“…a small think tank with a knack of spotting new trends…” – Geoffrey Lean, Telegraph.co.uk.
Chapter 1. the Economy and the Earth: Introduction
In 1543, Polish astronomer Nicolaus Copernicus published "On the Revolutions of the Celestial Spheres," in which he challenged the view that the Sun revolved around the earth, arguing instead that the earth revolved around the Sun. With his new model of the solar system, he began a wide-ranging debate among scientists, theologians, and others. His alternative to the earlier Ptolemaic model, which had the earth at the center of the universe, led to a revolution in thinking, to a new worldview.1
Today we need a similar shift in our worldview, in how we think about the relationship between the earth and the economy. The issue now is not which celestial sphere revolves around the other but whether the environment is part of the economy or the economy is part of the environment. Economists see the environment as a subset of the economy. Ecologists, on the other hand, see the economy as a subset of the environment.
Like Ptolemy's view of the solar system, the economists' view is confusing efforts to understand our modern world. It has created an economy that is out of sync with the ecosystem on which it depends.
Economic theory and economic indicators do not explain how the economy is disrupting and destroying the earth's natural systems. Economic theory does not explain why Arctic Sea ice is melting. It does not explain why grasslands are turning into desert in northwestern China, why coral reefs are dying in the South Pacific, or why the Newfoundland cod fishery collapsed. Nor does it explain why we are in the early stages of the greatest extinction of plants and animals since the dinosaurs disappeared 65 million years ago. Yet economics is essential to measuring the cost to society of these excesses.
Evidence that the economy is in conflict with the earth's natural systems can be seen in the daily news reports of collapsing fisheries, shrinking forests, eroding soils, deteriorating rangelands, expanding deserts, rising carbon dioxide (CO2) levels, falling water tables, rising temperatures, more destructive storms, melting glaciers, rising sea level, dying coral reefs, and disappearing species. These trends, which mark an increasingly stressed relationship between the economy and the earth's ecosystem, are taking a growing economic toll. At some point, this could overwhelm the worldwide forces of progress, leading to economic decline. The challenge for our generation is to reverse these trends before environmental deterioration leads to long-term economic decline, as it did for so many earlier civilizations.
These increasingly visible trends indicate that if the operation of the subsystem, the economy, is not compatible with the behavior of the larger system—the earth's ecosystem—both will eventually suffer. The larger the economy becomes relative to the ecosystem, and the more it presses against the earth's natural limits, the more destructive this incompatibility will be.
An environmentally sustainable economy—an eco-economy—requires that the principles of ecology establish the framework for the formulation of economic policy and that economists and ecologists work together to fashion the new economy. Ecologists understand that all economic activity, indeed all life, depends on the earth's ecosystem-the complex of individual species living together, interacting with each other and their physical habitat. These millions of species exist in an intricate balance, woven together by food chains, nutrient cycles, the hydrological cycle, and the climate system. Economists know how to translate goals into policy. Economists and ecologists working together can design and build an eco-economy, one that can sustain progress.
Just as recognition that the earth was not the center of the solar system set the stage for advances in astronomy, physics, and related sciences, so will recognition that the economy is not the center of our world create the conditions to sustain economic progress and improve the human condition. After Copernicus outlined his revolutionary theory, there were two very different worldviews. Those who retained the Ptolemaic view of the world saw one world, and those who accepted the Copernican view saw a quite different one. The same is true today of the disparate worldviews of economists and ecologists.
These differences between ecology and economics are fundamental. For example, ecologists worry about limits, while economists tend not to recognize any such constraints. Ecologists, taking their cue from nature, think in terms of cycles, while economists are more likely to think linearly, or curvilinearly. Economists have a great faith in the market, while ecologists often fail to appreciate the market adequately.
