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| Ecological 999 divide the stakes in a of dice when the game had to Further Reading be terminated prematurely (probably by the appearance Casti J (1992) Reality Rules: Picturing the World in Mathematics. I – The of the police or, perhaps, the gamblers’ wives). The Fundamentals, II – The Frontier. New York: Wiley (paperback edition, description and analysis of that very definite real-world 1997). problem led Fermat and Pascal to the creation of a math- Casti J (1994) Complexification. New York: HarperCollins. Casti J (1997) Would-Be Worlds. New York: Wiley. ematical formalism we now call probability theory. At Epstein J and Axtell R (1996) Growing Artificial Societies. Cambridge, present, complex- theory still awaits its Pascal MA: MIT Press. and Fermat. The mathematical concepts and methods Gleick J (1987) Chaos. New York: Viking. Jackson E (1990) Perspectives of Nonlinear Dynamics. Cambridge: currently available were developed, by and large, to Cambridge University Press, vols. 1 and 2. describe composed of material objects like pla- Mandelbrot B (1982) The Fractal Geometry of . San Francisco, CA: W.H. Freeman. nets and atoms. It is the development of a proper theory of Nicolis J (1991) Chaos and Information Processing. Singapore: World complex systems that will be the capstone of the transition Scientific. from the material to the informational. Peitgen H-O, Ju¨ rgens DH, and Saupe D (1992) Fractals for the Classroom, Parts 1 and 2. New York: Springer. Ray T (1991) An approach to the synthesis of . In: Langton CG, Taylor C, Farmer JD, and Rasmussen S (eds.) Artificial Life II, SFI Studies in the of , vol. X, pp. 371–408. Reading, See also: ; ; Emergent ; MA: Addison-Wesley. Hierarchy Theory in Ecology; Self-; Stability Schroeder M (1991) Fractals, Chaos, Laws. New York: W.H. Freeman. versus Complexity; . Stewart I (1989) Does God Play Dice? Oxford: Basil Blackwell.

Ecological Economics 1 R Costanza, University of Vermont, Burlington, VT, USA

ª 2008 B.V. All rights reserved.

Basic Worldview and Goals Valuation of Ecological Services History Integrated Ecological Economic Modeling and Links with Natural Assessment Material and Flows Summary and Conclusions for Natural , Ecological Limits, and Further Reading Sustainable Scale

Basic Worldview and Goals be simply expansion and growth of the economic subsys- tem with little regard to the rest of the system. We must starts with the observation that the now consider the whole system and the goal must shift human is a subsystem of the larger ecological from to . life support system. It recognizes that are a part of Growth implies increasing in quantity or size, while this larger ecological system and not apart from it. development implies improvement in quality without Humans have shaped and modified their supporting eco- necessarily increasing in size. In a full world context, the systems since the time of their appearance as a species, goal must shift from creating ‘more’ to creating ‘better’ – sometimes sustainably, sometimes not. In the past, this to create a sustainable and desirable future. human presence (the economic subsystem) was relatively This shift in primary goals and vision for the future has small in scale compared to the size of the rest of the profound implications for analysis and policy, across the supporting . In the last century, due largely to full range of academic disciplines and human activities. the utilization of fossil fuels, the human subsystem has For example, if one’s goals include ecological sustainabil- expanded so dramatically that it is now a major compo- ity then one cannot rely on the principle of ‘ nent of the overall system. Unlike the situation in the sovereignty’ on which most conventional economic majority of human history, we now live in a relatively solutions are based, but must allow for coevolving pre- ‘full’ world. This changes everything. In a full world ferences, , and . One of the basic context, the goal of the economic subsystem can no longer organizing principles of ecological economics is thus a 1000 | Ecological Economics focus on this complex interrelationship between ecologi- interdependent ecological and economic systems and cal (including system and their over time. resilience), (including of Ecological economics is not, however, a single new and rights, social capital, and coevolving prefer- paradigm based on shared assumptions and theory. It is ences), and economic sustainability (including allocative instead a ‘metaparadigm’. Rather than espousing and efficiency in the presence of highly incomplete and defending a single discipline or paradigm, it seeks to imperfect markets). The complexity of the many inter- allow a broad, pluralistic range of viewpoints and models acting systems that make up the means that this to be represented, compared, and ultimately synthesized involves a very high level of . Indeed, uncer- into a richer understanding of the inherently complex tainty is a fundamental characteristic of all complex systems it deals with. It represents a commitment among systems involving irreversible processes, and ecological , ecologists, and other academics and practi- economics