Category Archives: Ecological Economics

History of The Limits to Growth

In the new general sustainability science journal Solutions, sustainability researchers Jørgen Nørgård, John Peet, Kristín Vala Ragnarsdóttir provide their take on the history of the response to the controversial and influential environmental study Limits to Growth in The History of The Limits to Growth:

… In re-examining the analysis and central arguments of [Limits to Growth] LtG, we have found that its approach remains useful and that its conclusions are still surprisingly valid. …

Matthew R. Simmons, president of the world’s largest investment company specializing in energy, Simmons and Company International, read the book a few years ago, after hearing about the controversy. To his surprise he discovered that the criticisms had little to do with the content of the book. “After reading Limits to Growth, I was amazed,” he wrote in 2000. “There was not one sentence or even a single word written about an oil shortage or limits to any specific resource, by the year 2000.” He concluded that LtG broadly gives a correct picture of world development, and he became upset that so many of his colleagues had wasted three decades criticizing it instead of taking action.

The recent renewed interest in the environment and economic development gives hope for a solution. Although it has not yet led to new action, this shift in thinking has triggered a few analyses that recognize possible limits to growth and hence point toward solutions along the lines suggested in LtG. The following examples illustrate this hope.

A recent UK government committee indicates an emerging political willingness to at least challenge the growth paradigm as reflected in the title of the committee’s report: Prosperity without Growth? The report “questions whether ever-rising incomes for the already-rich are an appropriate goal for policy in a world constrained by ecological limits.”

Joseph Stiglitz, a Nobel Prize winner in economics who had at first rejected LtG‘s ideas about resource shortages, now recognizes that present trends in the world economy are unsustainable. Stiglitz, along with another Nobel laureate in economics, Amartya Sen, headed a commission convened by French president Nicolas Sarkozy to investigate alternative measures of social progress to GDP. One of their key messages is that “the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being.” In their critique of societies’ overreliance on GDP, Stiglitz and Sen are implicitly agreeing with LtG‘s analysis.

Finally, as a sign of renewed recognition of the limits to growth, 28 scientists have identified nine planetary boundaries within which human activities can operate safely. The scientists estimate that humanity has already transgressed three of these boundaries, namely those for climate change, biodiversity loss, and changes to the global nitrogen cycle.

Short Links: anthropology and loyalty

1) From Savage Minds, An interactive Anthropological theory timeline, and another, non-interactive, one.

2) Economist Rajiv Sethi reflects on Albert Hirschman‘s classic book Exit, Voice and Loyalty – I last read it over 15 years ago, Sethi’s reflection inspire me to reread it.  Sethi writes on The Astonishing Voice of Albert Hirschman:

This is a book with dozens of sparking insights tied together by a coherent vision. The vision allows for a broad range of human motivation, encompassing (but not limited to) standard hypotheses regarding rational behavior. Economic actors in Hirschman’s world shop for lower prices and higher quality, to be sure, but they also capable of making a nuisance of themselves, engaging in self-deception, and displaying fierce loyalty to organizations with which they are affiliated. This rich, complex conception of human behavior allows for a sweeping analysis that is as penetrating as it is ambitious.

An interview with Elinor Ostrom

Elinor Ostrom will be in Stockholm next week for a seminar at the Royal Swedish Academy of Sciences among other things (unless the Icelandic ash cloud stops her) [update - it stopped her].  She was also recently interviewed by Fran Korten for Yes! Magazine in Elinor Ostrom Wins Nobel for Common(s) Sense:

Photo by Chris Meyer / Indiana University

Fran Korten: When you first learned that you had won the Nobel Prize in Economics, were you surprised?

Elinor Ostrom: Yes. It was quite surprising. I was both happy and relieved.

Fran: Why relieved?

Elinor: Well, relieved in that I was doing a bunch of research through the years that many people thought was very radical and people didn’t like. As a person who does interdisciplinary work, I didn’t fit anywhere. I was relieved that, after all these years of struggle, someone really thought it did add up. That’s very nice.

And it’s very nice for the team that I’ve been a part of here at the Workshop. We have had a different style of organizing. It is an interdisciplinary center—we have graduate students, visiting scholars, and faculty working together. I never would have won the Nobel but for being a part of that enterprise.

