What is Ecological Economics?

Ecology: from the Greek oikos (house) and -logy (study)
Economics: from the Greek oikos (house) and -nomics (management)
 
Despite their common linguistic roots, ecologists and economists have traditionally viewed the natural world and the choices we make about the human and natural economy in far different ways.  Today, we recognize that the choices we make about what we eat, where we live, and what products we buy have real and large cumulative effects on our natural environment.   
 
Ecological economics is a transdisciplinary field that seeks to bridge the gap between economics and the biophysical world upon which the human economy depends.  For years the myth of an “economy versus the environment” trade-off has existed in the popular media and much of the public’s mindset.  Ecological economics explores the size, geography, goals, and importance of the human economy and the economy of nature and seeks policy tools to reconcile the “economy vs. environment” standoff while creating a more sustainable future for the world.

How do ecological and "neoclassical" economics differ?

Despite a different basic understanding of the role of the economy and its relationship to the natural world (generalized in the figure and table below), ecological and conventional or "neoclassical" economics do share some tools as well as an understanding that neither government or the market can efficiently provide for human well-being in all cases.
The ecological and neoclassical economic worldview
Ecological Economics Neoclassical Economics
Ultimate goals Maximize quality of life Maximize consumption of goods and services
Intermediate goals Sustainable scale of the macroeconomy, fair distribution of resources within and between generations, efficient allocation of resources Economic growth; efficient allocation of resources; secondary attention sometimes given to distribution of resources.
Basis for goals Evidence that raw materials, energy, and ecosystem services on a finite planet limit the size of a desirable economy.  Added evidence that continuous increases in consumption do not increase happiness or well-being, and that people don't always act purely in their own self-interest. Belief that resources are not limited; people as Homo economics (self-interested, seeking to maximize consumption)
"Measuring stick" Genuine Progress Indicator (GPI), others Gross Domestic Product (GDP)
Contributors to quality of life Natural capital, social capital, human capital, built capital.  Minimal substiutability between these four types of capital. Labor (e.g., human capital), capital (e.g., built capital); land (e.g., natural capital) sometimes included.  Extensive substitutability between land, labor, and capital is generally allowed.
Place of the economy and environment Human economy embedded within and totally dependent on "economy of nature" Economy and environment are independent of each other
Role of government in markets Recognize need for government intervention when the market produces "externalities" - cases where there are added costs or benefits to society beyond the market price of a good or service.  Taxes, subsidies, or other market-based instruments may be appropriate to address such "market failure."


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