Abstract
Traditional neo-classical economics analises the process of price formation by considering the economy as a closed system: firms sell goods and services, and then they remunerate the production factors (land, labour and capital). It is interesting to note that while classical economists such as Malthus [1798], Ricardo [1817], Mill [1857] and Marx [1867] had clear in their minds that economic activity is bounded by the environment, neo-classical economics completely forgot this important characteristic of real world economies up till to the seventies when it was started the debate on social and environmental limits to economic growth1. Real economy started to be seen as an open system that in order to function must extract resources from the environment and dispose large amounts of waste back into the environment. This is the so-called materials balance model [Ayres & Kneese, 1969; Kneese et al., 1970].
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References
Here we do not enter in details regarding the so called “growth debate”. The interest reader can refer to: Galbraith, 1959; Hirsch, 1977; Hueting, 1980; Meadows et al., 1972; Mishan, 1967 and 1976; Nordhaus and Tobin, 1972; Scitovsky, 1976.
If capital formation is taken into account, in any given period a more complicated relationship between natural resources and waste exists. In fact some of the resource flows become “embodied” in capital equipment, but at the same time, capital equipment constructed in past periods will be wearing out, so it will appear as a waste flow.
The first law of thermodynamics states that the total amount of energy is conserved in all processes hence in all transformations of materials. Since Einstein postulated the equivalence of matter and energy (E=mC2) it follows that what is conserved is “mass-energy”.
A backstop technology is an almost indefinitely renewable resource which eventually takes over when exhaustible resources have gone (e.g., energy from fusion reactors).
“In this textbook we show how we can use the main body of economic thought to derive important propositions about the linkages between the economy and the environment. Rather than looking for some “different economics”, we are seeking to expand the horizons of economic thought [Pearce & Turner, 1990, p. 30]”.
Sustainable development implies a concern for the future, and this concern is necessarily reduced by discounting. Everyone discounts the future to some extent; generally speaking, the poor people are forced to discount at a higher rates than the well off. The need for immediate survival outweighs any consideration of the future. There is some poverty level below which sustainability becomes an unaffordable luxury. Thus poverty gives birth to an over exploitation of natural resources [Clark, 1991].
Keynes and in general Post-Keynesians, have paid few attention to the problem of economy-environment interactions. Some interesting relations between some aspects of Post-Keynesian theory and Bioeconomics are highlighted by Gowdy [1991]. Although some common points can be found (methodological framework, emphasis on production rather than exchange, interpretation of social rate of discount), an important potential area of conflict between the two schools is their attitude toward economic growth.
Martinez-Alier [1987] shows that the increase in productivity of modern agriculture depends on the underestimation of energetic inputs of fossil fuels, the low value given to the contamination caused by pesticides and the loss of biodiversity.
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© 1995 Physica-Verlag Heidelberg
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Munda, G. (1995). From Environmental Economics to Ecological Economics. In: Multicriteria Evaluation in a Fuzzy Environment. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-49997-5_2
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DOI: https://doi.org/10.1007/978-3-642-49997-5_2
Publisher Name: Physica-Verlag HD
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