A Brief Glimpse into the New Paradigm of Economics

            The ways in which humans are perceiving and thinking about the planet are constantly evolving...hopefully for the good!  Few domains of thought are left out of this continuous evolution and some are in need of Darwinian progress faster than others.  One area of study that could use some sort of time machine is that of economics.  The field, especially in Western society, has become eerily intertwined with politics and the pursuit of democracy.  Furthermore, traditional or neoclassical economic approaches seem outdated in their respect for the earth's true carrying capacity.  While so-called environmental economics has evolved as a subset of neoclassical thought, this mode also falls short of accounting for finite supplies of resources on the planet.  Ecological economics, on the other hand, has truly distanced itself from its academic predecessors and begins to address some of the core planetary issues facing the world today.

            One of the key differences between neoclassical economics (NCE) and ecological economics is the strong focus on efficient allocation of resources held by neoclassical economists.  Ecological economists, on the other hand, view efficiency as an important aspect of a given economic system, yet see it as secondary to issues such as the scale of the system and the just distribution of its resources.  The analogy of loading cargo on a ship helps to emphasize the differences in these approaches.  While a neoclassical economist might tend to focus on loading the ship such that the weight was distributed on both sides equally, an ecological economist would tend to pay attention to the overall weight of the cargo (e.g. the scale), in order to make sure the ship would not sink.  The ecological economist might also question why some passengers on the ship are allowed to bring more cargo than others, thus looking at the just distribution of the system.

             Ecological economists also tend to differ from their neoclassical counterparts when it comes to focusing on the market as the main mechanism for allocating goods and services.  In neoclassical economics, the market is considered the sole means through which consumers attain their desired ends.  Also fundamental to NCE, is the idea that markets reveal most of what is desired by humans.  However, ecological economics tends to view the market as only one possible vehicle for allocating goods and services.  Furthermore, an ecological economist might argue that some “non-market” goods and services might actually increase human well-being more than their material, market-driven relatives.  In response, a neoclassical economist would likely argue that the key to happiness is the accumulation of market goods and services and that this desire is what fuels the prosperity and improvement of global society.

Another key difference in the two approaches can be found in the argument of growth vs. development.  While neoclassical economists tend to view growth as a positive indicator of a strong economy, ecological economists recognize that this kind of growth cannot be sustained by the finite supply of the earth’s resources.  Therefore, ecological economists often call for an end to growth and a stronger focus on development, or an increase in the quality of goods and services rather than the quantity. 

It is often this question of quantity vs. quality that businesses with an affinity towards ecological economics attempt to answer.  Solutions are often found in higher-quality goods and services that command higher prices.  The individual business hopes that potential consumers see the value in buying an item that will last longer.  Since the product endures over time, the business and the consumer can both feel better about the transaction knowing that less ecological resources are being used.  In this scenario, it is imperative that the business knows how to reach the customers whose values align with those of the business. 

Other approaches of businesses operating with respect to the principles of ecological economics are to look at the system as a whole and to view their own operations as an integral component of the whole.  Under this lens, many businesses can identify ways to reduce or eliminate waste – sometimes even turning waste streams into revenue streams.  Companies may also find creative solutions to reduce the overall footprint of supply chains, various business units, and even the company in total. 

Of course, looking at the bigger picture often results in having to make tough decisions.  Many businesses must decide whether certain aspects of its operations should continue, despite the ecological harms that may be resulting.  As an ecologically sensitive business, it is often impossible to remain competitive with companies that have little to no understanding or regret for their negative effects on the planet’s ecosystems.

In general, ecological sensitivity comes with a cost premium, whether during the harvesting, production, or delivery of a product or service.  This premium is usually passed onto the consumer, who then has the tough decision to make.  Often, there is no perceived value added to the product other than the ecologic consciousness used in its manufacturing processes.  For many consumers, this is simply not enough to justify the extra expense.  These are some of the many challenges that businesses attempting to operate sustainably face everyday.