Fran: It’s interesting that your research is about people learning to cooperate. And your Workshop at the university is also organized on principles of cooperation.

Elinor: I have a new book coming out in May entitled Working Together, written with Amy Poteete and Marco Janssen. It is on collective actions in the commons. What we’re talking about is how people work together. We’ve used an immense array of different methods to look at this question—case studies, including my own dissertation and Amy’s work, modeling, experiments, large-scale statistical work. We show how people use multiple methods to work together.

Fran: But what about the “free-rider” problem where some people abide by the rules and some people don’t? Won’t the whole thing fall apart?

Elinor: Well if the people don’t communicate and get some shared norms and rules, that’s right, you’ll have that problem. But if they get together and say, “Hey folks, this is a project that we’re all going to have to contribute to. Now, let’s figure it out,” they can make it work. For example, if it’s a community garden, they might say, “Do we agree every Saturday morning we’re all going to go down to the community garden, and we’re going to take roll and we’re going to put the roll up on a bulletin board?” A lot of communities have figured out subtle ways of making everyone contribute, because if they don’t, those people are noticeable.

Fran: So public shaming and public honoring are one key to managing the commons?

Elinor: Shaming and honoring are very important. We don’t have as much of an understanding of that. There are scholars who understand that, but that’s not been part of our accepted way of thinking about collective action.

Fran: Do you have a favorite example of where people have been able to self-organize to manage property in common?

Elinor: One that I read early on that just unglued me because I wasn’t expecting it was the work of Robert Netting, an anthropologist who had been studying the alpine commons for a very long time. He studied Swiss peasants and then studied in Africa too. He was quite disturbed that people were saying that Africans were primitive because they used common property so frequently and they didn’t know about the benefits of private property. The implication was we’ve got to impose private property rules on them. Netting said, “Are the Swiss peasants stupid? They use common property also.”

Let’s think about this a bit. In the valleys, they use private property, while up in the alpine areas, they use common property. So the same people know about private property and common property, but they choose to use common property for the alpine areas. Why? Well, the alpine areas are what Netting calls “spotty.” The rainfall is high in one section one year, and the snow is great, and it’s rich. But the other parts of the area are dry. Now if you put fences up for private property, then Smith’s got great grass one year he can’t even use it all and Brown doesn’t have any. So, Netting argued, there are places where it makes sense to have an open pasture rather than a closed one. Then he gives you a very good idea of the wide diversity of the particular rules that people have used for managing that common land.

Fran: Why were Netting’s findings so surprising to you?

Elinor: I had grown up thinking that land was something that would always move to private property. I had done my dissertation on groundwater in California, so I was familiar with the management of water as a commons. But when I read Netting, I realized that when there are “spotty” land environments, it really doesn’t make sense to put up fences and have small private plots.

Fran: If you were to have a sit-down session with someone with a big influence on natural resources policy say Robert Zoellick, head of the World Bank, or Ken Salazar, Secretary of the U.S. Department of the Interior, what would be your advice?

Elinor: No panaceas! We tend to want simple formulas. We have two main prescriptions: privatize the resource or make it state property with uniform rules. But sometimes the people who are living on the resource are in the best position to figure out how to manage it as a commons.

Fran: Do you have a message for the general public?

Elinor: We need to get people away from the notion that you have to have a fancy car and a huge house. Some of the homes that have been built in the last 10 years just appall me. Why do humans need huge homes? I was born poor and I didn’t know you bought clothes at anything but the Goodwill until I went to college. Some of our mentality about what it means to have a good life is, I think, not going to help us in the next 50 years. We have to think through how to choose a meaningful life where we’re helping one another in ways that really help the Earth.

Fran: Let’s look ahead 20 years. What would you hope that the world will understand about managing common property systems?

Elinor: What we need is a broader sense of what we call “social ecological systems.” We need to look at the biological side and the social side with one framework rather than 30 different languages. That is big, but I now have some of my colleagues very interested. Some of them are young, and what I find encouraging is that with a bunch of us working together, I can see us moving ahead in the next 20 years or so. Twenty years from now, at 96, I probably won’t be as active.