is particularly concerned with problems of tioners to learn from each other, to explore new patterns uncertainty. More particularly, it is concerned with the of thinking together, and to facilitate the derivation and problem of assuring sustainability under uncertainty. implementation of effective economic and environmental Instead of locking ourselves into development paths that policies. Ecological economics is deliberately and con- may ultimately lead to , ecological sciously pluralistic in its conceptual underpinnings. economics seeks to maintain the resilience of the highly Within this pluralistic metaparadigm, traditional disci- interconnected socioecological system by conserving and plinary perspectives are perfectly valid ‘as part of the investing in natural and social capital assets in a balanced mix’. Ecological economics therefore includes some way with in human and built capital. aspects of neoclassical , tradi- tional ecology, and ecological impact studies, and several other disciplinary perspectives as components, but it also encourages completely new, more integrated ways to History think about the linkages between ecological and eco- nomic systems. Ecology and economics share the same Greek root, oikos, Ecological economics has also developed a solid meaning ‘house’. Ecology is, literally, the ‘study of the institutional base. After numerous experiments with house’, while economics is the ‘ of the house’, joint meetings between economists and ecologists, the where the house is taken to be the world or any part of it. International Society for Ecological Economics (ISEE) Thus ecological economics implies studying and mana- was formed in 1988 and currently has over 3000 mem- ging the world in an integrated way, taking full advantage bers worldwide. The journal of the society, Ecological of our accumulated knowledge and understanding of both Economics, published its first issue in February 1989 and the natural and the social parts of the system. is currently publishing 12 issues per year, with an Ecological economics has historical roots as long and impact factor taking it to the top one-fifth of all eco- deep as any field in economics or the natural sciences, nomics journals. Major international conferences have going back to at least the seventeenth century. been held since 1990, with attendance reaching as high Nevertheless, its immediate roots lie in done in as 1500. Several ecological economic institutes have the 1960s and the 1970s. Kenneth Boulding’s classic The been formed around the world, a significant number Economics of the Coming set the stage for of books have appeared with the term ecological eco- ecological economics with its description of the transition nomics in their titles, and a fair number of university from the ‘frontier economics’ of the past, where growth in courses, certificate programs, and graduate degree pro- human implied growth in material , grams have also developed. to the ‘spaceship economics’ of the future, where growth in welfare can no longer be fueled by growth in material consumption. This fundamental difference in vision and Links with Natural Sciences worldview was elaborated further by , who in 1968 recast economics as a life science, akin to Ecological economics’ explicit links with the natural and especially ecology, rather than a physical science like sciences result in a more scientific approach, which is or physics. The importance of this shift in inherently more pluralistic and empirically grounded. It ‘preanalytic vision’ cannot be overemphasized. It implies places humans and human behavior in a broader histor- a fundamental change in the perception of the problems ical, evolutionary, and ecological context. Humans are of allocation and how such problems should be seen as a part of the natural world, not abstractions in addressed. More particularly, it implies that the focus of isolation from nature and each other. It is problem-based, analysis should be shifted from marketed in not tool-based, and its methods include any that are the to the biophysical basis of applicable to the problems at hand. These include Human Ecology | Ecological Economics 1001 everything from participatory processes to envisioning Material and Energy Flows alternative futures to complex systems simulation model- ing. It recognizes the importance of envisioning and the One focus of the work on joint ecological economic sys- limits of the positive-normative dichotomy. It goes well tems has been material and energy flows. A dominant beyond interdisciplinary dialog. It aspires to be a truly theme in this body of work has been the grounding of transdisciplinary science. conventional economic models in the biophysical realities The broad spectrum of relationships between ecosys- of the economic process. This emphasis shifts the focus tems and economic systems is the locus of many of our from exchange to the of wealth itself. most pressing current problems (i.e., sustainability, acid Cleveland traces the early roots of this work dating back , global warming, species extinction, wealth distribu- to the physiocrats. The energy and environmental events tion) but it is not covered adequately by any existing