emerged and is gaining an increasing level of popularity amongst scholars in both the economics discipline and the ecology discipline. This philosophy, as it is has occasionally been described, is called ecological economics.
In addition, to dealing with its weaknesses as far as its relationship with the environment is concerned, neoclassical economics may also benefit from clarifying the ultimate goal of its science and redirecting its efforts towards reaching its stated purpose. In this paper, we will begin by:
1. Explaining the generally accepted aims and concepts of neoclassical economics, and discussing its efforts to approach the problem of environmental pollution.
3. We describe the field of ecological economics and contrast it with neoclassical economics
4. We then go on to briefly discuss a few other economic paradigms and illustrate their potential contributions to mainstream economics to aid it in achieving its goals.
Neoclassical Economics:
The discipline of economics itself emerged from a need to deal with the problem of producing goods for the maximum of consumers, given a limited amount of available resources. It concerns itself with providing an optimal standard of living for both our generation and the ones to come. Neoclassical economics has used a plethora of mathematical and statistical tools as well as developed complex models to aid it in this endeavor. Today it finds itself a prisoner of its own tools and assumptions whose role of simplifying complex economic realities into models has reduced the potential of its prediction capabilities. Ironically, Neoclassical Economics was born in light of the lack of educated foresight of its predecessor Classical Economics. Its predecessor’s lack of foresight was epitomized by Thomas Malthus’ dismal theory concerning the fate of the world’s future living standards. He predicted that due to the fact that food supply was subject to an arithmetic rate of growth while the population’s rate of growth was exponential, humans were bound to reach a point where standards of living would be reduced to deplorable conditions. Basing itself on Malthus’ theory, classical economists widely held the view that the environment set a limit to economic growth. The progress of technological advances and its effect on the development of a more productive agriculture dismantled Malthus’ theory and classical economics itself with it. From its ruins emerged a new economics known today as Neo-classical economics; which is considered nowadays as the mainstream economics. Being a social science ostensibly dependent on interdisciplinary knowledge, neoclassical economics has been lead to many sound economic conclusions based on general wisdom born from other disciplines. However, it is clear that its current resistance to the input of the natural sciences, for example, has also resulted in incomplete or erroneous assumptions concerning ecological systems that have and will lead to economic decisions that fail to be optimal in the long run. Indeed neoclassical economics’ theory of the rational “economic man” has been shown to be lacking soundness, for it is frequently the case that man has overexploited the earth’s resources in the search for economic gain to the point of losing his very source of income. Of course this does not make the discipline itself invalid but it does argue for its inevitable imperfection and thus a need for improvement. Fortunately economists are aware of the disciplines’ weaknesses and have given birth to a few sub-disciplines to resolve some of these issues. Environmental Economics and Resource Economics are the offspring that have come about as an academic means to address mainstream economics’ failure to properly deal with the negative externalities that are pollution and a lack of sustainability. However, as subfields of the discipline, they mostly utilize the same tools and rest within the same paradigm as mainstream economics. Consequently their approach to environmental issues remains roughly the same as Neoclassical Economics. As described by (Daly and Farley 2004) “…conventional economics sees the economy, the entire macro-economy as a whole. To the extent that nature or the environment is considered at all, they are thought as parts or sectors of the macro-economy.” Ecological economics, however views the economy with a whole new perspective.