Modelling a social-ecological poverty trap due to infectious disease

In an interesting article Poverty trap formed by the ecology of infectious diseases (Proc Royal Soc B 2009) Mathew Bonds and others, describes how they couple a simple infectious disease model with an simple economic development model to produce model of a infectious disease induced poverty trap.  They write:

The combined causal effects of health on poverty and poverty on health implies a positive feedback system. Despite the importance of understanding such critical and systematic ecological interactions between humans and their most important natural enemies, and the anecdotal evidence that such poverty traps may indeed exist, we lack mechanistic frameworks of poverty traps that are rooted in the dynamics of disease. Here, we propose such a model. We find that a prototypical host–pathogen system, coupled with simple economic models, induces a poverty trap. More broadly, this model serves to illustrate how feedbacks between people and their environment can potentially give rise to major differences in human survival and economic welfare (Diamond 1997).

… we illustrate our underlying concept using a general one-disease SIS (susceptible–infected–susceptible) model, where individuals can be serially reinfected over the course of their lifetime. This model is meant to serve as the simplest general way of representing the kind of repeated threats of infection faced by poor tropical communities. More specifically, the general model also resembles a typical malaria system (Gandon et al. 2001), which has high prevalence rates among the poor and has been especially implicated in hindering economic growth (Gallup & Sachs 2001).

Their model produces two alternative regimes, a high productivity/low disease regime and a low productivity/high disease regime.

Feedback between economics and the ecology of infectious diseases forms a poverty trap. The prevalence of infectious diseases, I*(M) (black line), falls as per capita income rises, while per capita income, M*(I) (grey line), falls as disease prevalence, I, rises. The disease and income functions are in equilibrium where these two curves intersect at (I*(M*), M*(I*)). Two of these equilibria (I*(M*1), M*(I*1) and I*(M*3), M*(I*3)) are stable, and one (I*(M*2), M*(I*2)) is unstable. The poverty trap is the basin of attraction around (I*(M*3), M*(I*3)). α = 0.06; β̄ = 40; μ̄ = 0.01; ν = 0.02; h̄ = 90; δ = 5; ϱ = 0.003; τ = 0.15; ϕ = 15; κ = 30.

Feedback between economics and the ecology of infectious diseases forms a poverty trap. The prevalence of infectious diseases, I*(M) (black line), falls as per capita income rises, while per capita income, M*(I) (grey line), falls as disease prevalence, I, rises. The disease and income functions are in equilibrium where these two curves intersect at (I*(M*), M*(I*)). Two of these equilibria (I*(M*1), M*(I*1) and I*(M*3), M*(I*3)) are stable, and one (I*(M*2), M*(I*2)) is unstable. The poverty trap is the basin of attraction around (I*(M*3), M*(I*3)). α = 0.06; β̄ = 40; μ̄ = 0.01; ν = 0.02; h̄ = 90; δ = 5; ϱ = 0.003; τ = 0.15; ϕ = 15; κ = 30.

In this model, a social-ecological system can be pushed into or out of the poverty trap by changes that effect labour productivity, such as changes in the level of education or infrastructure, or changes in disease prevalence due to the expansion or contraction of public health.

In the paper the authors show that empirical patterns of disease burden and income suggest the existence of disease poverty traps.

They conclude:

While we hope that our model framework can serve as a useful point of departure for exploring more complex relationships, the theoretical analysis we present here has significant implications: simply coupling economics with a well-established model of the ecology of infectious diseases can imply radically different levels of health and economic welfare (i.e. poverty traps) depending on initial conditions. The practical implications are also significant. Because the world’s leading killers of the poor—malaria, HIV/AIDS, tuberculosis, diarrhoea and respiratory infections—are highly preventable and treatable, current global efforts to improve public health in areas of extreme poverty could theoretically pay long-term economic dividends. Furthermore, this analysis underscores that there are dramatic implications if economic activity is coupled with ecological processes that are well-known to behave in nonlinear ways.