of the 1960s and the 1970s pushed work in this area to new discipline. Environmental and resource economics, as levels. Energy and in recent times is they are usually practiced, are subdisciplines of neoclas- rooted in the work of a number of economists, ecologists, sical economics focused on the efficient allocation of and physicists. Economists such as Boulding and scarce environmental resources but generally ignoring Geogescu-Roegen demonstrated the environmental and ecosystem dynamics and scale issues, and paying only economic implications of the mass and energy balance scant attention to distribution issues. Ecology, as it has principle. Ecologists such as Lotka and H. T. Odum historically been practiced, sometimes dealt with human pointed out the importance of energy in the structure impacts on ecosystems, but the more common tendency and evolutionary dynamics of ecological and economic was to stick to ‘natural’ systems and exclude humans. systems. And physicists such as Prigogine worked out the Ecological economics also focuses on a broader set of far-from-equilibrium of . questions and goals than the traditional disciplines. Here, The principle of the conservation of mass and energy again, the differences are not so much the newness of the has formed the basis for a number of important contribu- questions or goals, but rather the attempt to integrate tions. The assumption was first made explicit in the them. They can be stated as both questions and goals, context of a general equilibrium model by Ayres and since they represent both complex questions requiring Kneese and subsequently by Ma¨ler, but it also is a feature further research to fully understand and goals that most of the series of linear models developed after 1966. All people would agree are worthy of the title: reflect the assumption that a closed must 1. assessing and insuring that the scale of human activities satisfy the conservation of mass condition, and hence that within the biosphere are ecologically sustainable; economic growth necessarily increases both the extrac- 2. distributing resources and rights fairly, both tion of environmental resources and the of within the current generation of humans and between deposited in the environment. this and future generations, and also between humans Perrings developed a variant of the Neumann– and other species; and Leontief–Sraffa general equilibrium model in the context 3. efficiently allocating resources as constrained and of a jointly determined economy–environment system defined by (1) and (2) above, including both marketed subject to a conservation of mass constraint. The model and nonmarketed resources, especially demonstrates that the conservation of mass contradicts the and ecosystem services. free disposal, free gifts, and noninnovation assumptions of These questions/goals are interdependent and yet need to such models. An expanding economy causes continuous be addressed hierarchically. The problem of ecological disequilibrating change in the environment. Since sustainability needs to be solved at the level of preferences in an interdependent economy–environment sys- or technology, not at the level of optimal prices. Only if the tem often do not accurately reflect environmental change, preferences and production possibility sets informing eco- such transformations of the environment often will go nomic behavior are ecologically sustainable can the unanticipated. corresponding set of optimal and intertemporally efficient Ayres describes some of the important implications of prices be ecologically sustainable. Thus the principle of the for the production process, ‘consumer sovereignty’ on which most conventional eco- including the limits they place on the substitution of nomic solutions are based is only acceptable to the extent for natural capital and the ability of tech- that consumer do not threaten the overall system, nical change to offset the depletion or degradation of and through this the welfare of future generations. This natural capital. Although they may be substitutes in indi- implies that if one’s goals include ecological sustainability vidual processes in the short run, natural capital and then one cannot rely on consumer sovereignty, and must human-made capital ultimately are complements, allow for coevolving preferences, technology, and because both manufactured and human capital require ecosystems. materials and energy for their own production and 1002 Human Ecology | Ecological Economics maintenance. The interpretation of traditional production critical control and feedback functions which enhance functions such as the Cobb–Douglas or Constant the survival of the system. Cleveland et al. and of Substitution (CES) must be modified to Kaufmann show that much of the decline in the energy/ avoid the erroneous conclusion that ‘self-generating tech- real GDP ratio in industrial nations is due to the shift nological change’ can maintain a constant with from coal to and primary . Their ever-decreasing amounts of energy and materials as long results show that autonomous energy- technical as ever-increasing amounts of human capital are available. change has had little, if any, effect on the energy/real