| Chapter 1: | Ecological Economics as a Transdisciplinary Approach to Sustainability |
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The individualistic ethos that has since become an integral part of modern society has slowly undermined its social foundations, especially the moral capital foundation. The continued success of any market economy depletes rather than accumulates moral capital (Daly & Cobb, 1989). The dominance of the specialisation principle and the virtual absence of the diversification principle are serious flaws at the heart of modern economics (Gale, 2000).
A Critique of Neoclassical Economics
The neoclassical paradigm envisages macroeconomic systems as being independent of the ecological and social systems in which they are embedded. It overlooks the fact ‘that the economy, in its physical dimensions, is an open subsystem of a finite, non-growing, and materially closed ecosystem’ (Daly, 1996, p. 75).
Neoclassical economics is increasingly criticised as a misleading theoretical construct. It has been labelled as out of touch with reality, and it is challenged to reform itself in a way that is both scientifically rigorous and relevant to real people with real concerns over pressing social and environmental issues. Past criticisms from the perspective of natural scientists can be summarised as three fundamental arguments:
- 1. The structure of the basic conceptual neoclassical model is unrealistic because it is not based on the biophysical world and the laws governing it, especially thermodynamics.
- 2. The boundaries of analysis are inappropriate because they do not include the real processes of the biosphere that provide the material and energy inputs, the waste sinks, and the necessary milieu for the economic process.