Of ecosystems and economies: re-connecting economics with reality | Clive L. Spash and Tone Smith | real-world economics review

The state of planet Earth is widely recognised as in jeopardy due to a range of environmental problems relating to a dominant economic system that extracts resources and uses energy on an unprecedented scale in human history. A long-running claim amongst mainstream economists, defenders of unregulated capitalism and those favouring a regulated productivist economy has been that human ingenuity can find substitutes for all resources and technology can solve all problems allowing humanity to change and adapt to anything. These arguments are made in almost total ignorance of how the economy interacts with ecosystems and impacts their structure and functioning, how dependent economies are on the flow of low entropy materials and energy and what are the basic limits to humans as biological animals. Indeed even ignorance itself is ignored and reduced down to risk and probabilities.

Yet, that economies must change is no longer in question. That they will change is also no longer even an issue. The question is what responses materialise as resources, energy supplies and functioning of ecosystems do change? The options being put forward are numerous, but most aim to preserve some form of high-technology, capital accumulating, growth economy embedded in price-making markets, including: green economy, climate economy, low carbon economy, circular economy, knowledge economy, bioeconomy. Yet, none of these addresses the causal mechanisms of the current crises, or structural issues facing social ecological transformation; they are concerned only with controlling for impacts and adapting to consequences, not with the bio-physical relations of the economy with non-human nature.

This article provides an overview of the relationships between economic systems and the environment, human society and non-human nature, ecology and economy. It brings together various literatures with the aim of introducing the reader to the importance of biophysical reality for the operation of real economies, and therefore also for economics. In the next section, we explain the problems facing standard economic approaches if they are to address environmental problems, but more generally their inability to even understand the social ecological crises due to a limited scope and direction. This is followed by outlining the place of economies in the context of their social and bio-physical structural relations, a basic general ontology. More specific detail is then added on the lessons that can be drawn from ecological understanding in terms of ecosystems, materials and energy. The final section draws out the implications of this understanding for social ecological transformation of the currently dominant economic systems and the type of economics required to help achieve that transformation.

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