Furthermore, there are irreducible thermodynamic GDP ratio. Stern finds that accounting for fuel quality minimum amounts of energy and materials required to produces an unambiguous causal connection between produce a unit of output that technical change cannot energy use and economic growth in the United States, alter. In sectors that are largely concerned with processing confirming the unique, critical role that energy plays in and/or fabricating materials, technical change is subject to the production of wealth. as it approaches these thermodynamic The analysis of energy flows has also been used to minimums. Ruth uses equilibrium and nonequilibrium illuminate the structure of ecosystems. Hannon applied thermodynamics to describe the materials–energy–infor- input–output analysis (originally developed to study mation relationship in the biosphere and in economic interdependence in ) to the analysis of energy systems. In addition to illuminating the boundaries for flow in ecosystems. This approach quantifies the direct material and energy conversions in economic systems, plus indirect energy that connects an ecosystem compo- thermodynamic assessments of material and energy nent to the remainder of the ecosystem. Hannon flows, particularly in the case of effluents, can provide demonstrates this methodology using data information about depletion and degradation that are not from the classic study of the Silver Springs (Florida) reflected in market . web. These approaches hold the possibility of treat- There is also the effect of the time rate of thermo- ing ecological and economic systems in the same dynamic processes on their efficiency, and, more conceptual framework, one of the primary goals of eco- importantly, their power or rate of doing useful work. logical economics. H. T. Odum and Pinkerton pointed out that to achieve the thermodynamic minimum energy requirements for a process implied running the process infinitely slowly. Accounting for Natural Capital, Ecological This means at a rate of production of useful work Limits, and Sustainable Scale (power) of zero. Both ecological and economic systems must do useful work in order to compete and survive, and Most current economic policies are largely based on the H. T. Odum and Pinkerton showed that for maximum underlying assumption of continuing and unlimited power production an efficiency significantly worse than material economic growth. Although this assumption is the thermodynamic minimum was required. slowly beginning to change as the full implications of a These biophysical foundations have been incorporated commitment to sustainability sink in, it is still deeply into models of supply and of the relationship embedded in economic thinking as evidenced by the between energy use and economic performance. Cleveland frequent equation of ‘sustainable development’ with ‘sus- and Kaufmann developed econometric models that expli- tainable growth’. The growth assumption allows problems citly represent and integrate the geologic, economic, and of intergenerational, intragenerational, and interspecies political forces that determine the supply of oil in the and sustainability to be ignored (or at least post- United States. Those models are superior in explaining the poned), since they are seen to be most easily solved by historical record than those from any single discipline. additional material growth. Indeed, most conventional Larsson et al. also use energy and material flows to demon- economists define ‘health’ in an economy as a stable and strate the dependence of a such as high ‘rate of growth’. Energy and , commercial shrimp farming on the services generated by , and other limits to growth, according to this marine and agricultural ecosystems. view, will be eliminated as they arise by clever develop- One important advance generated by this work is the ment and deployment of new technology. This line of economic importance of , namely, that a thinking often is called ‘technological optimism’. kilocalorie of primary electricity can produce more out- An opposing line of thought (often called ‘technologi- put than a kilocalorie of oil, a kilocalorie of oil can cal skepticism’) assumes that technology will not be able produce more output than a kilocalorie of coal, and so to circumvent fundamental energy, resource, or pollution on. H. T. Odum describes how energy use in ecological constraints and that eventually material economic growth and economic hierarchies tends to increase the quality of will stop. It has usually been ecologists or other life energy, and that significant amounts of energy are dis- scientists that take this point of view (notable exceptions sipated to produce higher-quality forms that perform among economists are Boulding and Daly), largely Human Ecology | Ecological Economics 1003 because they study natural systems that invariably do stop energy and environmental concerns to the side of the growing when they reach fundamental resource con- stage is probably appropriate, and detailed energy ana- straints. A healthy ecosystem is one that maintains a lyses are nothing more than interesting curiosities. But if relatively stable level. Unlimited growth is cancerous, the