The concept of the power of judgement goes back to the Greek word phronesis which means prudence. Aristotle dealt with it, and in the 19th century Kant wrote his ground-breaking Critique of the Power of Judgement.
Mainstream Economics traditionally is good at modelling predictable situations as well as situations with calculable risk. However, environmental issues generally evolve over the long-term, which entails surprise and ignorance. To this end we need concepts hitherto not employed by Mainstream Economics; in particular we need to consider the concept of the power of judgement. Although this is a philosophical concept, we all are aware of it in everyday life. It is the ability to react intuitively in a new situation. A judge or a doctor who is confronted with a new case needs the capability of power of judgement to pass an adequate judgement or find an appropriate treatment. Ecological Economics makes use of the power of judgement.
This concept enables us to discuss, in a non-scientific but nevertheless rational manner, long-term problems, evolutionary in nature, and our confrontation with uncertainty and ignorance.
An example of the power of judgement is the application of the precautionary principle which protects us from the consequences of actions that otherwise would take us completely by surprise. The example of Fukushima shows how that catastrophe could have been avoided had the power of judgement been applied.
Key Contributers: Bernd Klauer – Thomas Petersen – Reiner Manstetten – Johannes Schiller
Related Concepts: HOMO OECONOMICUS & HOMO POLITICUS – RESPONSIBILITY – IGNORANCE – JOINT PRODUCTION – ENVIRONMENTAL POLITICS
Mainstream Economics began considering human behaviour during the 17th century with the work of Thomas Hobbes. Its present assumption about behaviour is mainly that of homo oeconomicus: Human beings act according to their self-interest in a rational manner, hence they are utility maximisers.
This element examines the model of homo oeconomicus, analysing its accomplishments and shortcomings. Criticism from different disciplines such as Ecological Economics maintains that this is a one-sided view of human behaviour. A fundamental deficit of this tenet is that nature, justice and time do not receive the attention they deserve. We develop a further concept of humankind by drawing on political philosophy: homo politicus. Homo politicus is characterised by an interest in justice, common welfare and the sustainability of the natural basis of life. Homo politicus does not replace homo oeconomicus but rather complements him since both concepts contain essential dimensions of human behaviour. This twofold approach allows a better explanation of human behaviour as observed in reality and leads to better predictions.
Our practical example examines the passage of legislation on a waste management system in Germany during the 1980s and 1990s. The example reveals that officials were not acting exclusively as homo oeconomicus, but also as homo politicus. Indeed, these officials pursued long-term goals of justice, sustainability and the protection of the common good. It is generally recognised that the new waste management system was a breakthrough in German environmental policy and has since been adapted by other countries due to its success.
Key Contributers: Peter Bernholz – Friedrich Breyer – Olaf Hottinger – Thomas Petersen – Johannes Schiller
Related concepts: SUSTAINABILITY & JUSTICE – POWER OF JUDGEMENT – RESPONSIBILITY – INDIVIDUAL, COMMUNITY & ENTIRETY – BASICS OF TIME
While an awareness of joint production (i.e. combined production of at least two goods) played a key role in the early years of classic economics and Marx’ thinking, it later fell into oblivion. Environmental crises have brought it back into practical and theoretical discussions. When physicists proved that industrial production is always attended by the manufacture of at least one waste product, they also highlighted the general relevance of this concept for environmental issues. Their proof is based on the first and second laws of thermodynamics.
The added value of this concept is that it shows that the Mainstream Economics’ theory of externality is an ex post approach, while the Ecological Economics’ concept of joint production provides an ex ante approach. The former recognizes environmental degradation only after it has occurred, whereas the latter focuses on it right from the start.
An example from the soda-chlorine industry illustrates a process that evolved over 250 years. New technologies and products were invented due to resource scarcity. Over the course of time, pollution from the new technology was increasingly recognised, leading to environmental legislation. Thus, we can develop a “triangle of causation”: Resource scarcity initiates technological invention, this in turn produces environmental pollution which must be regulated by politics. This process leads to new technological innovation which produces new resource scarcities and new environmental pollution. This is how the textile industry led to the soda-chlorine industry and finally to the production of CFCs (Chlorofluorocarbons) which have destroyed the ozone layer.
