Withering Ecological Economics

Ecological economics was developed as an alternative to mainstream economics. Early writers attempted to develop a new approach based on ecological and physical principles. However, papers in Ecological Economics gradually drift toward and converge to mainstream economics over time. Newer papers in general concern little about ecological and physical principles. Researchers are under great pressure to conform to the mainstream to secure a bright career.

In the following, we will show how ecological and physical principles provide clear understanding to some basic concepts in economics.

1. On the concepts of developed and developing economies. In ecology, there are no developed and developing species. Climax and pioneering species roughly correspond to developed and developing economies. However, pioneering species don’t always evolve toward climax species. Pioneering species and climax species adapt to different environments. Similarly, developing economies don’t always evolve towards developed economies. Climax species are not superior to pioneering species. Similarly, developed economies are not superior to developing economies. Indeed, most developed economies have below replacement fertility and are experiencing population aging. Developed societies are declining.

2. On the concepts of perfection and imperfection. It is often assumed that regulatory environments are perfect or near perfect in “developed” countries. In “developing” countries, regulatory environments are imperfect. From ecology, we know that different species adapt to different environments. No environment is perfect in general. Humans are evolved from fish. This does not mean land environment, where humans inhabit, is perfect while aquatic environment, where fish inhabit, is imperfect. Fish don’t find land perfect while humans are very relaxed on land. Humans struggle in the ocean while fish are at home there. The concepts of perfectness and imperfectness are very misleading. In practice, they obscure the tremendous difficulties the “developed” countries are facing right now. Specifically, excessive environmental regulations are deindustrializing “developed” economies. Many people who could become high skill high pay manufacturing workers are stuck in the low skill low pay service jobs or withdraw from the job market altogether. This also makes developed countries very vulnerable to supply chain disruptions and trade disputes.

3. On the definition of green industry. Solar panel industry is defined as green industry. But manufacturing solar panels generates a great amount of pollution. However, it is the powerful who have the right to define which is green and which is not. Similarly, carbon dioxide is the food for all plants. The increase of carbon dioxide makes the earth a greener planet. The increase of carbon dioxide increases the carrying capacity of the earth. The increase of carbon dioxide in the atmosphere enables more poor people to have food. Yet carbon dioxide is called pollutant. The whole green theory and climate change theory was developed to legitimize the looting of the working class by the powerful. 

4. On Solow production theory. The Cobb-Douglas production function used in Solow production theory has little relevance to real economic activities. A recent meta-analysis of research on Cobb Douglas functions concludes that "the weight of evidence accumulated in the empirical literature emphatically rejects the Cobb-Douglas specification." (Gechert et al., 2021)   There is no reason to believe that further elaborations or modifications of this functional form are able to overcome the basic deficiency of irrelevance.

From ecological economics, natural resources are the ultimate sources of all wealth. But in mainstream production theory, natural resources are either ignored or lumped into capital.

References

Gechert, S., Havranek, T., Irsova, Z. and Kolcunova, D., 2021. Measuring capital-labor substitution: The importance of method choices and publication bias. Review of Economic Dynamics.