limits are binding constraints, then energy and envir- not healthy, under this view. onmental issues are pushed much more forcefully to Technological optimists argue that human systems are center stage and the tracking of energy and resource fundamentally different from other natural systems flows through ecological and economic systems becomes because of human intelligence and that history has much more useful and important. shown that resource constraints can be circumvented by Issues of sustainability are ultimately issues about new ideas. Technological optimists claim that Malthus’ limits. If material economic growth is sustainable indefi- dire predictions about population have not nitely by technology then all environmental problems come to pass and the ‘’ of the late 1970s is can (in theory at least) be fixed technologically. Issues of behind us. Technological skeptics, on the other hand, fairness, equity, and distribution (between subgroups and argue that many natural systems also have ‘intelligence’ generations of our species and between our species and in that they can evolve new behaviors and organisms others) are also issues of limits. We do not have to worry (including humans themselves). Humans are therefore a so much about how an expanding pie is divided, but a part of nature, not apart from it. Just because we have constant or shrinking pie presents real problems. Finally, circumvented local and artificial resource constraints in dealing with uncertainty about limits is the fundamental the past does not mean we can circumvent the fundamen- issue. If we are unsure about future limits the prudent tal ones that we will eventually face. Malthus’ predictions course is to assume they exist. One does not run blindly have not come to pass yet for the entire world, the through a dark that may contain crevasses. skeptics would argue, but many parts of the world are in One assumes they are there and goes gingerly and a Malthusian trap now, and other parts may well fall into with eyes wide open, at least until one can see a little it. This is particularly important because many industrial better. nations have increased their numbers and standard of Vitousek et al., in an oft-cited paper, calculated the living by importing carrying capacity and exporting eco- percent of the Earth’s (NPP) logical degradation to other regions. which is being appropriated by humans. This was the The debate has gone on for several decades now. It first attempt to estimate the ‘scale’ or relative size of began with Barnett and Morse’s and Growth in human economic activity compared to the ecological 1963, but really got into high gear only with the publica- life-support system. They estimated that 25% of total tion of by Meadows et al. in 1972 and NPP (including the oceans) and 40% of terrestrial NPP the Arab oil embargo in 1973. Several thousand studies was currently being appropriated by humans. It left open over the last 15 years have considered aspects of our the question of how much of NPP could be appropriated energy and resource future, and different points of view by humans without damaging the life-support functions have waxed and waned. But the bottom line is that there is of the biosphere, but it is clear that 100% is not sustain- still considerable uncertainty about the impacts of energy able and even the 40% of terrestrial NPP currently used and resource constraints. In the next 20–30 years, we may may not be sustainable. begin to hit real supply limits. Will fusion A related idea is that ecosystems represent a form of energy or or conservation or some as yet capital – defined as a stock yielding a flow of services – unthought of energy source step in to save the day and and that this stock of ‘natural capital’ needs to be main- keep economies growing? The technological optimists say tained intact independently in order to assure ecological ‘yes’ and the technological skeptics say ‘maybe’ but let us sustainability. The question of whether natural capital not count on it. Ultimately, no one knows. needs to be maintained independently (‘strong sustain- The more specific issues of concern all revolve around ability’) or whether only the total of all capital stocks need the question of limits: the ability of technology to circum- to be maintained (‘weak sustainability’) has been the sub- vent them, and the long-run costs of the technological ject of some debate. It hinges on the degree to which ‘cures’. Do we adapt to limits with that have human-made capital can substitute for natural capital, potentially large but uncertain future environmental costs and, indeed, on how one defines capital generally. In or do we limit population and per capita consumption to general, conventional economists have argued that there levels sustainable with technologies which are known to is almost perfect substitutability between natural and be more environmentally benign? Must we always human-made capital, while ecological economists gener- increase supply or can we also reduce demand? Is there ally argue on both theoretical and empirical grounds that an optimal mix of the two? the possibilities for substitution are severely limited. If the ‘limits’ are not binding constraints on economic They therefore generally favor the strong sustainability activity, then conventional economics’ relegation of position. 1004 Human Ecology | Ecological Economics