Key Contributers: Stefan Baumgärtner – Harald Dyckhoff – Frank Jöst – Henrike Koschel – Andreas Kuhlmann – Gerhard Maier – Georg Müller-Fürstenberger – Horst Niemes – J.L.R Proops – Ralph Winkler
Related Concepts: THERMODYNAMICS – HOMO OECONOMICUS & HOMO POLITICUS – ABSOLUTE & RELATIVE SCARCITY – EVOLUTION
Darwin’s seminal book on biological evolution has triggered an ongoing debate on evolution, in biology and in general. Not until the 1960s did Mainstream Economics start to take up Joseph Schumpeter’s ideas of evolutionary thought for economic analysis in one of its branches, Evolutionary Economics. However, Mainstream Economics did not emphasise the relevance of his ideas for environmental problems. Ecological Economics, on the other hand, uses the concept of evolution as a key to diagnose, analyse and treat environmental and resource problems.
We show the fruitfulness of the concept of evolution by examining predictable and unpredictable processes, inventions and innovations, ignorance and novelty. For instance, the concepts of genotype (the gene structure of a living being) and phenotype (the realization of a living being) can be employed not just in a biological context but also in a physical and economical context. This broad view of evolution is useful for two reasons: (i) Several concepts first introduced in natural science are useful because they provide economics with a physical foundation. (ii) The way natural science has treated time and irreversibility offers important lessons to economics, for many economic actions have irreversible consequences, like the use of groundwater which cannot be replaced if it is extracted too fast.
Our example of the soda-chlorine industry shows an evolutionary process in an economy over the course of 250 years. First, new technologies and products are invented due to resource scarcity. Second, increasing pollution caused by the new technology is recognized, and third, environmental legislation is implemented, leading to new inventions, and so on. Hence new questions lead to new answers in an evolutionary way.
Key Contributers: Alexander Gerybadze – Marco Lehmann-Waffenschmidt – Reiner Manstetten – J.L.R. Proops – Johannes Schiller – Horst Niemes – Gunter Stephan
Related Concepts: IGNORANCE – BASICS OF TIME – JOINT PRODUCTION – POWER OF JUDGEMENT – IRREVERSIBILITY – TELEOLOGICAL CONCEPT OF NATURE
The concept of responsibility was addressed in philosophy in particular by Aristotle, Kant and Weber. This concept offers an overview of the philosophical understandings of responsibility, building up an approach that can deal with high complexity, the occurrence of novelty and irreducible ignorance.
When dealing with responsibility, Mainstream Economics limits itself to responsibility for an individuals’ wellbeing. Ecological Economics, however, focuses on responsibility for society and the environment as well.
What is responsibility? Responsibility causally links the consequences of an action to the actor. Legal responsibility must be distinguished from moral responsibility. We differentiate individual responsibility from collective responsibility. Finally, we introduce political responsibility and political-ethical responsibility. Ascribing responsibility in this differentiated way helps reduce complexity, for it shows who is responsible for what and to what extent. This allows us to distinguish between reality and wishful thinking. The added value of this concept is that it presents different dimensions of responsibility. Further, it allows us to analyse complex environmental and resource issues.
The examples of joint production, like water pollution, lead to an important conclusion: A top-down approach does not suffice to deal with environmental problems. We need a bottom-up approach: Individuals must assume their responsibility alongside the community and political actors.
Key Contributers: Stefan Baumgärtner – Mi-Yong Lee – Thomas Petersen – Johannes Schiller
Related Concepts: POWER OF JUDGEMENT – HOMO OECONOMICUS & HOMO POLITICUS – IGNORANCE – INDIVIDUAL, COMMUNITY & ENTIRETY – SUSTAINABILITY & JUSTICE – JOINT PRODUCTION
During the 19th century physics underwent a revolution. Sadi Carnot, Lord Kelvin, Rudolf Clausius and others founded a new field of physics, thermodynamics, which focuses on the study of energy.
Although energy is one of the most important economic production factors, thermodynamics does not play a key role in Mainstream Economics. However, energy is necessary for every production process and has an impact on nature because it creates environmental damage. Its use leads to irreversible loss of coal, oil and gas. This is the reason why the founder of Ecological Economics Nicholas Georgescu-Roegen focused on thermodynamic considerations in his pioneering work The Entropy Law and the Economic Process (1972).
This concept explains the consequences of the two fundamental laws of thermodynamics: (i) Energy can neither be created nor destroyed, but only transformed. (ii) To give an example of the second law: Heat will by itself always transfer from a hotter to a colder body, like a heated stone will give up its heat to the cooler air surrounding it.
This concept lays the foundation for an understanding that every industrial production process yields joint products, at least one of which is a waste product. This fact is easily communicated to the public, heightening awareness of the danger of our mode of production.
A practical example is the production of steel by using coke and iron ore. The output is not only steel but also the remains of the manufacturing process, such as CO2, waste water, dust etc.
