ECOLOGICAL ECONOMICS: A BETTER FRAMEWORK FOR SUSTAINABLE DEVELOPMENT

Abstract

Sustainable development has been the focus and. the target of many resource managementrelated issues. However, proper definitions and frameworks of action have seemed to begreatly unexplored. This paper aims at providing a framework for sustainable developmentbased on concepts of ecological economics. The main focus will be on the issues of intraand inter generational equity on natural resource use and maintaining non-declining levelsof critical natural capital.

The conventional economic view is generally optimistic about the ability of the economicsystem to overcome natural resource depletion with the help of the technological progress.However, conventional approaches in resource economics limit themselves to only optimalrate of exploitation of a natural resource and determination of optimal pollution discharges.Although such approaches are sensitive to scale issues at the micro level, it is insensitive tothe macro level scale of the whole economy relative to the ecosystem. Although the marketprovides space for substituting abundant resources for scarce ones, it is not able toovercome entropy constraints. Such issues are not reflected in Pareto optimality sinceoptimal allocation is independent of whether or not the scale of physical throughput isecologically sustainable.

Therefore is important to recognize the existence of a new constraint on the physical scaleof the economy relative to the ecosystem. This constraint has to be set according to thecriteria of sustainability and under such constraint, the market will be able to achieveprices which reflect the social value of sustainability.

Unique natural environments and other critical natural capital need special considerationsin economic analysis since technology can do little to replicate their ecological, physicaland geographical characteristics. In order to determine the social cost and benefits of adecision to develop a previously undeveloped area, it is necessary to know both thepreferences of present and future generations who may be affected by that decision. Theexisting valuation frameworks and discounting in cost benefit analysis have inherent biasesagainst future generations. Recognition of such facts and identifying the means ofminimizing such biases are essential in achieving sustainable development.

Ecological economic framework is essentially an extension of environment and resourceeconomics in to the explicit analysis of biophysical constraints and equity amonggenerations.