DISCUSS (IN)COMPATIBILITY BETWEEN ECONOMIC AND ECOLOGICAL SUSTAINABILITY

Sustainability means that something possesses the trait of being sustainable, that it can look after itself and maintain equilibrium; however this word holds very different meanings for economists and ecologists. Within the realm of environmentalism, there is a spectrum on which political parties and everyday people place themselves. The spectrum was created by Timothy O Riordan in 1981, where he identifies four categories of environmentalism under two larger umbrellas that are ‘ecocentrism’ and ‘technocentrism’ (See Figure 1).

The author articulates traits of each category, which will now be explored in further detail. On the left side of the spectrum under the ‘ecocentrism’ umbrella lie ‘deep ecologists’ and ‘self-reliance soft technologists’, the latter being closest to the middle on the spectrum. O’ Riordan describes ‘deep ecologists’ as those who hold the value that the unhuman world is equally as important as the human world, and that humans should live their life in accordance to natural law; a real life example of this are Buddhist monks who regard natural law as fundamental truths and live their life in harmony with the environment. ‘Self-reliant soft technologists’, still on the left hand side of the spectrum but situated closer to the middle are described as anti-materialists who believe in small communities and are sceptical about the use of modern large-scale technology to fix environmental issues; an example of this (although not yet fully executed yet) is ‘The Venus Project’, a group of activists that wish to reshape society into a resource based economy with small communities working together to achieve equality and pure sustainability (http://www.thevenusproject.com/).

Moving on to the right side of the spectrum, and exploring the ‘technocentrism’ umbrella, ‘environmental managers’ and ‘cornucopians’, the latter being the furthest to the right. ‘Environmental managers’ believe that resource exploitation for human needs can continue, under the conditions that there is a minimal level of environmental quality; a real life example of this being the carbon tax that was introduced under the Australian Labor Party in 2010. ‘Cornucopians’ are described as people that believe that no matter what, the human race will find a way out of the situation, with a heavy faith that scientific and technological advancement will eventually pave a way to sustainability and reversing the detrimental effects on the environment, and most importantly put a much greater onus on economic growth, believing that this is what will lead to a good future; a real life example of this being John Stuart Mills view on economic progress, being a race between technology development and environmental degradation, he believed that technology would win the race and humans would live in a world of economic and environmental equilibrium, where they are free to pursue their spiritual and artistic interests (Cato 2011, p. 137).

 “The general agreement amongst neoclassical/technocentric economists is that neither pollution nor resource limitations should operate as constraints on perpetual economic growth” (Cato 2011, p.137).

Technocentric views of sustainable development refer purely to economic development, and this discounts the environment severely. Their approach to natural resources is that they are there for our exploitation, and it is because of this that environmental benefits and costs get translated into a monetary value, so that a simple ‘cost-benefit’ analysis can be conducted. Ecologists disagree with this sentiment, arguing that a two-dimensional x-y graph where one good or service is traded off against the other simplifies things too much and opens the door to exploitation. They argue that this approach cannot incorporate the complexness of the ecosystem, a web of interconnectedness; hence this is why the neoclassical (or technocentric) approach to sustainability has failed to predict the serious environmental consequences of exponential growth (Cato 2011 p.140).

This disagreement led to environmentalists creating values for the environment or natural resources that the neoclassical approach missed. David Pearce wrote a paper that would be used as background for the World Development Report (1992), in which he constructed the ‘Total Economic Value (TEV)’ (See Figure 2 for an example of TEV in practice). This was an attempt to move away from typical benefit-cost rules, and instead use four values that account for monetary and intrinsic value. These four values will be briefly outlined:

– Direct values are assigned to physical products that are easily assigned a monetary value.

– Indirect values concern ‘ecological functions’, something that does not necessarily take a physical form, but can be an important ecological process, or a chemical reaction.

– Option values is the amount that an individual is willing to pay to conserve an area for future use, for example the price that a family pays to camp in a nature reserve for a week.