Ecological Economics and its contrasts with Neoclassical Economics:
Departing from the prevailing economic way of viewing the environment, Ecological economics offers a multidisciplinary approach to understanding the relationship between the economy and the environment. Again as put by (Daly and Farley 2004) “ Ecological economics, by contrast, envisions the macro-economy as part of a larger enveloping and sustaining whole—namely, the Earth, its atmosphere, and its ecosystem. The economy is seen as an open subsystem of that larger Ecosystem”. As opposed to Neoclassical Economics, Ecological economics strives to adopt an economic development path that does not lead to an eventual transgression of the earth’s resilience threshold. The discipline utilizes the knowledge that is generated from the natural sciences in its endeavor to reconcile economic growth with ecological sustainability. It acknowledges the uncertainty that is characteristic of the risks involved in our manipulation and transformation of the earth. While Neoclassical Economics naively postulates that future technological advances will have the ability to undo the consequences of our uninformed and environmentally pernicious activities, Ecological economics approaches uncertainty with prudence and astuteness. The latter discipline is aware of the dangerous repercussions of running blindly into the obscurity of unknown possibilities and outcomes that may turn out to be harmful and even irreversible. Therefore it relies on the guidance of the natural sciences whose expertise and understanding of the ecological system give it a better assessment of the possibilities for economic growth that run the least environmental risks possible. Though mainstream economics has begun to work with the concept of sustainability it still lags behind ecological economics’ broad focus on maintaining the integrity of the environment and its resources for the benefit of future generations; this is because it believes that future generation’s quality of life should not be largely discounted in favor of overconsumption in the present generation. Ecological Economics recognizes that there are three elements of sustainability that need to be attained in any community; that is economic sustainability but also social sustainability and ecological sustainability. The Economy, the ecology and society are complex systems that are intertwined and interconnected. When one of these systems is left uncontrolled and does not seek to advance for the benefit of the rest of the systems, it inevitably finds itself affected. In fact, veritable economic efficiency, considers the costs and benefits across all the systems that affect the economy. It seeks to obtain the true costs of such activities that cause a depletion of natural resources. It concerns itself with the effect that certain economic activities may have on society itself and the integrity of social capital. It captures the environmental and health costs of activities that produce large quantities of waste, air pollution, water pollution etc… The realization of all these costs should naturally bring the economy towards efficiency and sustainability. Value is another concept where neoclassical economists and ecological economists diverge in perspective. To the first, value is narrowly defined and totally determined by either the market price or an individual’s stated willingness to pay. The latter suggests that the theory of value should be represented in all its complexity by incorporating the intrinsic value, aesthetic value, intrinsic value, socio-cultural value as well as the economic value of a good or service, whether it be provided by nature of by human labor.
Other Emerging Economic Paradigms:
As mentioned earlier, Neoclassical Economics’ failure to address many of its weaknesses adequately has opened the door for new economic paradigms to emerge through the umbrella of a few disciplines including that of economics itself. In this section of the paper we discuss these new economic approaches and their potential contributions to creating sustainability driven and comprehensive field of economics.
Schumacher’s Economics (Dubbed “Buddhist Economics”):
“Buddhist economics” as it is called today, was made popular in the west by author Ernest Friedrich Schumacher through his book “Small Is Beautiful: Economics as if People Mattered”. In his book Schumacher argues that conventional economics’ blind pursuit of profit should not be at the expense of the very people’s quality of life that the discipline is intended to preserve and enhance. He not only envisions changing the conventional economic paradigm but also the type of society it is producing. Buddhist economics views the trend of consumerism started by the prevailing economic ideology as phenomena that inevitably ends in the overconsumption and depletion of our finite resources. It seeks to change the sort of economic environment that promotes such behavior. Inspired by spiritual values offered by the Buddhist religion; Buddhist economics goes even deeper than merely attempting to change economic concepts and assumptions. It seeks to change the way of life of the actors that make the economy, thus creating a different economic dynamic from its roots; by changing the people’s approach to fulfilling their individual lives. Buddhist economics aims at the very core of neoclassical economics ultimate goal; which is to increase people’s well being or standards of living. However it does not see material acquisitions as the principal solution to increasing well-being. Though it concedes that material possessions are important it does not abide to the slogan “more is better” but more so “small is beautiful”. Buddhist economists are similar to ecological economists in their belief that the ecosystem, the human species and the rest of the species in the planet are interconnected and their vision of the economy both includes sustainability that transcends continents and generations.
Anthropological Economics:
Anthropological economics, notably its culturalist position, is a nascent field born from the discipline of anthropology. It observes that mainstream economics is does not adequately approach different cultures in its endeavor to promote economic development. It criticizes conventional economics for its universal application of western economic models in culturally different communities around the world. It attributes many of neoclassical economics’ failure to implement sound policies in developing countries to the fact that their models are not indicative of the socio-cultural realities that are inextricably connected to the economy. Anthropological economics believes that every society has its “local model” that must be understood before any economic changes can take place through the making of policies. These local models carry with them assumptions that are sensitive to local psychology and society of a given community. Concepts such as value, exchange property and even profit are occasionally different from that of the west and must be studied if those countries are to benefit for any foreign economic advice.