Mapping global flows of virtual green and blue water

Green and blue virtual-water ‘flows’ related to wheat trade by major exporting and importing nations (km3/year). The size of each pie is determined by the amount of virtual water ‘traded’. Countries with virtual-water ‘exports’ are depicted in green and countries with virtual-water ‘import’ in red;<br /> the colour shade depends on the quantity of virtual water ‘traded’. Period 2000–2004.
Green and blue virtual-water ‘flows’ related to wheat trade by major exporting and importing nations (km3/year).
The size of each pie is determined by the amount of virtual water ‘traded’.
Countries with virtual-water ‘exports’ are depicted in green and countries with virtual-water ‘import’ in red; the colour shade depends on the quantity of virtual water ‘traded’. Period 2000–2004.

M.M. Aldaya, J.A. Allan and A.Y. Hoekstra in their paper Strategic importance of green water in international crop trade (Ecological Economics 2009) doi:10.1016/j.ecolecon.2009.11.001 map global flows of virtual water in the wheat trade.

In their paper they explain their figure:

The map presented in Fig. 6 shows the virtual-water ‘flows’ to the five major importing countries for wheat for the period 2000–2004.

By ‘importing’ virtual water embodied in agricultural commodities, a nation “saves” the amount of water it would have required to produce those commodities domestically.

Though from an importing country perspective it is not relevant whether products have been produced using green or blue water in the country of origin, from a global point of view it has important implications (Chapagain et al., 2006a). For instance, Egypt is the largest importer of wheat, with the USA providing about 45% of the country’s imports. Wheat from Egypt has an average virtual-water content of 930 m3/ton of which 100% is blue water (Chapagain et al., 2006a), while the USA has a virtual-water content for wheat of 1707 m3/ton of which 39.8% is blue water (Table 3).

By importing wheat, Egypt saves 930 m3 of water per ton of wheat. Globally, when imported from the USA, there is not a total water saving because wheat production in the USA requires more water than in Egypt. Exports to Egypt from this country result in a considerable net global water loss of 777 m3 per ton. However, if we just look at blue water only, importing wheat from the USA to Egypt saves 251 m3/ton (since USA production requires 679 m3/ton of blue water and wheat production in Egypt 930 m3/ton).

Along these lines, Egypt, as some other water-scarce importing countries, has formulated policies to import low value but high water consuming food like cereals (Van Hofwegen, 2005). Nevertheless, even if the potential of trade to “save” water at national level is substantial, most international food trade occurs for reasons not related to water resources (CAWMA, 2007).

Economics of ecosystems and biodiversity study available

Climate Issues UpdateThe Economics of Ecosystems and Biodiversity study (TEEB) is synthesizing information on the economics  of conservation of ecosystems and biodiversity, attempting to do for Biodiversity what the Stern report has done for climate change.

The study is drawing on expertise from around the world to evaluate the costs of the loss of biodiversity and the associated decline in ecosystem services worldwide, and to compare them with the costs of effective conservation and sustainable use.  The intent of the study is to sharpen awareness of the value of biodiversity and ecosystem services and facilitate the development of effective policy, as well as engaged business and citizen responses.

Their report for policy maker was released in Nov 2009, they write that it:

underlines the urgency of action, as well as the benefits and opportunities that will arise as a result of taking such action. The report shows that the cost of sustaining biodiversity and ecosystem services is lower than the cost of allowing biodiversity and ecosystem services to dwindle. It demonstrates how we can take into account the value of ecosystems and biodiversity in policy decisions and identify and support solutions, new instruments, and wider use of existing tool in order to pioneer a way forward. In so doing, the report addresses the needs of policy-makers and those in the policy-making process.

TEEB for Policy Makers Summary document

  1. The global biodiversity crisis and related policy challenge
  2. Framework and guiding principles for the policy response
  3. Strengthening indicators and accounting systems for natural capital
  4. Integrating ecosystem and biodiversity values into policy assessment
  5. Rewarding benefits through payments and markets
  6. Reforming subsidies
  7. Addressing losses through regulation and pricing
  8. Recognising the value of protected areas
  9. Investing in ecological infrastructure
  10. Responding to the value of nature

Agro-colonialism and/or Agricultural development?

The New York Times Magazine has an article by Andrew Rice Is There Such a Thing as Agro-Imperialism? on new mega-investments in agricultural land in Africa.

