Stock-Flow & Fund-Service Resources

Prompt: Think about a specific ecosystem (even an urban ecosystem if you like)-or better yet, go visit one, and take along a field notebook. Make a list of three stock-flow resources found in that ecosystem, and three fund-service resources.

Is the resource rival or non-rival? In general, can you think of any stock-flow resources that are non-rival? Can you think of any fund-service resources provided by nature that are rival?

Is the resource excludable or non-excludable? If it is non-excludable, can you think of an institution or technology that could make it excludable? Do you think it should be made excludable? Why or why not?

Is the resource a market good or a nonmarket good?

In general, can you think of any stock-flow resources that cannot be made excludable? Can you think of fund-service resources provided by nature that can be made excludable?

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Ecosystem – WVU Core Arboretum (small, deciduous forest in urban environment)

Stock-flow resources

1. Paw-paws (fruit)

2. Timber

3. Deer (for food)

Fund-service resources

1. Temperature regulation

2. Carbon absorption

3. Water retention (rain, urban runoff)

All three stock-flow resources are rival; that is, the more of them I use, the less there is for you to use. They are also all excludable. Because the arboretum is owned by a university and open to the public without restriction, the resources that can be harvested (paw paws) are non-market. Regulations prevent the harvest of timber or deer from the forest, but if they were harvested, timber would very likely become a market good, and deer would almost certainly be a non-market good.

All of the fund-service resources are, for practical purposes, non-rival and non-excludable. All are, at present, non-market. However, temperature regulation could be made excludable and marketed by charge for entrance. I don’t think that should be done, as I believe that access to our evolutionary environment, not to mention shade, should be a birthright. Carbon absorption is absolutely non-excludable, and it is non-rival in that your carbon emissions can’t be differentiated from mine. However, it could be made marketable via, eg., a cap-and-trade system. There would be myriad challenges associated with developing and implementing such a system; however, it doesn’t seem like an all-together bad idea to me, especially if it could be developed in an international framework.

I cannot think of a stock-flow resource that is necessarily non-excludable. Fresh water is the closest thing I can think of, but, of course, efforts are in place to make it an excludable resource both via regulation, eg., the Colorado River Compact and technology, eg., dams.

Some fund-service resources can be made excludable. For example, a hot springs provides the service of warm bathing. At least within our conception of property rights, one could buy the land surrounding the springs and fence them off, thereby excluding anyone else from receiving the service of the springs.

Climate change and ecological economics paradigm

Prompt: Consider one of the serious problems that society faces today. Is there a relationship between this problem and conventional market economics? Does ecological economics offer useful insights into this problem? Would this problem have emerged if society had adopted an ecological economics perspective 100 years ago? Why didn’t we adopt ecological economics 100 years ago? Why have we still failed to adopt it today?

Global climate change is among the most serious problems our society must address. Conventional market economics has not only failed to address the problem of climate change, it has spurred it onward. Our economies are highly dependent on cheap fossil energy for growth, and conventional economics sees growth as the ultimate goal. Thus, the more energy used, the better. To this end, not only have costs associated with fossil fuel extraction, transport, preparation, use, and waste handling been externalized from the companies carrying out those activities, but the US government, among others, has actively subsidized energy industries and has repeatedly deployed the military to further those industries’ access to fossil fuels.

Ecological economics (EE) offers multiple insights into the problem of, and solutions to, global climate change. In contrast to conventional economics, EE recognizes that the economic system is a subsystem of the global ecosystem. Therefore, the waste from the economic system, including greenhouse gases like carbon dioxide and methane, end up in the ecological system. The blatant fallacy of conventional economics’ notion that the economic system is the whole is readily apparent when one considers what happens to waste from that system: where can it go?

Furthermore, ecological economics prioritizes an appropriate scale of the economy and a just distribution of its resources. By asking, what is an appropriate size for our economic system? EE suggests that we should consider how much fossil energy the economy should use before asking how we can most efficiently use it.