Key Contributers: Stefan Baumgärtner – Werner Böge – Lutz Freytag – Hans-Jürgen Jaksch – Henrike Koschel – Andreas Kuhlmann – Gernhard Maier – Georg Müller-Fürstenberger – Horst Niemes – J.L.R. Proops – Martin Quaas – Gunther Stephan – Gerhard Wagenhals
Related concepts: JOINT PRODUCTION – SUSTAINABILITY & JUSTICE – IRREVERSIBILITY – BASICS OF TIME – EVOLUTION
Whereas our concept of space seems well established, perhaps ‘hard-wired’ into our brains, time is altogether more elusive. Since Aristotle (or even before), the nature of time has been a source of contention among philosophers, both pure and natural.
Mainstream Economics employs a restricted view of time, which in turn leads to a simplified analysis of long-term developments. This holds particularly for the interplay between nature and the economy. Ecological Economics, in contrast, employs a wider view of time.
This concept introduces several conceptions of time, tracing the line from ancient philosophy to political decision-making. Chronos, which can be found in Aristotle’s and Newton’s writings, reflects a linear, objective understanding and is at the core of the modern scientific world view. Kairos, adopted from the name of a Greek God, signifies the right moment to act, meaning a subjective interpretation of when to act with limited knowledge or even in the face of ignorance. Both chronos and kairos are important to understand and make use of the inherent dynamics of evolutionary processes.
This concept argues that this broad view of time culminates in a stocks perspective which provides an indispensable tool for political advisors and decision-makers.
Our first example comes from Tolstoy’s War and Peace in which patience and time lead to an outcome that seemed impossible at the outset. The second example concerns German water policy where a slow build-up of production stocks leads to social support of the innovative policy and ultimately to the long-term protection of water.
Key Contributers: Peter Bernholz – Werner Böge – Friedrich Breyer – Karin Frank – Alexander Gerybadze – Werner Güth – Johann Irsigler – Hans-Jürgen Jaksch – Frank Jöst – Bernd Klauer – Marco Lehmann-Waffenschmidt – Gerhard Maier – Ingo Pellengahr – Thomas Petersen – Martin Quaas – Winfried Reiß – Matthias Ruth – Johannes Schiller – Armin Schmutzler – Stefan Speck – Gunther Stephan – Ernst-Ludwig von Thadden – Ralph Winkler – Franz Josef Wodopia
Related concepts: IRREVERSIBILITY – EVOLUTION – BASICS OF LIFE – IGNORANCE – ENVIRONMENTAL POLITICS
The phenomenon of ignorance was an issue in Greek philosophy as early as Plato’s first dialogues (e.g. Meno). The importance of the consciousness of ignorance is illustrated by the famous Oracle of Delphi: It acknowledged Socrates as the wisest of all human beings because he said, ‘I know that I know nothing’.
Mainstream Economics is particularly strong in dealing with risk and, to some extent, uncertainty. In contrast, Ecological Economics focuses on the boundary between what we know, what we know that we do not know, and where we are even unaware of our lack of knowledge. To this end, we outline different forms of ignorance, such as personal and social, open and closed, reducible and irreducible ignorance. This concept enables us to improve our understanding of natural processes and our political decision-making.
The example of joint production shows how manufacturing one good results in at least one waste product. Various joint products, however, can go unrecognized for a long time, with detrimental effects. Responsible action therefore demands that we deal explicitly with ignorance.
Key Contributers: Reiner Manstetten – J.L.R Proops
Related Concepts: JOINT PRODUCTION – RESPONSIBILITY – POWER OF JUDGEMENT – EVOLUTION – BASICS OF TIME – ENVIRONMENTAL POLITICS
During the 19th century, new insights into the concept of irreversibility were developed with the founding of thermodynamics. It turned out, that an understanding of time irreversibility requires a thermodynamic underpinning. In the second half of the 20th century, the physical chemist Ilya Prigogine discovered ground-breaking insights regarding irreversibility in self-organising systems, such as biological plants. The economist Georgescu-Roegen introduced the physical concept of irreversibility into Ecological Economics. Mainstream Economics has a flawed view of temporal irreversibility in production theory since it neglects important thermodynamic considerations, for instance it generally assumes that all goods can be substituted by others.
Ecological Economics argues that a thermodynamic understanding of irreversibility is necessary to adequately analyse the interplay between nature and economy. For ease of understanding, let us assume that time is reversible. Accordingly, time has the same status as a spatial variable; hence time can move in two directions, into the past and into the future. Thus, its direction is not uniquely defined, and past and future can be treated symmetrically. However, as soon as we experience real time, we note that we are only able to move in one direction, namely from the present to the future, for we cannot return to the past. So, a good definition of irreversibility is: A process is irreversible if it is not possible to reverse it.