Another critical set of issues revolve around the way methods based on explicitly modeling the linkages we define economic income, economic welfare, and total between ecosystems and economic systems in the long human welfare. Daly and Cobb clearly distinguish these run respectively. concepts, and point out that conventional GNP is a poor Preference formation is influenced by limited informa- measure even of economic income. Yet GNP continues to tion in estimating WTP-based values for biodiversity be used in most policy discussions as the definitive mea- preservation. Empirical studies show that a significant sure of economic health and performance, and will portion of individuals exhibit ‘lexicographic’ preferences, continue to be until viable alternatives are available. that is, they refuse to make tradeoffs that require the According to Hicks, economic income is defined as the substitution of biodiversity for other . This places quantity we can consume without damaging our future significant constraints on the use of stated preferences, as consumption possibilities. This defininition of income used in studies, for valuation of automatically embodies the idea of sustainability. GNP ecosystem services and decision-making. It places more is a poor measure of income on a number of grounds, emphasis on the need to develop more direct methods to including the fact that it fails to account for the depletion assess the of these resources as a supplement to of natural capital and thus is not ‘sustainable’ income in conventional WTP-based methods. the Hickian sense. GNP is an even poorer measure of The valuation of ecological resources requires a deeper economic welfare, since many components of welfare are understanding of the ways in which economic activity not directly related to income and consumption. The depends on biogeophysical processes than is usually recog- of Sustainable Economic Welfare (ISEW) devised nized. However, the issue of is far by Daly and Cobb is one approach to estimating eco- from solved. In fact, it is probably only in the early stages nomic welfare (as distinct from income) that holds of development. Conventional WTP-based approaches significant promise. The ISEW has been calculated for have severe limitations. Key directions for the future several industrialized countries and shows that in all these include integrated ecological economic modeling, as ela- cases, an ‘economic threshold’ has been passed where borated in the next section. increasing GNP is no longer contributing to increasing welfare, and in fact in most cases is decreasing it. Integrated Ecological Economic Modeling and Assessment Valuation of Ecological Services The emphasis on both (1) issues of scale and limits to the All decisions concerning the allocation of environmental carrying and assimilative capacity of ecological systems resources imply the valuation of those resources. and (2) underlying dynamics of those systems imply the Ecological economics does not eschew valuation. It is need for a new approach to the modeling of joint systems. recognized that the decisions we make, as a society, It is not surprising that this is an active area of research in about ecosystems imply a valuation of those systems. ecological economics. Indeed, combining (sometimes We can choose to make these valuations explicit or not; implicit) models of ecological processes and economic we can undertake them using the best available ecological decision models in a new that makes the feedbacks science and understanding or not; we can do them with an between the two sets of processes transparent is where explicit acknowledgment of the huge we most expect new advances to be made as a result of the involved or not; but as long as we are forced to make ongoing dialog between economists and ecologists. choices about the use of resources we are valuing those Ecology and economics have long diverged both resources. These values will reflect differences in the methodologically and conceptually. One reason for the underlying worldview and culture of which we are a difficulty in bridging the modeling gap is that economics, part, just as they will reflect differences in preferences, as a discipline, has developed almost no tools or concepts technology, assets, and income. An ecological economics to handle spatial differentiation beyond the notions of approach to valuation implies an assessment of the spatial transport cost and international . The spatial analysis and temporal dynamics of ecosystem services, and their of human activity has been seen as the domain of geo- role in satisfying both individual and social preferences. It graphers, and has had remarkably little impact on the way also implies explicit treatment of the uncertainties asso- economists have analyzed the allocation of resources. ciated with tracking these dynamics. This makes collaboration between economists and disci- Ecological economics is different from environmental plines based more directly on spatial analysis very economics in