The gap between economists and ecologists in their perception of the world as the new century begins could not be wider. Economists look at the unprecedented growth of the global economy and of international trade and investment and see a promising future with more of the same. They note with justifiable pride that the global economy has expanded sevenfold since 1950, raising output from $6 trillion of goods and services to $43 trillion in 2000, boosting living standards to levels not dreamed of before. Ecologists look at this same growth and realize that it is the product of burning vast quantities of artificially cheap fossil fuels, a process that is destabilizing the climate. They look ahead and see more intense heat waves, more destructive storms, melting ice caps, and a rising sea level that will shrink the land area even as population continues to grow. While economists see booming economic indicators, ecologists see an economy that is altering the climate with consequences that no one can foresee.2
As the new century gets under way, economists look at grain markets and see the lowest grain prices in two decades—a sure sign that production capacity is outrunning effective demand, that supply constraints are not likely to be an issue for the foreseeable future. Ecologists, meanwhile, see water tables falling in key food-producing countries, and know that 480 million of the world's 6.1 billion people are being fed with grain produced by overpumping aquifers. They are worried about the effect of eventual aquifer depletion on food production.3
Economists rely on the market to guide their decisionmaking. They respect the market because it can allocate resources with an efficiency that a central planner can never match (as the Soviets learned at great expense). Ecologists view the market with less reverence because they see a market that is not telling the truth. For example, when buying a gallon of gasoline, customers in effect pay to get the oil out of the ground, refine it into gasoline, and deliver it to the local service station. But they do not pay the health care costs of treating respiratory illness from air pollution or the costs of climate disruption.
Ecologists see the record economic growth of recent decades, but they also see an economy that is increasingly in conflict with its support systems, one that is fast depleting the earth's natural capital, moving the global economy onto an environmental path that will inevitably lead to economic decline. They see the need for a wholesale restructuring of the economy so that it meshes with the ecosystem. They know that a stable relationship between the economy and the earth's ecosystem is essential if economic progress is to be sustained.
We have created an economy that cannot sustain economic progress, an economy that cannot take us where we want to go. Just as Copernicus had to formulate a new astronomical worldview after several decades of celestial observations and mathematical calculations, we too must formulate a new economic worldview based on several decades of environmental observations and analyses.
Although the idea that economics must be integrated into ecology may seem radical to many, evidence is mounting that it is the only approach that reflects reality. When observations no longer support theory, it is time to change the theory—what science historian Thomas Kuhn calls a paradigm shift. If the economy is a subset of the earth's ecosystem, as this book contends, the only formulation of economic policy that will succeed is one that respects the principles of ecology.4
The good news is that economists are becoming more ecologically aware, recognizing the inherent dependence of the economy on the earth's ecosystem. For example, some 2,500 economists-including eight Nobel laureates-have endorsed the introduction of a carbon tax to stabilize climate. More and more economists are looking for ways to get the market to tell the ecological truth. This spreading awareness is evident in the rapid growth of the International Society of Ecological Economics, which has 1,200 members and chapters in Australia/New Zealand, Brazil, Canada, India, Russia, China, and throughout Europe. Its goal is to integrate the thinking of ecologists and economists into a transdiscipline aimed at building a sustainable world.5
1. Nicolaus Copernicus, De Revolutionibus Orbium Coelestium, Libri VI (Six Books on the Revolutions of the Celestial Spheres) (1543).
2. Growth in global economy from historical series compiled by Worldwatch Institute from Angus Maddison, Monitoring the World Economy 1820-1992 (Paris: Organisation for Economic Co-operation and Development, 1995), using deflators and recent growth rates from International Monetary Fund (IMF), World Economic Outlook (Washington, DC: October 2000).
3. Grain prices from IMF, International Financial Statistics (Washington, DC: various years); share of global population fed by grain produced by overpumping aquifers calculated using grain consumption from U.S. Department of Agriculture (USDA), Production, Supply, and Distribution, electronic database, Washington, DC, updated May 2001, and annual water deficit of 160 billion cubic meters in Sandra Postel, Pillar of Sand (New York: W.W. Norton & Company, 1999), p. 255.
4. Thomas Kuhn, The Structure of Scientific Revolutions (Chicago: University of Chicago Press, November 1996).
5. The International Society for Ecological Economics, , viewed 31 July 2001; Redefining Progress, "2,500 Economists Agree That Combating Global Warming Need Not Necessarily Harm the U.S. Economy Nor Living Standards," press release (Oakland, CA: 29 March 2001).
Copyright © 2001 Earth Policy Institute