This type of activity featured in the Millennium Ecosystem Assessment‘s TechnoGarden scenario as something that can have complicated ecological and social consequences. These investments often displace small scale farmers, but can greatly increase yields.  Indirectly they can benefit local people enhancing local agricultural infrastructure, skills, and economic opportunities – or they can just degrade local ecosystems for external benefit.  The article sets the stage and provides some examples from Ethiopia:

Investors who are taking part in the land rush say they are confronting a primal fear, a situation in which food is unavailable at any price. Over the 30 years between the mid-1970s and the middle of this decade, grain supplies soared and prices fell by about half, a steady trend that led many experts to believe that there was no limit to humanity’s capacity to feed itself. But in 2006, the situation reversed, in concert with a wider commodities boom. Food prices increased slightly that year, rose by a quarter in 2007 and skyrocketed in 2008. Surplus-producing countries like Argentina and Vietnam, worried about feeding their own populations, placed restrictions on exports. American consumers, if they noticed the food crisis at all, saw it in modestly inflated supermarket bills, especially for meat and dairy products. But to many countries — not just in the Middle East but also import-dependent nations like South Korea and Japan — the specter of hyperinflation and hoarding presented an existential threat.

“When some governments stop exporting rice or wheat, it becomes a real, serious problem for people that don’t have full self-sufficiency,” said Al Arabi Mohammed Hamdi, an economic adviser to the Arab Authority for Agricultural Investment and Development. Sitting in his office in Dubai, overlooking the cargo-laden wooden boats moored along the city’s creek, Hamdi told me his view, that the only way to assure food security is to control the means of production.

Hamdi’s agency, which coordinates investments on behalf of 20 member states, has recently announced several projects, including a tentative $250 million joint venture with two private companies, which is slated to receive heavy subsidies from a Saudi program called the King Abdullah Initiative for Saudi Agricultural Investment Abroad. He said the main fields of investment for the project would most likely be Sudan and Ethiopia, countries with favorable climates that are situated just across the Red Sea. Hamdi waved a sheaf of memos that had just arrived on his desk, which he said were from another partner, Sheik Mansour Bin Zayed Al Nahyan, a billionaire member of the royal family of the emirate of Abu Dhabi, who has shown interest in acquiring land in Sudan and Eritrea. “There is no problem about money,” Hamdi said. “It’s about where and how.”

All through the Rift Valley region, my travel companion, an Ethiopian economist, had taken to pointing out all the new fence posts, standing naked and knobby like freshly cut saplings — mundane signifiers, he said, of the recent rush for Ethiopian land. … Behind it, we could glimpse a vast expanse of dark volcanic soil, recently turned over by tractors. “So,” said my guide, “this belongs to the sheik.”

He meant Sheik Mohammed Al Amoudi, a Saudi Arabia-based oil-and-construction billionaire who was born in Ethiopia and maintains a close relationship with the Ethiopian Prime Minister Meles Zenawi’s autocratic regime. (Fear of both men led my guide to say he didn’t want to be identified by name.) Over time, Al Amoudi, one of the world’s 50 richest people, according to Forbes, has used his fortune and political ties to amass control over large portions of Ethiopia’s private sector, including mines, hotels and plantations on which he grows tea, coffee, rubber and japtropha, a plant that has enormous promise as a biofuel. Since the global price spike, he has been getting into the newly lucrative world food trade.

Ethiopia might seem an unlikely hotbed of agricultural investment. To most of the world, the country is defined by images of famine: about a million people died there during the drought of the mid-1980s, and today about four times that many depend on emergency food aid. But according to the World Bank, as much as three-quarters of Ethiopia’s arable land is not under cultivation, and agronomists say that with substantial capital expenditure, much of it could become bountiful. Since the world food crisis, Zenawi, a former Marxist rebel who has turned into a champion of private capital, has publicly said he is “very eager” to attract foreign farm investors by offering them what the government describes as “virgin land.” …

By far the most powerful opposition, however, surrounds the issue of land rights — a problem of historic proportions in Ethiopia. Just down the road from the farm on Lake Ziway, I caught sight of a gray-bearded man wearing a weathered pinstripe blazer, who was crouched over a ditch, washing his shoes. I stopped to ask him about the fence, and before long, a large group of villagers gathered around to tell me a resentful story. Decades ago, they said, during the rule of a Communist dictatorship in Ethiopia, the land was confiscated from them. After that dictatorship was overthrown, Al Amoudi took over the farm in a government privatization deal, over the futile objections of the displaced locals. The billionaire might consider the land his, but the villagers had long memories, and they angrily maintained that they were its rightful owners.