Concern for just distribution of resources in EE extends to intergenerational distribution. So, as we continue to burn fossil fuels at a rate that provides each of us in the rich world with the energy equivalent of hundreds of slaves, the ecological economist asks whether that is fair to a Bangladeshi whose home will be flooded as sea levels rise or to a child born in the Chihuahuan Desert in 2100 who will face warmer temperatures and less precipitation than they would have if we had lived more modestly.

Had ecological economics guided our actions through the twenthieth century, we would undoubtedly be in much less of a predicament. It seems to me that considerations of sustainability and justice would have prevented the much, if not all, of the extraction fossil fuels, obviating all concerns regarding climate change. For example, residents of Appalachia who live near mountaintop removal coal mining have higher rates of birth defects, die younger, and are poorer than other residents of Appalachia. If justice were a primary concern of economists for the last 100 years, it is hard to imagine that this type of mining would ever have been practiced.

Of course, we didn’t adopt an ecological economical paradigm 100 years ago, and we still haven’t today. That made more sense 100 years ago, when there were “only” a couple billion people on the planet and vast areas of land and sea were untapped and still fecund. Now, however, we have filled the world with humans, depleted non-renewable resources, hyper-exploited renewable resources, and filled waste sinks. It is clearly beyond time to adopt a full world paradigm. I suspect we haven’t for three primary reasons:

1. Inertia. We have been doing industrial capitalism under an empty world/conventional economical paradigm for a long time. Our systems are so large that they cannot change course rapidly.

2. Entitlement. We quite naturally enjoy having tomatoes in January, air conditioning in July, and jet travel whenever we want it. Unfortunately, as a society, we seem to have the maturity level of a toddler regarding getting what we want when we want it.

3. Power structures. Those who benefit most from the systems that are in place are those who have the most influence on those systems. Conversely, those who have the most to gain from adopting an ecological paradigm—the global poor, future human generations, and almost all non-human beings—have very little influence on our systems.

The situation is dire; we urgently need to adopt an ecological economical paradigm. I think we have begun to move in that direction, but we have already done a great deal of damage. It remains to be seen whether we will be able to get our act together before we hit powerful tipping points – points at which feedback loops strengthen to cross points of no return.

Desirable ends for hydraulic fracturing

What follows is a free-write for exercise 1.2 in the workbook associated with this class. At this point, I'm suppose to have chosen a tentative "problem" for which I will do a project that involves defining and working toward a solution. The nascent explosion of horizontal drilling and hydraulic fracturing in the Marcellus Shale for methane is a pretty big problem around here, so I'm thinking that will be my project topic. What follows is a free-write.... it was written as a stream-of-consciousness and has not been edited for content or grammar.

The Problem – Hydraulic fracturing of Marcellus shale for methane

Sustainable Scale

sustainable scale of gas well drilling!? Ha, there couldn’t be. or could there? in theory there’s an amount of CO2 we could burn that the ecosystem could absorb. but the drilling could never be sustainable, the gas is finite and consumed. on an empty planet, the problem wouldn’t be one of sustainability, because there might be enough gas for everyone to burn some without making a dent in total reserves, but problems of pollution and environmental injustice would remain.

If the rate of throughput increases?! HA! The rate of throughput is exploding, with disasterous consequences. The benefits – a few jobs, slightly cheaper natural gas, and we will be able to keep the lights on for a few years longer, if we don’t melt the planet first. The consequences – we’re befowling our streams, tearing apart our mountains, toxifying the air. And it’s falling on people that have lived with the disasterous consequences of coal mining for generations. My heart sinks to think that now they’ll be burdened with this. I can and will leave; it’s not really my battle. I’ll fight it while I’m here, but I’ve never felt like it was my water being polluted. But I see how beaten down these people are by the mining, and I see how divided they are about the industry. It breaks my heart to see it reving up in a new arena.

Just Dirstribution

Who benefits? The mineral owners (if they don’t plan to stay living near the wells) and the energy companies. And the population as a whole in a very dilute way by the pennies they save on their gas bills. Though I’m not sure that’s true…… if we were to not drill into unconventional gas reserves, increased prices would force conservation, which might lead to a happier way of life, and could slow encroaching disasters associated with climate change.

