ABOUT THIS BOOKConventional economics is often criticized for failing to reflect adequately the value of clean air and water, species diversity, and social and generational equity. By excluding biophysical and social systems from their analyses, many conventional economists overlook problems of the increasing scale of human impacts and the inequitable distribution of resources.
Ecological Economics is an introductory-level textbook for an emerging paradigm that addresses this flaw in much economic thought. The book defines a revolutionary "transdiscipline" that incorporates insights from the biological, physical, and social sciences, and it offers a pedagogically complete examination of this exciting new field. It provides students with a foundation in traditional neoclassical economic thought, but places that foundation within a new interdisciplinary framework that embraces the linkages among economic growth, environmental degradation, and social inequity.
Introducing the three core issues that are the focus of the new transdiscipline -- scale, distribution, and efficiency -- the book is guided by the fundamental question, often assumed but rarely spoken in traditional texts: What is really important to us? After explaining the key roles played by the earth's biotic and abiotic resources in sustaining life, the text is then organized around the main fields in traditional economics: microeconomics, macroeconomics, and international economics. The book also takes an additional step of considering the policy implications of this line of thinking.
Ecological Economics includes numerous features that make it accessible to a wide range of students:
more than thirty text boxes that highlight issues of special importance to students
lists of key terms that help students organize the main points in each chapter
concise definitions of new terms that are highlighted in the text for easy reference
study questions that encourage student exploration beyond the text
glossary and list of further readings
An accompanying workbook presents an innovative, applied problem-based learning approach to teaching economics.
While many books have been written on ecological economics, and several textbooks describe basic concepts of the field, this is the only stand-alone textbook that offers a complete explanation of both theory and practice. It will serve an important role in educating a new generation of economists and is an invaluable new text for undergraduate and graduate courses in ecological economics, environmental economics, development economics, human ecology, environmental studies, sustainability science, and community development.
AUTHOR BIOGRAPHYJoshua Farley is assistant professor in Community Development and Applied Economics and research assistant professor at the Gund Institute for Ecological Economics at the University of Vermont. He is also on the faculty of the Center for Resource Management and Environmental Studies at the University of the West Indies in Barbados.
Herman E. Daly is professor at the University of Maryland, School of Public Affairs. From 1988 to 1994 he was senior economist in the environment department of the World Bank. Prior to 1988 he was Alumni Professor of Economics at Louisiana State University, where he taught economics for twenty years. His books include Steady-State Economics (Freeman, 1977; second edition, Island Press, 1991); For the Common Good (with John Cobb, Beacon, 1989), and Beyond Growth (Beacon, 1996). In 1996, he received the Heineken Prize for Environmental Science awarded by the Royal Netherlands Academy of Arts and Sciences, and the Right Livelihood Award, also known as the "alternative Nobel Prize."
TABLE OF CONTENTS
Contents
Acknowledgments
A Note to Instructors
Introduction
Part I An Introduction to Ecological Economics
Chapter 1 Why Study Economics?
What is Economics?
The Purpose of this Textbook
Coevolutionary Economics
The Era of Ecological Constraints
Outline of the Text
Chapter 2 The Fundamental Vision
The Whole and the Part
Optimal Scale
Diminishing Marginal Returns and Uneconomic Growth
Paradigm Shift
Say's "Law": Supply Creates Its Own Demand
Leakages and Injections
Linear Throughput and Thermodynamics
Big Ideas to Remember
Chapter 3 Ends, Means, and Policy
Ends and Means--A Practical Dualism
The Presuppositions of Policy
Determinism and Relativism
The Ends-Means Spectrum
Three Strategies for Integrating Ecology and Economics
Big Ideas to Remember
Conclusions to Part I
Part II The Containing and Sustaining Ecosystem, the Whole
Chapter 4 The Nature of Resources and the Resources of Nature
A Finite Planet
The Laws of Thermodynamics
Fund-service and Stock-flow Resources
Rivalness and Excludability
Goods and Services Provided by the Sustaining System
Big Ideas to Remember
Chapter 5 Abiotic Resources
Fossil Fuels
Mineral resources
Water
Ricardian Land
Solar Energy
Big Ideas to Remember
Chapter 6 Biotic Resources
Ecosystem Structure and Function
Renewable Resources
Ecosystem Services
Waste Absorption Capacity
Big Ideas to Remember
Chapter 7 From Empty World to Full World
Fossil Fuels
Mineral Resources
Water
Renewable Resources: Structure and Function
Waste Absorption Capacity
Big Ideas to Remember
Conclusions to Part II
Part III Microeconomics
Chapter 8 The Basic Market Equation
The Basic Market Equation
What Does the Market Equation Mean?