– Existence values are the last of the four values, and the most difficult to exchange into monetary figures, it is the intrinsic value of the ecosystem. (Pearce 1992 p.8)

As shown above, there is an inherent conflict between economic and ecological ways of thinking, for each theory or method one creates, the other quickly serves up a rebuttal. This has led to the idea that there may never be a compatibility and harmony between the two schools of thought. “Herman Daly refers to sustainable growth as an ‘impossibility theorem’ making reference to Kenneth Arrows impossibility theorem of voting behaviour” (Cato 2011 p.140). Arrows et.al wrote a paper in the Science Journal (1995) arguing against the relationship between per capita income and environmental quality, the relationship demonstrated in the ‘Environmental Kuznets Curve’ (See Figure 3). This was developed by environmental economists, based on the curve created by Simon Kuznets used to demonstrate the relationship between income and equality (Cato 2011 p. 62). The environmental take on this curve shows that development in its early stages creates more pollution, but once countries become richer and stabilised, they start to focus on the environment and work toward cleaner, greener alternatives. Arrows et.al argued that this is a tunnel visioned way of looking at environmental sustainability, that development is important in increasing environmental policy; however it discounts other methods that are necessary.

The argument above is centred on equal distribution of wealth, and both neoclassical and ecological economists agree that a steady state economy will have to be one where wealth is distributed equally. A snapshot into the current distribution of wealth shows that 0.7% of the world’s adult population control 41% of the world’s wealth (http://www.businessinsider.com.au). Herman Daly in his paper ‘Essays toward a steady-state economy’ (1971)guarantees that a steady state economy would result in a global respect of the ecosystems limits and encourage use of renewable resources without exceeding their ability, and minimise the use of non-renewable resources (Cato 2011 p. 141). It was Herman Daly that took issue with neoclassical theorists and their “technology argument”.

In the 1970’s, an equation was devised by Ehrlich and Holdren to identify the three factors that had the most significant impact on the environment: population, affluence and technology. The IPAT is seen as a formula that has the most promising impact of sustainability. “IPAT is an identity simply stating that environmental impact (I) is the product of population (P), affluence (A) and technology (T)” (Chertow 2001, p.15).  Technocentrists focus on the economic sustainability associated with the IPAT, and are specifically interested in the affluence part of the equation. They think that affluence needs to be kept at a constant, to keep the standard of living high, and achieve an overall greater amount of happiness and are confident in the ability of future technology to reverse damage done to the environment from resource exploitation. Ecocentrists on the other hand focus on the environmental sustainability, however agree that technology needs to be encouraged in reversing devastation to the environment, but find it ideal to attack both population and consumption in a heavy handed matter to reverse the damage as quickly as possible. Again, economic sustainability and environmental sustainability are ignored by the contra-party.

Nick Hanley’s et.al “Introduction to Environmental Economics” is a simple paper, acknowledging existing methods and equations relation to environmental/economic sustainability, and redirected the focus to a much more hands on approach to achieving environmental sustainability. By providing a basic list of economic theories that he hopes policy makes will reflect on in order to protect the environment, covering that economic and environmental systems are determined simultaneously to the fact that environmental resources are scarce. This papers main purpose was to clearly define what environmental quality means, and how policies can be implemented that support it.

“Some of the confusion about the compatibility of economic growth and environmental quality arises from a failure to define concepts and arguments. Thus, some writers regard economic growth as an increase in the materials and energy throughout the economy. Defined in this way, the conflict between growth and the environment is not inevitable . . But defining economic growth as materiials and energy throughput is not what economists would typically mean by economic growth. Economic growth is an increase in the level of real GNP over time. Now the link between growth and environmental degredation is far less certain because not only can the link between materials/energy throughput pollution be broken, but so can the link between income growth and materials/energy throughput”                                      (Pearce and Barbier 2000)

To answer the question of compatibility between economic and ecological sustainability seems a mammoth task, with so many clashes and conflicts from every direction. Hawken (1999) coined the term “natural capitalism” which suggests that we can produce twice as much using half as much energy, once it is acknowledged that the earth is not an endless pit of resources, however with population growing exponentially and over consumption increasing, his argument appears to be invalid (Cato 2011 p. 142). What needs to occur in order to find a working relationship between economic and environmental sustainability is to question the foundations of each stance. Environmental combatants base their foundations on the laws of nature, drawing on empirical evidence that we are slowly destroying the place we call home. Economists rely on the GDP (gross domestic product) measure, the GDP is used in all transactions and decisions, and measures stocks and applies a monetary value to said stocks. This has a devastating impact of the natural world, and environment because a resource that has not been mined up, or cut down has no monetary value, and will only gain economic value when it is able to be sold in a market.

