In last night’s Café on “Economics versus Ecology”, Richard Jones outlined key elements of how economists see the world around them before suggesting that there are huge differences between the economic picture and that drawn by ecological views of the world. Ecology, he suggested, is a way of thinking and picturing which is built on the idea of a whole, self-enclosed and self-regulating system. Such systems (ecosystems) are composed of functional parts, each of which plays a vital part in keeping the whole system working. Understanding the relationships between one part (say, a predatory species) and other parts (prey species, plants, fungi, and so on) is a complex matter. Precise laws which predict how changes in one part (say, the disappearance of a plant species) may affect other parts (predator species) are not easy to state. Things become even more complex when ecosystems are placed in relation to other natural systems (geological, climatic and so on) to build up a picture of a whole of wholes, the Earth as such.
Where ecology and economics share common ground is perhaps on the importance of scarcity. The scarcity or abundance of resources needed by different parts of the system shape create change. A surplus of rabbits means a surplus of foxes, and conversely, an outbreak of myxamatosis leads to fewer foxes. Economics also builds a picture of a system built on scarcity. But the key determinant of scarcity here is not natural variation. Instead, it’s how humans choose to allocate resources (including primary goods like water and food, but also money and time). And choosing between alternative ways to use resources represents a basic form of human behaviour, which economists typically suggest is the key to understanding everything else we do. Understanding how and why humans do make the kinds of choices they actually do is possible, economists suggest, on the basis of certain principles.
First, choices are shaped by assessments of expected costs versus expected benefits, on the basis of information available about both. Most importantly, what determines choices is ultimately the marginal utility of a choice. For example, if I have £2 to spend, bottled water costs 50p, and I’m thirsty, then using 50p to buy a bottle of water will make sense to me. After drinking it, I’m still thirsty, though much less so. I can now choose to buy more water or spend the money on something else. At this point, the marginal utility of a bottle of water – the value to me of consuming one more bottle now – has decreased. It may have decreased to the point where I decide to buy something else – the shop also sells sandwiches, and it’ll soon be lunchtime. What matters in determining whether I do one thing or another is the relative marginal utility of each choice.
The importance of marginal utility is the point, Richard suggested, where economics and ecology, as alternative pictures of the world, stand in starkest contrast to each other. Ecology is a worldview which strives to understand things in terms of interconnected wholes. The value of parts can only be established by understanding what function their existence plays in relation to the whole system. Economics, on the other hand, views the world through the lens of individual human choices, and how they are based upon evaluations of alternative possibilities. What drives these evaluations is marginal utility, the value to the individual of this particular choice here and now.
When we are faced by ecological or environmental problems – like human-caused climate change, mass extinction of species, resource depletion and so on – can economics help? Or is it part of the problem? Individual choices, when added together, can create scarcity where there was none previously, in ways which have ripple effects on wider ecological systems. Richard mentioned the example of the Black Rhino, hunted almost to extinction because of the value of its horns, a scarce “resource” which , an economist might say, due to choices “at the margin”, became increasingly scarce, thus affecting the ecological systems of which the rhino is part.
Is there, then, some kind of rapprochement possible between an economic and an ecological point of view? Richard described ecological economics as a way of understanding the economic system as part of a wider ecological system, rather than being somehow separate from it. Evidently, ecological systems can exist without economic systems, but the converse is not true. Therefore, do we need to rethink the economic point of view so that it no longer emphasises the marginal over the whole? Or is the difference between economics and ecology a reflection of a deeper division between the power of humans to affect their environment and the world they inhabit? Do we need to heal this division, and if so, how?
A copy of Richard’s presentation is available to view on Slideboom.