8.2 Pre-Analytical Visions

 

 

8.2 Pre-Analytical Visions

The concern about scale in ecological economics is related to what Herman Daly has called its different “pre-analytical vision” from that of the neo-classical mainstream. These visions can be represented diagrammatically as follows:

8.2.1 Pre-Analytic vision of neo-classical (mainstream) economics

Figure 8.2.1 sourced from Feasta under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
http://www.feasta.org/2012/04/11/an-introduction-to-ecological-economics/

The relationship between the economy and the ecological system is essentially colonial – profit maximising companies push what are termed “environmental costs” unpaid for onto the world around them which economists call “externalities”

as if they are minor aberrations in an otherwise efficient system. This aberration can be corrected for as long as prices for resources and waste absorption by the planet are set correctly to incentivize markets to provide substitutes for scarce resources and alternative arrangements for waste absorption. The economy can go on expanding indefinitely.

In the mainstream view any economic activity involves costs, including environmental costs, so whether any particular activity should occur or not is best worked out by comparing the stream of benefits and costs in the future to work out the net benefits. Then, because people have a “time preference” in which current benefits are preferred to future ones, there is a need to discount future net benefits to show what should happen when resources are allocated here and now. In the economics mainstream the interest rate is a payment to compensate people because when they lend money they forego current spending and consumption so need to be paid for doing so. At a 3% interest rate £100 today is worth £103 in one year's time and the logic of discounting arises because, looking at that the other way round, £103 in one year should be discounted back to £100 to get its present value.

Here and now suffice it to note that a concept system that discounts future benefits like this across generations and sees the income of future generations as less important than benefits now is already downgrading priority to future generations. Mainstream economists however have no problem with this because they see economic growth as continuing and assume that future generations will be much richer than we are. Ecological economists think that this begs important questions.

8.2.2 Pre-analytic vision of ecological economics

Figure 8.2.2 sourced from Feasta under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
http://www.feasta.org/2012/04/11/an-introduction-to-ecological-economics/

In this vision the economy cannot go on expanding in what Daly terms the “full world” situation. The availability of “natural capital” sets restraints on how much the economy can expand both in regard to sources of materials and energy and in regard to “sinks” where the wastes of economic activity have to be absorbed by the planet. Moreover certain inputs into the economy are absolutely crucial because they enter into all economic activity – specifically energy inputs which power all the machines and devices of modern civilisation. It is true that materials like metals can be recycled but this takes energy and there is always some net loss.

Moreover, most energy is currently fossil energy and is non renewable. It is subject to the laws of physics and entropy. One cannot recycle energy and there is evidence that it is becoming more costly, in energy terms to access fossil energy (coal, oil and gas). At the same time there are absolute limits on the amount of renewable energy too, which, because it is less dense and intermittent, is not such a convenient source.