Thermodynamic irreversibility restricts economic actions in time (Georgescu-Roegen 1971). Only those actions are possible that are not restricted by the two laws of thermodynamics. Hence, thermodynamic irreversibility is a constraint for economic action.
A practical example of irreversibility is the burning of a piece of coal. Once burned, you can never turn it back into coal.
Key Contributers: Stefan Baumgärtner – J.L.R. Proops – Armin Schmutzler
Related concepts: THERMODYNAMICS – EVOLUTION – BASICS OF TIME – BASICS OF LIFE
Life and forms of living beings began around 4 billion years ago. However, the terms stocks and stores have only developed as scientific concepts over the course of the last two centuries, while the term fund came into use even more recently (Georgescu-Roegen 1971). A fund can be understood as a source of services for one or more species of living beings.
While Mainstream Economics does not focus on the origins of life, this is a basic concern of Ecological Economics. To understand life, we need concepts which focus on its temporal structure and are suitable to examine the interaction between the dynamics of coupled systems, made up of natural and economic components.
A central concept is that of a stock, hence this concept develops a general theory of stocks, applicable in ecology and economics. Some stocks are used as stores in ecosystems and economic systems. Crucial questions for sustainability are: When do stores become scarce? How can they be replenished or substituted by other stores? To answer these questions, we need a third concept, a fund. Essential for a fund is that it maintains itself, and that it gives services to other living beings. Take an apple tree, for example. Its services are material and immaterial, be they shelter or aesthetic services. Drawing on three other concepts a Teleological Concept of Nature, Thermodynamics and Irreversibility, enables us to operationalize the concept of life. This concept helps us grasp the intertemporal relationships between stocks, stores and living beings.
As a practical example we use the three concepts to examine the development of oxygen in the atmosphere and its consequences for life on earth.
Key Contributers: Dale Adams – Karin Frank – Bernd Klauer – Mi-Yong Lee – Reiner Manstetten – Matthias Ruth – Gerhard Wagenhals – Christian Wissel
Related concepts: TELEOLOGICAL CONCEPT OF NATURE – THERMODYNAMICS – IRREVERSIBILITY – EVOLUTION – BASICS OF TIME – ABSOLUTE & RELATIVE SCARCITY – INDIVIDUAL, COMMUNITY & ENTIRETY
Justice has been a well-established notion since antiquity – see e.g. the Politeia by Plato. As Socrates noted, a just state and a just soul is governed by reason, not by human desires. The notion of sustainability arose in public discourse with the ‘Report of the Club of Rome on the State of Humanity: The Limits to Growth’ (Meadows et al. 1972). When referring to the natural basis of life, we mean the resources provided by nature that are necessary to support human life and cannot be substituted by man-made artefacts.
Sustainability has three dimensions: the economic, what is just and the ecological. Mainstream Economics and public discourse focus on the economic und just dimensions, while the ecological dimension is largely ignored. Ecological Economics focuses on the latter one.
This concept presents a conceptual framework for sustainability and justice. The concept of justice is developed in terms of distributional justice and in the sense of order justice (a sort of constitutional justice) as well; the latter is crucial for solving environmental problems. We show how closely sustainability and justice are interrelated.
This concept serves as a bridge between the general concepts of sustainability and justice and their concrete components. One major outcome is that the growth paradigm turns out not to be the solution but an obstacle to achieving a sustainable world.
As a practical example, we show how we can achieve a sustainable world. It is very unlikely that we will be able to decouple economic growth from environmental burden. It is crucial that we attain sufficiency in society, for sufficiency identifies what is enough to live a good life (Schneidewind and Zahrnt 2013; Zahrnt and Zahrnt 2016).
Key Contributers: Christian Becker – Dieter Ewringmann – Frank Jöst – Bernd Klauer – J.L.R. Proops – Johannes Schiller – Angelika Zahrnt
Related concepts: HOMO OECONOMICUS & HOMO POLITICUS – RESPONSIBILITY – POWER OF JUDGEMENT – BASICS OF LIFE – TELEOLOGICAL CONCEPT OF NATURE – ENVIRONMENTAL POLITICS
Aristotle employed the teleological approach to explain the world. The adjective teleological is derived from the Greek word telos which means ‘aim’. The teleological approach was used until the middle ages. It was largely abandoned in scientific discourse in favour of causal analysis.
