Questions that do not arise in standard neoclassical economics – Herman Daly
Regarding quantification the ecological economists distinguish growth from development. Growth is increase in size by assimilation or accretion of matter – it is quantitative. Development is qualitative improvement in design, priorities, or purpose. For this reason growth is easier to measure than development, but development is more important for the future. Sustainable development, so-called, is qualitative improvement without quantitative growth in scale beyond ecosystem capacities for waste absorption and resource regeneration. By accepting ecological limits, we force the path of progress away from quantitative growth and on to qualitative development. Some people have argued that because economics deals with growth in value (GDP), it does not encounter physical limits. While it is true that value cannot be expressed in simple physical units, it is also true to say that the value of production is measured in units of “dollar’s worth”, not dollars, and a dollar’s worth of anything is a physical quantity, namely that quantity that can be purchased for one dollar. Therefore aggregating many diverse “dollar’s worth” quantities into GDP does not erase the physical dimensions. The eagerness to defend “growthism” gives rise to many lame arguments.
The key to understanding ecological economics is its pre-analytic vision of the economy as an open subsystem of a larger ecosystem that is finite, non- growing, and materially closed (though open with respect to solar energy). This immediately suggests three analytical questions that do not arise in standard neoclassical economics:
- How large is the economic sub- system relative to the containing ecosystem?
- How large can it be?
- How large should it be?
These lead to the further question:
- Is there an optimal scale beyond which physical growth in the economic subsystem begins to reduce total welfare by diminishing the sources of ecological services faster than it increases the sources of production services?