terms of the latitude of approaches to the difficult. Since the development of spatially explicit inte- ecosystem valuation problem it allows. They include grated models is one of the areas in which ecological more conventional Willingness To Pay (WTP)-based economics is expected to develop most rapidly in the approaches, but they also explore other more novel next few years, it would seem that geographers are likely Human Ecology | Ecological Economics 1005 to become an increasingly important part of the research in and the significance of co-depen- agenda in ecological economics. dence between gene . The steady accumulation A second characteristic of ecological–economic mod- of evidence that is not a stationary els concerns the way in which the valuation of ecological process, that human understanding, preferences, and functions and processes is reflected in the model struc- technology all change with development, and that such ture. The point was made in the previous section that change is generally nonlinear and discontinuous, has valuation by stated preference methods (estimation of prompted economists to seek to endogenize technological willingness to pay or accept using contingent valuation change. Although the adaptation of this work by environ- or contingent ranking) may capture the strength of peo- mental economists has been rather disappointing, the ple’s perceptions and their level of income and treatment of technology and consumption preferences as endowments (their ability to pay), but it generally fails endogenous to the economic process is a fundamental to capture the impact of a change in ecosystem functions change that brings economics much closer to ecology. and processes on the output of economically valued goods The challenge to ecological economics in the future is and services. Unless the role of nonmarketed ecological to develop models that capture these features well enough functions and processes in the production of economically to incorporate at least the major in economic deci- valued is explicitly modeled, it is hard sions that increase the level of stress on ecological to see how they can be properly accounted for in eco- systems. nomic decision making. A third characteristic concerns the role of integrated modeling in strategic decision making. One of the chal- lenges to ecological economics has been to devise Summary and Conclusions methods to address strategic ‘what if’ questions in a way that reflects the dynamics of the jointly determined sys- This is a sample of the range of transdisciplinary thinking tem. The general problem confronting anyone attempting that can be put under the heading of ecological econom- to model long-run dynamics explicitly is that ecological– ics. While it is difficult to categorize ecological economics economic systems are complex nonlinear systems. The in the same way one would a normal academic discipline, dynamics of economic systems are not independent of the some general characteristics can be enumerated. dynamics of the ecological systems which constitute their The core problem is the ‘sustainability’ of interactions environment, and that as economies grow relative to their • between economic and ecological systems. environment, the dynamics of the jointly determined An explicit attempt is made at ‘pluralistic dialog’ and system can become increasingly discontinuous. Indeed, • integration across disciplines, rather than territorial the development of ecological economics can be thought disciplinary differentiation. of as part of a widespread reappraisal of such systems. An emphasis is placed on ‘integration’ of the three In ecology, this reappraisal has influenced recent • hierarchical goals of sustainable scale, fair distribution, research on scale, complexity, stability, and resilience, and and efficient allocation. is beginning to influence the theoretical treatment of the There is a deep concern with the ‘biophysical under- coevolution of species and systems. The results that are • pinnings’ of the functioning of jointly determined most important to the development of ecological economics ecological and economic systems. concern the link between the spatial and temporal structure There is a deep concern with the relationship between of coevolutionary hierarchical systems. Landscapes are con- • the ‘scale’ of economic activity and the nature of ceptualized as hierarchies, each level of which involves a change in ecological systems. specific temporal and spatial scale. The dynamics of each Since valuation based on stated willingness to pay level of the structure are predictable so long as the biotic • reflects limitations in the valuer9s knowledge of eco- potential of the level is consistent with bounds imposed by systems functions, there is an emphasis on the the remaining levels in the hierarchy. Change in either the ‘development of valuation techniques’ that build on structure of environmental constraints or the biotic poten- an understanding of the role of ecosystem functions tial of the level may induce threshold effects that lead to in economic production. complete alteration in the state of the system. There is a broad focus on systems and ‘systems In economics there