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Figure 1: Market Based Valuation Framework

ECOLOGICAL ECONOMICS – THE SCIENCE OF SUSTAINABILITY National Economist Club June 12, 2008 Sabine U. O’Hara CIES/IIE. Figure 1: Market Based Valuation Framework. Environment. Human Social Activity. Economic Activity. Market Activity. C. P. Figure 2: Context Based Valuation Framework.

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Figure 1: Market Based Valuation Framework

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  1. ECOLOGICAL ECONOMICS – THE SCIENCE OF SUSTAINABILITY National Economist ClubJune 12, 2008Sabine U. O’HaraCIES/IIE

  2. Figure 1: Market Based Valuation Framework Environment Human Social Activity Economic Activity Market Activity C P

  3. Figure 2: Context Based Valuation Framework Environment Human Social Activity Economic Activity Market Activity C P

  4. Ecological Economics is Economics in Context • Nature is taken seriously (intrinsic value) • Justice and the dignity of human being are taken seriously (normative perspective) • Time is taken seriously (there is irreversibility and uncertainty)

  5. “There is a single universal model of the world. It only needs to be applied. You can drop a modern economist from a time machine … at any time, in any place, along with his or her personal computer, and he or she could set up business without even bothering to ask what time and which place.” Robert Solow (1985) “In theoretical economics there is no irreversibility concept, which is one reason that Georgescu-Roegen is critical of mainstream economics.” Paul Samuelson (1983) “The more precise capital theory became the more static it became…” John Hicks (1965)

  6. “Ecological Economics has norm that go much further than those of Mainstream Economics so that Ecological economists are confronted with a much more complex world. The world of Ecological Economics deals explicitly with the constraints of nature, for it acknowledges that in reality there are limits to the growth in real income. Hence, the question of just income distribution can neither be dispensed with by attaining boundless affluence… nor can it be diffused by unlimited economic growth as mainstream economics proposes, because growth is definitely limited by the constraints of nature. “ Malte Faber (2008)

  7. The Enterprise of Valuation • Internalizing Externalities? • Internalizing Economics?

  8. Principles of Internalizing Externalities-Market Rationality • Consumers Maximize Individual Satisfaction • Producers Maximize Profits • Value is determined by Market Value • Pareto Optimality as Ethical Principal • Relative value • Individually based value as norm

  9. Methodologies for Internalizing Externalities • Contingent Valuation • Cost Benefit Analysis • Hedonic Pricing

  10. Global Market Institutions and Policy Tools • International Monetary Fund (IMF) • Structural Adjustment Credits (SACs) Structural Adjustment Programs (SAPs) • World Bank • World Trade Organization (WTO) • General Agreement on Tariffs and Trade (GATT) • General Agreement on Trade in Services (GATS) • Trade Related Intellectual Property Rights (TRIP)

  11. Rethinking the Economic Process –Examples from Ecological Economics • Lessons from Ecology and Ecosystems – its not a source problem it’s a sink problem • Lessons from Thermodynamics – minimizing entropy • Lessons from material science - minimizing material throughput and rethinking materials • Articulating value – policy as normative • Lessons from communities – participation, local knowledge and stakeholder processes

  12. Principals of a Context Based Rationality • Consumers and producers are shaped by the context within which they live (Lebenswelt) • Values are shaped by market interaction and by the communicative interaction of a diverse group of informed citizens • Discursive Ethic • Adding a community perspective that questions self-interest based rationality (the commons) • Giving expressions to trade offs • A practical ethic

  13. Methodologies for Internalizing Economics – Embracing Methodological Pluralism • Alternative measures of non-commensurability – Energy; land – the ecological footprint • Multi-indicator analysis; lessons from development economics (education, health, social and cultural amenities, recreation and ecosystems health; transportation and technology infrastructures) • Stakeholder processes and discourse based valuation • Systems modeling

  14. And the exploration continues…scholarship is the discovery, integration, creative engagement and thoughtful application of knowledge -- that is, of what we understand to be true about our world, world, about human experience and culture, and about that which transcends both

  15. Science and Policy for a Sustainable Future The 5th bi-annual conference of the United States Society for Ecological Economics (USSEE) will be held in Washington DC from May 31st to June 3rd 2009. The conference theme is “Science and Policy for a Sustainable Future”. This theme intends to move the debate from scientific discoveries and insights to practical solutions and viable policies. Conference participants will come from academia, the non-profit sector and the public sector with the goal of advancing collaborations between the private, public and non-profit sector to advance sustainability. The USSEE is one of ten regional professional organizations with the International Society for Ecological Economics (ISEE) forming the world wide umbrella organization. All ecological economics societies hold professional meetings that serve as a forum for exchanging information, presenting cutting edge research results and advancing practical solutions toward an ecologically sustainable and economically viable future.

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