Who created the costs? The beneficiaries, of course. Duh.

Who bears the burden? The people of Appalachia. The poor, health-impacted, community-divided people of Appalachia. For those few who can lease gas rights and make enough money to retire and perhaps move away, who can blame them? And even more so when their neighbors have already leased gas rights. In that way, it spreads like a contagious disease.

who created the values that are affected? nature, first and formost – the streams, the hills, the forests, all raped and pillaged. but also people who have built houses, developed farms, and developed relationships with their local landbase.

who determines what is just and unjust? in what court? in the court of public opinion, I suppose each of us individually, with (sometimes coercive) guidance from the media. in the court with material consequences, the courts, armed with police and appointed by corrupt political processes.

Efficient Allocation

the external costs are many – I hope someone will do an analysis for Marcellus wells like the ‘true cost of coal’ analysis that Epstein recently published. if they had to pay for the potential risks and eventual costs, I suspect they wouldn’t be able to drill. externalized costs include pollution of waterways that is guaranteed: sedimentation runoff and some amount of organics, and the product of the probality of a blowout or other disaster times the costs of such a disaster—from the emergency crews that come to put the fires out, to the downstream ecological effects. there’s also the air pollution, the people who have to move off their farm lands or from their homes because they’re getting sick from the air pollution. there’s the lost aquifers, which are becoming all the more valuable as (clean) water becomes scarcer.

perhaps prices could be used to internalize some of these costs, and I think they should be as long as drilling is happening. but ultimately, our knowledge is insufficient to estimate the costs associated with these damages. the technology is five years old – how could we possibly know how it’s going to impact future generations?

Neoclassical vs. Ecological Economics

Prompt: Create a chart comparing and contrasting ecological economics and neoclassical economics. On each respective side put the main points for each school of thought. For each major point also write down the reasoning behind the development of these practices and their goals, these may be either historical or current needs.

The wants of Homo economicus

Prompt: Read the “Economic Man” and “Wants” from the New Palgrave Dictionary of Economics. State whether you believe humans actually act in such a manner in their daily lives. How do these actions and beliefs differ from those held within ecological economics?

Homo economicus has perfect information, infinite computing power, and makes optimal, rational decisions. Demonstrations that H. sapiens ≠ H. economicus abound. One example is the variety of prices at which goods are purchased. Even on the internet, where the perfect-information premise is most-closely realized and the opportunity cost of selecting a different vender is near zero, goods are routinely sold at prices greater than their minimum.

It seems worth noting that corporate entities are more likely to make rational decisions than individuals. Corporate decisions are made by groups of individuals, often through formalized processes that are designed to maximize profits. Periodic review by managers and, at the ultimate level, shareholders, ensures that individuals or processes that produce sub-optimal (ie., irrational, ie., non-profit-maximizing) decision making are weeded out.

In contrast, individuals make decisions based on a complex psychological suite of rationality, morality, and emotion with little oversight or review. The decision to take $300 to a casino rather than to invest it is irrational*, but, as casino-loyalty-rewards programs demonstrate, there is seldom a mechanism to stop the individual from repeating the irrational act. In marked contrast, if the same person took $300 of a corporation’s money to a casino, they would be eliminated from the company and safeguards would be put in place to ensure that similar irrationality would not be repeated. This may be one of many reasons corporations have grown so dominant in our society.

On the subject of wants, it seems clear that neoclassical economics has inappropriately thought of individuals as surrogates for firms. Human wants aren’t rational; they are influenced, for instance, by social conditions (see, eg., cosmetic skin-whitening cream, which is presently very popular in East Asia). Furthermore, as the essay on economic man points out, the idea that individuals are preference-maximizing entities is entirely unfalsifiable, which makes it entirely unscientific. Preferences being invisible, the theory takes one’s actions as markers of preferences, and then says that those actions are evidence of the preferences they demonstrated. Circular reasoning, par exemplar.

Ecological economics acknowledges that human wants are complex and driven by a variety forces, among which rationality is but one. Being transdisciplinary, ecological economics' appreciation of human wants and decision making is informed by behavioral economics, cognitive psychology, anthropology, sociology, etc.