For more see Food Crisis and the Global Land Gra which is a website run by GRAIN an NGO supporting small-scale farmers.

Hydrological impact of biofuels

R. Dominguez-Faus and others analyze the impact of different biofuels on water in the USA in their article in Envir. Science and Technology, The Water Footprint of Biofuels: A Drink or Drive Issue? (doi:10.1021/es802162x).  The figure below, from the paper, shows the substantial ecological requirements (and variation) among biofuels.

Figure 1. Evapotranspiration, irrigation, and land requirements to produce 1 L of ethanol (Le) in the U.S. from different crops.

Figure 1. Evapotranspiration, irrigation, and land requirements to produce 1 L of ethanol (Le) in the U.S. from different crops.

They write:

The current and ongoing increase in biofuel production could result in a significant increase in demand for water to irrigate fuel crops, which could worsen local and regional water shortages. A substantial increase in water pollution by fertilizers and pesticides is also likely, with the potential to exacerbate eutrophication and hypoxia in inland waters and coastal areas including Chesapeake Bay and the Gulf of Mexico. This in turn would cause undue financial hardship on the fishing industry as well as negative impacts to these vital, biodiversity-rich, ecosystems. Such threats to water availability and water quality on local and national scales represent a major obstacle to sustainable biofuel production and will require careful assessment of crop selection and management options. It is important to recognize that certain crops such as switchgrass and other lignocelluosic options deliver more potential biofuel energy with lower requirements for agricultural land, agrichemicals, and water.

Climatic factors such as frequency of droughts and floods are beyond human control, but as the wide range of estimated nutrients discharged to surface waters shows, clearly some important variables are within our control. These include crop selection, tillage methods, and location. As more biofuel production is integrated into the agriculture sector it will be important to adopt land-use practices that efficiently utilize nutrients and minimize erosion, such as co-cropping winter grains and summer biomass crops. These land use choices should also focus on establishing riparian buffers and filter strips to serve a dual purpose in erosion control and biomass production. Similarly, a CRP-like program should be considered to promote cellulosic biofuel crop planting in marginal lands to prevent excess erosion and runoff while allowing producers to benefit from historically high commodity prices. CRP-like payments would then help to balance societal goals with ecological benefits and provide financial viability for the farmers making the land use choices. Finally, increasing charges for irrigation water for biofuel crops to market rates should be considered to promote fuel crop agriculture in areas where rainfall can supply the majority of the water requirements and to reflect the true value of water resources in the price of biofuels. Policies and programs should be coordinated to avoid the current situation where some efforts (ethanol subsidies, mandates) bid against other programs (CRP) though both are funded by taxpayers with the common goal of environmental protection.

Oil Prices and the Financial Crisis

The Financial Times suggests that the IEA agrees with Herman Daly (at least a little bit), in  Did oil cause the latest recession? IEA weighs into the debate:

A feature in the draft executive summary of the IEA’s World Energy Outlook, which will be published tomorrow, revisits this argument and comes to a rather worrying conclusion.

It starts out keeping in line with the prevailing view: the run-up in oil prices from 2003 to mid-2008 played “an important, albeit secondary” role in the global economic downturn that took hold last year. Higher oil prices made oil-importing countries more vulnerable to the financial crisis, it says.

The feature concludes, however, on a somewhat stronger note.

The IEA points out that it had warned in 2006 that the effect of high oil prices from the preceding four years had not yet worked their way through the world economy, and that further increases in prices would “pose a significant threat to the world economy, by causing a worsening of current account imbalances and by triggering abrupt exchange rate realignments, a rise in interest rates and a slump in house and other asset prices”.