However, as Immanuel Kant (1724 – 1804) argued in his Critique of Pure Reason, normal scientific discourse must be enhanced if one wishes to understand life, for living things cannot be explained purely mechanically but must be interpreted teleologically, i.e. one must ask, what is it for? In everyday life we ask, What is the nectar in apple blossoms for? The proximate answer is because the “nectar attracts bees which pollinate the flower. The nectar fulfils a certain purpose for the living thing. In this vein, we want to bring the question what is it for? back into scientific discourse: What is the purpose of nature? What is the purpose of life?” (Faber/Manstetten 2010: 85). Mainstream Economics views nature only as an environment that is used as a supplier of resources and a receiver of waste and pollution from economic activity, be it extraction, production or consumption.
In contrast, Ecological Economics has developed a teleological concept of nature which allows us to formulate a concept of nature so encompassing as to enable us to develop a conceptual basis for Ecological Economics.
This concept reintroduces the teleological approach to generate new perspectives and fruitful questions to help secure the foundation of natural life. Since this concept is purely theoretical one, it does not give a practical example.
Key Contributers: Dale Adams – Reiner Manstetten
Related concepts: BASICS OF LIFE – BASICS OF TIME – THERMODYNAMICS – EVOLUTION – INDIVIDUAL, COMMUNITY & ENTIRETY
In ancient philosophy, practice existed only to create space for the wise to contemplate theory. In the ideal of modern science, however, science is an abstract system of cognition, providing the basis for technological control of nature.
The stocks framework is an attempt to overcome the gap between theory and practice, between academics and practitioners. In contrast to Mainstream Economics, Ecological Economics emphasizes the role of time in politics by examining the dynamics of economic, social and environmental stocks and their relationships. Stocks may be material or immaterial, such as a social institution like legislation.
Our applied example examines the development of sustainable inland shipping policy in Germany. To this end, we proceed in seven steps, starting with the policy aims and relevant facts known about German inland shipping. This enables us to identify the relevant material and immaterial stocks associated and their dynamics. In doing so we can summarise the normative demands placed on German inland shipping policy by the general principle of sustainability and formulate concrete goals. Finally, we propose concrete policy recommendations for the transportation system.
The last chapter describes the stocks framework as a school of long-term thinking. It shows how a practitioner is able to learn to deal with issues over long timescales.
We note that this concept is almost identical to chapters 12 and 13 of the book Sustainability and the Art of Long-Term Thinking by Klauer et al. 2017.
Key Contributers: Hans Christoph Binswanger – Dieter Ewringmann – Beate Hermann – Frank Jöst – Bernd Klauer – Henrike Koschel – Mi-Yong Lee – Peter Michaelis – Georg Müller-Fürstenberger – Horst Niemes – Thomas Petersen – Philipp Gay – J.L.R. Proops – Martin Quaas – Matthias Ruth – Stefan Speck – Gunter Stephan – Gerhard Wagenhals – Ralph Winkler – Franz Josef Wodopia – Angelika Zahrnt
Related concepts: BASICS OF TIME – BASICS OF LIFE – SUSTAINABILITY & JUSTICE – HOMO OECONOMICUS & HOMO POLITICUS – POWER OF JUDGEMENT – IGNORANCE
Thomas Robert Malthus (1766 – 1834) introduced the notion of absolute scarcity of nature into classic economic thought. He maintained that a population grows faster than the food required to sustain the population, and that will eventually lead to a decline in the population.
In contrast, Mainstream Economics focuses on relative scarcity which defines a good as scarce in relation to other scarce goods. A scarce good carries opportunity costs, which in turn results in a positive price. Goods with no price are not scarce. However, many pollutants have no price, therefore they are not dealt with. In contrast, Ecological Economics focuses its analysis on the damage caused by these pollutants.
We show why the concept of relative scarcity is too narrow to secure the natural basis of life. For example, ground water is irreversibly lost, and climate change causes draught and flooding. In contrast, Ecological Economics is very much aware of the absolute scarcity of natural goods: A good which cannot be substituted with another is absolutely scarce Ecological Economics focuses its analysis on non-priced goods.
This concept is necessary to recognise that many services provided by the environment become absolutely scarce in the long run, therefore we must take precautionary measures now.
To illustrate our critique, we examine the concept of relative scarcity in the context of the present loss of biodiversity.
Key Contributers: Stefan Baumgärtner – Christian Becker – Kirsten Hertel – Reiner Manstetten
Related concepts: HOMO OECONOMICUS & HOMO POLITICUS – RESPONSIBILITY – BASICS OF LIFE – BASICS OF TIME – IRREVERSIBILITY