* The counter-argument would be that the individual derives pleasure from going to the casino in excess of the difference between the anticipated gains of investment and the anticipated loss of gambling. I would respond by suggesting that the counter-arguer go to a casino and look for such pleasure. It has been my experience that individuals are profoundly unhappy while they are in casinos, which returns us to the point that humans often make irrational decisions.

On premises

As I read the opening chapters of my new ecological economics texts, I’m occasionally frustrated by a feeling of patronization. When a text asks the student to reflect on whether ever-increasing working hours lead to ever-increasing happiness or whether infinite growth on a finite planet is possible, my initial response is, come on, can we get to the real issues already!?

But, of course, this is precisely the problem. Conventional economics takes as an axiom that increasing consumption is increasing happiness. Conventional economics recognizes no ecological bounds.

Last summer, I took a class called Intermediate Macroeconomic Theory. Before the class started, I was giddy to learn how nation-scale economic philosophy was developed and practiced. For the first two weeks of the class, I was shocked. I wiggled about in my chair, trying to limit my show of disbelief at ridiculous premise after ridiculous premise. I bit my tongue as often as possible, but I couldn’t let all those assumptions slide through unchallenged. To her credit, our teaching assistant, challenged on the fundamental pillars of the subject in which she was becoming an expert, patiently acknowledged that the assumptions were “imperfect.” And then we moved on to the next step, having incorporated yet another blatantly fallacious premise.

Then something unexpected happened. After those first, unbearable classes, I got quiet. Suddenly, there was nothing to question. Once the systems had been defined, it was just pushing variables around, and the math all seemed to check out.

That’s how economics has been able to drive us to this insane situation in which we’re destroying our life support system and growing none-the-happier for it—they have slid their premises in with hand waving and admissions of “imperfect assumptions” in the first chapter. Debate and contention is allowed about the subjects in chapter 24, but never about chapter one. Questioning the premises could mean rewriting everything that comes after them, and then what would all those old PhDs be worth?

It has been said that, “from insane premises to monstrous conclusions, Hitler was relentlessly logical.”¹

It’s become clear that we can say the same about neoclassical economics.

So, to return to the topic whence I’ve digressed, of course the opening pages of a subject meant to overthrow an established ideology start by examining the basic premises of the dominant ideology.

Once we’ve accepted the premises, we’ve been had.

If we’re going to define a new economics, we need to examine our premises very carefully.

So I’ll be patient as I read these opening pages and try to enjoy an economics that meshes with common sense and my system of morals and values.

1. http://www.amazon.com/Nazi-Doctors-Medical-Psychology-Genocide/dp/0465049052

Visioning a better future

Prompt: Write a one page description of your vision of a sustainable and desirable future, i.e. what you believe are the desirable ends towards which society should allocate its resources. Use your imaginations without ignoring the laws of physics and ecology. Post your vision on the discussion board. Read and comment on the other students’ visions. You will be asked to return to this in the module on societal challenges and paradigm shifts.

I think the loss that we are most hurting from is the loss of connection to community and place. Many of us scarcely know our neighbors, let alone those who produce our food and clothing. For half of humanity, connection to the natural environment in which we evolved to exist has been replaced with suffocation by concrete and steel. It has been my experience (and to my limited knowledge, cutting edge research agrees) that contentedness arises from communion with human community and the natural environment. Therefore, since our goal is to increase human wellbeing, any changes we wish to make to the economic system should enhance connection to the places we live and the people with whom we share them.

Food, being our primary requirement, seems like a natural place to start visioning. The way we acquire and consume our food used to be the cornerstone of community interactions. For the vast majority of human history, that meant hunting and gathering in tribes, and, more recently, farming and raising animals in families and communities. Not coincidentally, as we have progressed from hunter-gatherers, to agriculturalists, to modern-microwavers, the quantity of calories we consume has increased while the quality of nutrition contained in those calories has decreased. In fact, human health deteriorates with the rise of agriculture¹.

