| Chapter 1: | Ecological Economics as a Transdisciplinary Approach to Sustainability |
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- 3. The basic assumptions underlying the models used have not been put forth as testable hypotheses, but rather as givens. (Hall et al., 2001)
In addition, neoclassical economics assumes away complexity and feedback processes that exist in the real world.
The early cross-fertilisation between ecology and economics can be traced back to the 1960s (e.g., Boulding, 1966a). The following arguments have challenged neoclassical economics in profound ways. Costanza (1989, 1991) and others work (e.g., Costanza & Daly, 1987; Costanza & Ruth, 1997; Costanza et al., 2001) have long emphasised the biophysical foundations of economic systems and the need to address flows of matter and energy in economic analysis. Daly (1973, 1992, 1994, 1996) has argued for an economic system based on the tenets of biophysical limits to growth, limits to substitution, the economy as a subsystem of the ecosystem, and an optimal economic scale. Also, he has highlighted the insufficiency of monetary valuation as a criterion of social choice, calling for a renewed emphasis on the moral foundations of economic thought with an explicit focus on long-term sustainability. Norgaard (1984, 1987, 1994) has stressed the interdependencies between natural and social systems, as well as the role of culture in constructing both scientific understandings and the prevailing values that surround economic decisions. Thus, ecological economics provides a better alternative by recognising both the dependence of the economic system on the natural world and the ethical content of economic decisions (Gowdy & Olsen, 1994). Unfortunately, neoclassical economists largely ignore—and the rest of the scientific community seems to be mostly unaware of—these criticisms.
Limitations of Environmental and Resource Economics
Environmental and resource economics are subdisciplines of neoclassical economics that are focused on the efficient allocation of scarce environmental resources, but they generally ignore ecosystem dynamics (e.g., feedback processes) and scale issues and pay little attention