The most fundamental part of our current economic system ignores the natural world and the environment, economists view natural resources simply as capital, and with this attitude and the neoclassical approach being so ingrained into our society, how can it be possible for economic and environmental sustainability to be compatible? We have a long way to go to achieve environmental sustainability, and as shown in the examples throughout this essay, there is a constant butting of heads with new theories and arguments arising frequently, with little to none addressing economic and environmental sustainability as one homogenous process. Without natural resources, there will be no capital, and at this stage, without capital there will be no resources.

The prisoner’s dilemma is a famous philosophical problem, where two prisoners are in a predicament. If they go against each other and simply look out for themselves, they will receive punishment; however if they both cooperate and not work in a self-interested manner, they both walk away free men <http://plato.stanford.edu/entries/prisoner-dilemma/&gt;. This is very applicable in the debate about climate change, environmental sustainability and economic sustainability, drawing from green economist ideologies, these issues are holistic, and require both Anthropocentric and Ecocentric parties to acknowledge the necessity of both economic and environmental sustainability.

In conclusion, economic sustainability and ecological sustainability in the current setting are not compatible; both parties fighting for their cause do not acknowledge the true importance of the big picture and the greatness that can be achieved if they worked together and found a middle ground. It is possible for economic and environmental sustainability to be compatible however, there is an unequal distribution of power and the ‘green’ movement is still a relatively new one without roots in history to grasp onto.

Everyone needs to have the same interests, and the only plausible way of this occurring is social action. In order for deep ecologists to move to the right on the spectrum, and cornucopians to move to the left and meet in the middle, for society and the world we live in to be transformed into a platform where both parties work in harmony and the economy and environment both thrive, the people need to move into the public area and politics (O’riordan 1981, p. 14). The twenty first century and the current generation is already surging in this direction, and have the potential to make change that matters.

 

 

 

 

 

 

Reference List

 

Arrow, K., Bolin, B., Constanza, R., Dasgupta, P et.al 1995, ‘Economic Growth, Carrying Capacity and the Environment’, Science, vol. 268, p. 520

 

Cato, M.S. 2011, Environment and Economy, Routledge, London.

 

Chertow, M. R. 2001, ‘The IPAT equation and its variants’, Journal of Industrial Ecology, vol. 4, no. 4, pp. 3-15.

 

Daly, H. E 1971, Essays Toward a Steady-State Economy, W H Freeman & Co, London

 

Hanley, N., Shogren, J.F and White, B 2001, Introduction to Envrionmental Economics, Oxford Press, Oxford

 

Hawken, P., Lovins, A. and Lovins, L.H. 1999, Natural Capitalism: Creading the Next Industrial Revolution, Rocky Mountain Institute, Snowmass CO

 

O’Riordan, T. 1981, ‘Environmentalism and education’, Journal of Geography in Higher Education, vol. 5, no. 1, pp. 3-18.

 

Pearce, D. 1992, Economic Valuation and The Natural World, Background paper for World Development Report 1992, The World Bank

 

Pearce, D. W and Barbier, E. B 2000, Blueprint for a Sustainable Economy, Earthscan, London

 

Property and Environment Research Centre 2013, Mexico and the Environmental Kuznets Curve, viewed 29 October 2013, http://perc.org/blog/mexico-and-environmental-kuznets-curve

Stanford Dictionary of Philosophy 2007, Prisoner’s dilemma, Stanford Dictionary of Philosophy, viewed 21 September 2013, http://plato.stanford.edu/entries/prisoner-dilemma/

 

The Venus Project 2013, About the Venus Project, The Venus Project, viewed 29 October 2013, http://www.thevenusproject.com/#

 

 


 

Appendix

Figure 1

Image

(O’Riordan, T. 1981 p.5)

 

Figure 2

Image

(Pearce, D. 1992 p.8)

 

 

Figure 3

Image 

(http://perc.org/blog/mexico-and-environmental-kuznets-curve)

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