Conclusion:
This paper is not meant to claim that neoclassical economics is an invalid science, incapable of contributing to the advancement of human affairs in the world. It has definitely played a great role in the great economies that have emerged in our times, such as that of the United States and even China. However, the survival of neoclassical economics depends on its ability to address contemporary issues and accurately predict and obviate future obstacles to economic prosperity. It is undoubtedly paramount that economic growth which hinders the ecology be adequately accounted for within the economic field, especially given the knowledge that we have of the dangers of ignoring human activities harmful effects to the environment and ultimately to ourselves. Ecological economics as well as Buddhist economics and even Anthropological economics have a lot to offer in insight concerning the transformation of mainstream economics into one that is sustainable, efficient and applicable across the globe as diverse as it is.
Starting from the prehistoric ages of primitive tool-making to our era of complex technology, humanity has used the earth and its resources to ensure its survival and provide itself with a sense of well-being and comfort through material means. However, as our capacity for technological development continues to advance, so does our ability to exploit and harness the planet’s natural resources to satisfy our growing social and economic demands. This trend has been going on for centuries and even millenniums but in the recent years has it begun to jeopardize our livelihood; and if uncontrolled it is likely to threaten our very existence. The environmental and natural sciences have long ago revealed the potential vulnerability of our planet and forewarned us of the dire consequences of the burdens we continue to subject the earth to with our reckless pursuit of economic growth. Today the planet seems to be validating claims of a limit to its resilience and a threshold after which irreversible natural events may come into manifestation. While ignorance of the extent of the burden we subject the planet to has hitherto provided leeway for our actions to persist. The escalation in frequency and magnitude of natural disasters such as tsunamis, hurricanes and earth quakes, as well as the alarming rate at which arctic glaciers are melting, testify to the immediacy of the environmental crisis that looms upon us. Faced with this global exigency, neoclassical economists have been forced to reevaluate their original models representing the economy’s relationship with the ecosystem. Indeed, in light of our realization of the detrimental effects that human activities can have on the environment, a new economic paradigm has also emerged and is gaining an increasing level of popularity amongst scholars in both the economics discipline and the ecology discipline. This philosophy, as it is has occasionally been described, is called ecological economics.
In addition, to dealing with its weaknesses as far as its relationship with the environment is concerned, neoclassical economics may also benefit from clarifying the ultimate goal of its science and redirecting its efforts towards reaching its stated purpose. In this paper, we will begin by:
1. Explaining the generally accepted aims and concepts of neoclassical economics, and discussing its efforts to approach the problem of environmental pollution.
3. We describe the field of ecological economics and contrast it with neoclassical economics
4. We then go on to briefly discuss a few other economic paradigms and illustrate their potential contributions to mainstream economics to aid it in achieving its goals.
