Economy << Ecosystem

Today it hit me that the model of the economy and the ecosystem in ecological economics is more right than I had previously understood. The work of Herman Daly and others made sense before today, with its key premise that the human economy is a subset of the ecosystem. This is something neoclassical economists, not to mention environmental economists, tend to ignore or deny.

What I didn’t realize before, though, is this: not only is the global economic system a subset of the global ecosystem, but it is an ecosystem even though we don’t think of it that way. An ecosystem roughly speaking involves energy flows between biological, geological, and chemical entities and processes. That’s what an economy consists of as well — flows of energy, food, minerals, water, and then derived goods that are built upon those foundations. A bird gathering twigs that were produced by a tree to build a house is no different than a human gathering lumber from the hardware store that was produced by a tree to build a house. The term economy could apply in both contexts, and so the distinction between the two is a false one. While non-humans, to our knowledge, don’t use currencies to mediate their exchanges, they use a vast array of mechanisms to interact and exchange energy and resources with each other; consider the symbiosis that takes place among coral or in any mycorrhizal association, to pick two among millions of examples.

Once this linguistic substitution is made, the false premises of conventional economics are more apparent. For example, imagine reading a recent news headline while applying this substitution:

China’s ecosystem growth slows to 7.7%

The absurdity of it is immediately apparent when framed that way: the only way for China’s economic ecosystem (or any type of ecosystem for that matter) to grow is to expand its boundaries — that is, to appropriate flows from outside its current boundaries. Thus we can return to Daly’s dictum with confidence:

[T]he economy is an open subsystem of a finite and nongrowing ecosystem (the environment). The economy lives by importing low-entropy matter-energy (raw materials) and exporting high-entropy matter-energy (waste). Any subsystem of a finite nongrowing system must itself at some point also become nongrowing.

Leave a Reply


Responses to “Economy << Ecosystem”

  1. If I remember rightly, Howard Odum’s work explicitly includes human economies as a part of the ecosystems of which they’re a part. In particular, the pulsing paradigm applies to economies as well as to the rest of the biosphere.

  2. Don — I think you’re right, and I think this line of thinking is common among ecological economists like Odum. I think this post is a reflection of the fact that while I had read such works, it really hadn’t sunk in for me until recently that an economy *is* an ecosystem rather than just being part of an ecosystem (which is the mental frame I had used before).

  3. I like “While non-humans, to our knowledge, don’t use currencies to mediate their exchanges…”

    I also very much liked your pigeon SD-card footnote in your Internet Quine paper!

    As to expanding its boundaries, I’m thinking of the writings of Tainter (I’ve read a few of his more recent (2000-) articles).

    Also, I have become interested in Wallerstein’s world-systems theory. Best of all is to read about it through Hornborg’s “The power of the machine: Global inequalities in economy, technology and environment”.

  4. Daniel — thanks! I’ve been meaning to read Hornborg.

    Do you have any links to the Tainter and Wallerstein work you’re referring to? I’d be interested in checking that out.