is now considerable interest in the • dynamics, scale, and hierarchy’ and on ‘integrated dynamics of complex nonlinear systems. Economists have modeling’ of ecological economic systems. paid less attention to spatial scale and its significance at or near system thresholds, but there is now a growing body These characteristics make ecological economics applic- of literature with roots in geography which seeks to inject able to some of the major problems facing humanity a spatial dimension into nonlinear economic models. today, which occur at the interfaces of human and natural There is also an economic analog to the biologist’s systems, and especially to the problem of assuring 1006 Human Ecology | Ecological Economics humanity’s health and survival within the biosphere into Costanza R (ed.) (1991) Ecological Economics: The Science and Management of Sustainability. New York: Columbia University Press. the indefinite future. It is not so much the individual core Costanza R (2000) Visions of alternative (unpredictable) futures and their scientific questions that set ecological economics apart – use in policy analysis. Conservation Ecology 4(1): 5 http:// since these questions are covered independently in other www.consecol.org/vol4/iss1/art5/ (accessed October 2007). Costanza R (2001) Visions, values, valuation and the need for an disciplines as well – but rather the treatment of these ecological economics. BioScience 51: 459–468. questions in an integrated, transdisciplinary way, which Costanza R, Cumberland JC, Daly HE, Goodland R, and Norgaard R is essential to their understanding and effective use in (1997) An Introduction to Ecological Economics, 275pp. Boca Raton, FL: St. Lucie Press. policy. The solutions being considered in ecologial eco- Costanza R, Voinov A, Boumans R, et al. (2002) Integrated ecological nomics are deserving of increasing attention. economic modeling of the Patuxent River watershed, Maryland. Ecological Monographs 72: 203–231. Costanza R, Wainger L, Folke C, and Ma¨ ler K-G (1993) Modeling See also: and Integrative complex ecological economic systems: Toward an evolutionary, dynamic understanding of people and nature. BioScience assessments; ; Ecosystem Services; 43: 545–555. Limits to Growth; Sustainable Development. Daly HE (1968) On economics as a life science. Journal of 76: 392–406. Farley J and Costanza R (2002) Envisioning shared goals for humanity: A detailed shared vision of a sustainable and desirable USA in 2100. Further Reading Ecological Economics 43: 245–259. Jansson AM, Hammer M, Folke C, and Costanza R (eds.) (1994) Barbier EB, Burgess JC, and Folke C (1994) Paradise Lost? The Investing in Natural Capital: The Ecological Economics Approach to Ecological Economics of Biodiversity, 267pp. London: . Sustainability, 504. Washington, DC: Island Press. Boulding KE (1966) The economics of the coming spaceship earth. Krishnan R, Harris JM, and Goodwin N (eds.) (1995) A Survey of In: Jarrett H (ed.) Environmental Quality in a Growing Economy, Ecological Economics. Washington, DC: Island Press. pp. 3–14. Baltimore, MD: Resources for the Future/Johns Hopkins Martinez-Alier J (1987) Ecological Economics: Energy, Environment, University Press. and Society, 287pp. Oxford: Blackwell. Boumans R, Costanza R, Farley J, et al. (2002) Modeling the dynamics Norton B, Costanza R, and Bishop R (1998) The evolution of of the integrated earth system and the value of global ecosystem preferences: Why ‘sovereign’ preferences may not lead to services using the GUMBO model. Ecological Economics sustainable policies and what to do about it. Ecological Economics 41: 529–560. 24: 193–211.

Ecological Economics 2 R Costanza, University of Vermont, Burlington, VT, USA

Published by Elsevier B.V.

Introduction Further Reading

Introduction only to the market economy – the value of those goods and services that are exchanged for . Its purpose is Stories about the economy typically focus on gross usually taken to be to maximize the value of these goods domestic product (GDP), jobs, stock prices, interest and services – with the assumption that the more the rates, retail sales, , housing starts, activity, the better off we are. Thus, the more the GDP , and assorted other indicators. We hear things like (which measures aggregate activity in the market econ- ‘‘GDP grew at a 3% rate in the fourth quarter, indicating a omy), the better. Likewise the more contributors to GDP recovering, healthy economy, but with room for further (such as retail sales and salaries paid to employees), the improvement.’’ Or, ‘‘The Fed raised short-term interest better. Predictors of more GDP in the future (such as rates again to head off ’’. housing starts and consumer confidence) are also impor- But do these reports, and the indicators they cite, tant pieces of information from this perspective. really tell us how the economy is doing? What is the Declining or even stable GDP is seen as a disaster. economy anyway? And what is this economy for? Growth in GDP is assumed to be a government’s primary Conventional reports on these questions are rather policy goal and also something that is sustainable narrow. The ‘economy’ we usually hear about refers indefinitely.