Monopoly and the Basic Market Equation
Non-Price Adjustments
Supply and Demand
Big Ideas to Remember
Chapter 9 Supply and Demand
Shift in Curve Versus Movement Along a Curve
Equilibrium P and Q, Shortage and Surplus
Elasticity of Demand and Supply
The Production Function
The Utility Function
Big Ideas to Remember
Chapter 10 Market Failures
Characteristics of Market Goods
Interaction of Excludability, Rivalness, and Congestibility
Open Access Regimes
Excludable and Non-Rival Goods
Non-Rival But Congestible Goods
Pure Public Goods
Externalities
Missing Markets
Summary
Big Ideas to Remember
Chapter 11 Market Failures and Abiotic Resources
Fossil Fuels
Mineral Resources
Freshwater
Ricardian Land
Solar Energy
Big Ideas to Remember
Chapter 12 Market Failures and Biotic Resources
Renewable Resource Stocks and Flows
Renewable Resource Funds and Services
Waste Absorption Capacity
Biotic and Abiotic Resources: The Whole System
Big Ideas to Remember
Conclusions to Part III
Part IV Macroeconomics
Chapter 13 Macroeconomic Concepts: GNP and Welfare
A Troubled Marriage
Gross National Product
Sustainable Income
Beyond Consumption-Based Indicators of Welfare
Big Ideas to Remember
Chapter 14 Money
Virtual Wealth
Seigniorage
The Fractional Reserve System
Money and Thermodynamics
Money as a Public Good
Big Ideas to Remember
Chapter 15 Distribution
Pareto Optimality
Distribution of Income and Wealth
Functional and Personal Distribution of Income
Measuring Distribution
Consequences of Distribution for Community and Health
Intertemporal Distribution of Wealth
Big Ideas to Remember
Chapter 16 The IS-LM Model
IS: The Real Sector
LM: The Monetary Sector
Combining IS and LM
Exogenous Changes in IS and LM
IS-LM and Monetary and Fiscal Policy
ISLM in the Real World
Adapting IS-LM to Ecological Economics
Big Ideas to Remember
Conclusions to part IV
Part V International Trade
Chapter 17 International Trade
The Classical Theory: Comparative Advantage
Kinks in the Theory
Capital Mobility and Comparative Advantage
Absolute Advantage
Globalization versus Internationalization
The Bretton Woods Institutions
The World Trade Organization
Big Ideas to Remember
Chapter 18 Globalization
Efficient Allocation
Sustainable Scale
Just Distribution
Summary
Big Ideas to Remember
Chapter 19 International Flows and Macroeconomic Policy
Balance of Payments
Exchange Rate Regimes
Capital Mobility and National Policy Levers
Economic Stability
Big Ideas to Remember
Conclusions to Part V
Part VI Policy
Chapter 20 General Design Principles for Policy
Basic Rules
Which Policy Comes First?
Controlling Throughput
Price versus Quantity as the Policy Variable
Sink vs. Source
Big Ideas to Remember
Chapter 21 Sustainable Scale
Direct Regulation
Pigouvian Taxes
Pigouvian Subsidy
Tradable Permits
Policy in Practice
Big Ideas to Remember
Chapter 22 Just Distribution
Caps on Income and Wealth
Minimum Income
Distributing Returns from the Factors of Production
Additional Policies
Big Ideas to Remember
Chapter 23 Efficient Allocation
Pricing and Valuing Non-Market Goods and Services
Macro Allocation
Spatial Aspects of Non-market Goods
Redefining Efficiency
Big Ideas to Remember
Conclusions
Glossary
Further Readings
Index
About the Authors
Library of Congress Subject Headings for this publication: Environmental economics