Neoclassical Economics:
The discipline of economics itself emerged from a need to deal with the problem of producing goods for the maximum of consumers, given a limited amount of available resources. It concerns itself with providing an optimal standard of living for both our generation and the ones to come. Neoclassical economics has used a plethora of mathematical and statistical tools as well as developed complex models to aid it in this endeavor. Today it finds itself a prisoner of its own tools and assumptions whose role of simplifying complex economic realities into models has reduced the potential of its prediction capabilities. Ironically, Neoclassical Economics was born in light of the lack of educated foresight of its predecessor Classical Economics. Its predecessor’s lack of foresight was epitomized by Thomas Malthus’ dismal theory concerning the fate of the world’s future living standards. He predicted that due to the fact that food supply was subject to an arithmetic rate of growth while the population’s rate of growth was exponential, humans were bound to reach a point where standards of living would be reduced to deplorable conditions. Basing itself on Malthus’ theory, classical economists widely held the view that the environment set a limit to economic growth. The progress of technological advances and its effect on the development of a more productive agriculture dismantled Malthus’ theory and classical economics itself with it. From its ruins emerged a new economics known today as Neo-classical economics; which is considered nowadays as the mainstream economics. Being a social science ostensibly dependent on interdisciplinary knowledge, neoclassical economics has been lead to many sound economic conclusions based on general wisdom born from other disciplines. However, it is clear that its current resistance to the input of the natural sciences, for example, has also resulted in incomplete or erroneous assumptions concerning ecological systems that have and will lead to economic decisions that fail to be optimal in the long run. Indeed neoclassical economics’ theory of the rational “economic man” has been shown to be lacking soundness, for it is frequently the case that man has overexploited the earth’s resources in the search for economic gain to the point of losing his very source of income. Of course this does not make the discipline itself invalid but it does argue for its inevitable imperfection and thus a need for improvement. Fortunately economists are aware of the disciplines’ weaknesses and have given birth to a few sub-disciplines to resolve some of these issues. Environmental Economics and Resource Economics are the offspring that have come about as an academic means to address mainstream economics’ failure to properly deal with the negative externalities that are pollution and a lack of sustainability. However, as subfields of the discipline, they mostly utilize the same tools and rest within the same paradigm as mainstream economics. Consequently their approach to environmental issues remains roughly the same as Neoclassical Economics. As described by (Daly and Farley 2004) “…conventional economics sees the economy, the entire macro-economy as a whole. To the extent that nature or the environment is considered at all, they are thought as parts or sectors of the macro-economy.” Ecological economics, however views the economy with a whole new perspective.
Ecological Economics and its contrasts with Neoclassical Economics:
Departing from the prevailing economic way of viewing the environment, Ecological economics offers a multidisciplinary approach to understanding the relationship between the economy and the environment. Again as put by (Daly and Farley 2004) “ Ecological economics, by contrast, envisions the macro-economy as part of a larger enveloping and sustaining whole—namely, the Earth, its atmosphere, and its ecosystem. The economy is seen as an open subsystem of that larger Ecosystem”. As opposed to Neoclassical Economics, Ecological economics strives to adopt an economic development path that does not lead to an eventual transgression of the earth’s resilience threshold. The discipline utilizes the knowledge that is generated from the natural sciences in its endeavor to reconcile economic growth with ecological sustainability. It acknowledges the uncertainty that is characteristic of the risks involved in our manipulation and transformation of the earth. While Neoclassical Economics naively postulates that future technological advances will have the ability to undo the consequences of our uninformed and environmentally pernicious activities, Ecological economics approaches uncertainty with prudence and astuteness. The latter discipline is aware of the dangerous repercussions of running blindly into the obscurity of unknown possibilities and outcomes that may turn out to be harmful and even irreversible. Therefore it relies on the guidance of the natural sciences whose expertise and understanding of the ecological system give it a better assessment of the possibilities for economic growth that run the least environmental risks possible. Though mainstream economics has begun to work with the concept of sustainability it still lags behind ecological economics’ broad focus on maintaining the integrity of the environment and its resources for the benefit of future generations; this is because it believes that future generation’s quality of life should not be largely discounted in favor of overconsumption in the present generation. Ecological Economics recognizes that there are three elements of sustainability that need to be attained in any community; that is economic sustainability but also social sustainability and ecological sustainability. The Economy, the ecology and society are complex systems that are intertwined and interconnected. When one of these systems is left uncontrolled and does not seek to advance for the benefit of the rest of the systems, it inevitably finds itself affected. In fact, veritable economic efficiency, considers the costs and benefits across all the systems that affect the economy. It seeks to obtain the true costs of such activities that cause a depletion of natural resources. It concerns itself with the effect that certain economic activities may have on society itself and the integrity of social capital. It captures the environmental and health costs of activities that produce large quantities of waste, air pollution, water pollution etc… The realization of all these costs should naturally bring the economy towards efficiency and sustainability. Value is another concept where neoclassical economists and ecological economists diverge in perspective. To the first, value is narrowly defined and totally determined by either the market price or an individual’s stated willingness to pay. The latter suggests that the theory of value should be represented in all its complexity by incorporating the intrinsic value, aesthetic value, intrinsic value, socio-cultural value as well as the economic value of a good or service, whether it be provided by nature of by human labor.
