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Ecological flaws

The ecological flaws in modern economics include the failure to account for all the resources required to fuel an economy, the lack of recognition that many of these resources are finite (and the assumption that they are infinite) and the relentless growth of the economy without regard to the limitations of resource supply. In short, modern economics suffers from the lack of scope and accounting for all the resources needed to make it work.

Usually an economy managed through modern economic theory and practice isolates the flow of capital and the exchange of resources from the context of the environment and the physical world around it. Many resources that are consumed within the operation of an economy, such as the air and soil used in the growing of crops, are not accounted for. Nor are the costs of production of unwanted by-products such as pollution of the air, water and soil. In these ways, economies fail to recognise or work within some basic ecological principles.

It’s also in these aspects that there are some similarities to Mr Ponzi’s scheme; taking new investments to pay the profits of older investors in the same way that we are using resources that will be unavailable to future generations to prop up the economy of today (the concept of ‘Future-eating‘ as put forward by Tim Flannery).

And there is another similarity that should cause great alarm; Ponzi schemes are stable for a short while in their initial operations, but depend on unrestricted growth through finding ever-more new investors. Ponzis have to collapse because of their growth and they can’t exist without it.

To grow or not to grow

So it is with modern economics; growth is the central mantra, but no system dependent on finite resources can continue to grow forever.

Crudely there are two drivers of growth in modern economies. If economics is about the flow and distribution of resources through a society, then population growth must lead to a commensurate growth of the economy, sometimes called ‘consumption growth’.

The second type of growth within a capitalist economy is capital growth: the idea that businesses or individuals have a right to accumulate resources beyond their needs.  Economic modelling usually occurs in very limited timeframes, often a year or two, sometimes a decade or more but rarely deeper into the future than a century. The environmental systems they are embedded within have been around for thousands or millions of years and I am not aware of any economic model that extends a similar distance into the future.

A fundamental difference between ecology and economics is that the parameters of ecological systems are set by the laws of nature, we cannot change them without severe penalties..Economies are entirely human constructs, we make the rules and have ultimate control over their conduct. We can alter the economies of the world because we made them. That is not an option for the ecosystems that our economies rely on…….http://www.abc.net.au/science/articles/2014/11/03/4119082.htm