Our modern system of food production and consumption damages human health (see, eg., obesity and diabetes, but also, likely, cardiovascular disease and many cancers²), destroys ecosystems (see, eg., soy production in the former Amazon rainforest or the 9,000mi² deadzone in the Gulf of Mexico), depletes limited stocks ranging from topsoil to rock phosphorus to oil, and has severed our primal link to the natural world. When a people live in constant contact with the systems that support them, they value those systems. It is only our dissociation from the natural world that has enabled the degradation of it. Conversely, by putting ourselves back in contact with the source of our sustenance, we will naturally become caretakers of those systems. As Derrick Jensen points out, “If your experience is that your water comes from the tap and that your food comes from the grocery store, then you are going to defend to the death the system that brings those to you because your life depends on them; if your experience is that your water comes from a river and that your food comes from a land base then you will defend those to the death because your life depends on them.”

Current economic policies, such as subsidization of oil production and agriculture, along with powerful cultural forces, such as the drive for increasing consumption fueling longer working hours keep us chained to a system that dissociates us from our sources of happiness and vitality. The good news is that a return to one naturally means a return to the other.

1. http://www.sciencemag.org/content/324/5927/588.1

2. http://www.amazon.com/Anticancer-New-Life-David-Servan-Schreiber/dp/0670020346

Intergenerational Pareto (In)Efficiency

Prompt: Why might excessive resource use have greater impacts on future generations than the current one? Consider the definition of Pareto efficient allocation. If the current generation is the de facto owner of all resources, could it be Pareto efficient for this generation to consume fewer resources so that future generations are better off?

There are many reasons resource use in the present could have a greater impact—positive or negative—on future generations than the present generation. For example, suppose there is a stockpile of grain sufficient to feed one person for one year. Someone, free from the burden of having to find food, could spend a year developing methods to produce food more efficiently, which could reduce food scarcity for future generations far more than the stock of food that was consumed to develop those methods.

More relevant to the topic at hand, present consumption can have powerful negative effects on future wellbeing. Many fisheries are presently severely depleted and dangerously close to collapse. The aggressive harvest of the remaining fish in a depleted fishery may increase present-day wellbeing a bit, but if it results in the collapse of a fishery, it would have dramatic negative effects on future wellbeing.

Pareto efficient allocation is the state of a system at which no alternative allocation of resources exists that would make anyone better off without making someone else someone worse off. If future beings are included in the system, it becomes clear that Pareto efficiency demands restraint on the current generation.

Considering the potential breach of feedback loop tipping points, such as desertification of forests and irreversible increases in atmospheric carbon, present consumption levels and methods are likely very, very far from Pareto efficient.

What is this blog?

First, who am I? My name is Michael Levy. I am a graduate student at West Virginia University studying the recovery of ecosystem structure and function on reclaimed surface coal mines.

Lately, I have become very interested in ecological economics. Ecological economics is a transdisciplinary endeavor that seeks to put economics in its rightful place as a subsystem of the global ecosystem which contains it. It prioritizes sustainability and justice and recognizes that infinite growth on a finite planet is impossible. It may be the coolest thing I've come across so far.

Thankfully, the University of Vermont offers two ecological economics courses online, for free! The first is Introduction to Ecological Economics. The second is Simulation Modeling. When I first started working on my master's degree, I took a Biogeochemistry course that involved some systems modeling using the software STELLA. At the time I thought that was the coolest thing ever and ran out and bought Donella Meadow's Thinking in Systems. That ecological economics deals with the great moral issues of our time (sustainability, environmental justice, transitioning to a mature human culture) and does so using simulation modeling secures its place as The Coolest Thing Ever.

UVM's online courses include posting writings to a discussion board to get feedback from other students and professors. Since that option isn't available to those of us taking the class for free, I thought I'd post my writings here, to the whole web.

Since you've found yourself reading this, you too much have some interest in ecological economics. I encourage you to explore the Gund Institute for Ecological Economics at UVM. Also, please leave comments, questions, and criticisms on my writings at the appropriate post. I am a firm believer in dialectic and would be thrilled to discuss these very interesting and important issues with you here.