Other Emerging Economic Paradigms:
As mentioned earlier, Neoclassical Economics’ failure to address many of its weaknesses adequately has opened the door for new economic paradigms to emerge through the umbrella of a few disciplines including that of economics itself. In this section of the paper we discuss these new economic approaches and their potential contributions to creating sustainability driven and comprehensive field of economics.
Schumacher’s Economics (Dubbed “Buddhist Economics”):
“Buddhist economics” as it is called today, was made popular in the west by author Ernest Friedrich Schumacher through his book “Small Is Beautiful: Economics as if People Mattered”. In his book Schumacher argues that conventional economics’ blind pursuit of profit should not be at the expense of the very people’s quality of life that the discipline is intended to preserve and enhance. He not only envisions changing the conventional economic paradigm but also the type of society it is producing. Buddhist economics views the trend of consumerism started by the prevailing economic ideology as phenomena that inevitably ends in the overconsumption and depletion of our finite resources. It seeks to change the sort of economic environment that promotes such behavior. Inspired by spiritual values offered by the Buddhist religion; Buddhist economics goes even deeper than merely attempting to change economic concepts and assumptions. It seeks to change the way of life of the actors that make the economy, thus creating a different economic dynamic from its roots; by changing the people’s approach to fulfilling their individual lives. Buddhist economics aims at the very core of neoclassical economics ultimate goal; which is to increase people’s well being or standards of living. However it does not see material acquisitions as the principal solution to increasing well-being. Though it concedes that material possessions are important it does not abide to the slogan “more is better” but more so “small is beautiful”. Buddhist economists are similar to ecological economists in their belief that the ecosystem, the human species and the rest of the species in the planet are interconnected and their vision of the economy both includes sustainability that transcends continents and generations.
Anthropological Economics:
Anthropological economics, notably its culturalist position, is a nascent field born from the discipline of anthropology. It observes that mainstream economics is does not adequately approach different cultures in its endeavor to promote economic development. It criticizes conventional economics for its universal application of western economic models in culturally different communities around the world. It attributes many of neoclassical economics’ failure to implement sound policies in developing countries to the fact that their models are not indicative of the socio-cultural realities that are inextricably connected to the economy. Anthropological economics believes that every society has its “local model” that must be understood before any economic changes can take place through the making of policies. These local models carry with them assumptions that are sensitive to local psychology and society of a given community. Concepts such as value, exchange property and even profit are occasionally different from that of the west and must be studied if those countries are to benefit for any foreign economic advice.
Conclusion:
This paper is not meant to claim that neoclassical economics is an invalid science, incapable of contributing to the advancement of human affairs in the world. It has definitely played a great role in the great economies that have emerged in our times, such as that of the United States and even China. However, the survival of neoclassical economics depends on its ability to address contemporary issues and accurately predict and obviate future obstacles to economic prosperity. It is undoubtedly paramount that economic growth which hinders the ecology be adequately accounted for within the economic field, especially given the knowledge that we have of the dangers of ignoring human activities harmful effects to the environment and ultimately to ourselves. Ecological economics as well as Buddhist economics and even Anthropological economics have a lot to offer in insight concerning the transformation of mainstream economics into one that is sustainable, efficient and applicable across the globe as diverse as it is.
posted by Albouri Ndiaye | 14:34
1 Comments:
I have just started a blog at trickle-in.blogspot.com, which is concerned with some of the matters you address in your most recent post . . . which I found by doing a blog search. I haven't got a lot of material there but am letting people know about it.
I thought your article was well researched and written. I plan to write about Schumacher's "Buddhist Economics" in a later post. Though he accurately got a glimpse of a Buddhist cultural attitudes toward economics while living in Burma, his chapter on Buddhist economics is not particularly based on Buddhist philosophy or teachings specifically, a fact which he states at the end of the chapter. In fact, I saw an old video clip posted on the web in which he said, "Well, I suppose I could have called it Christian economics, but then no one would have gotten interested in it!"
In any case I consider Schumacher the true forerunner of the whole movement of economics in which I am trying to participate.
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