As human civilization progresses we can see that many environmental risks are being mitigated. The root cause a cultural change in how we give value to the environment both culturally and economically.
The clearest example is the fact that nowadays nature is no longer a 'wild' place: for instance, Africa used to be called 'the wild continent'. Nature now is rather something necessary for humans. Moreover, those African wild areas are now places people around the world visit to contemplate nature and to learn from nature's peace and equilibrium. In the past, cities were protected by walls and fences from the 'wild'. Today, new urban planning requires more 'green spaces' within urbanized perimeters.
Etymologically, the terms 'economy' and 'ecology' have almost the same meaning. While 'economy' comes from the Greek 'oikos' -home- and 'nomos' -management, regulation-; the term 'ecology', first used by the German Ernst Haeckel in 1866 means 'oikos' and 'logia' -study-. Consequently, a clear and common meaning can be seen: 'oikos' refers to 'home', whether as a household, or 'home, our Planet, the natural world', as the ecosystem upon which we deeply depend. The terms 'nomos' and 'logia' also refer to logical, not simply random, patterns and consequently they are not such distant concepts either.
The definition of 'classical economics' is framed around how humans barter goods and services within a market context. This definition focuses on how parties will seek the lowest possible price for the production/delivery and consumption/use of goods and services. This concept of economics, is today, too simple. It neglects the 'oikos' aspect; that is, the natural ecosystem. As a result, very often this sort of understanding of economics damages the environment. But sooner or later it will hit back at the very market that triggered negative effects such as the misuse of resources or pollution, producing a kind of 'boomerang' effect.
These economic inefficiencies were often called 'externalities of the economy'; referring to those issues – in this case, environmental– upon which the market economy did not set a price. As a consequence, the price was paid by third parties who may have been neither producers nor consumers of the goods and services that triggered, for instance, pollution. A classic example is the citizen who does not use a car and yet is affected by respiratory diseases caused by fossil fuel associated air pollution.
Environmental damage affects markets and thus commercial activities. It causes scarcity of some goods/assets. These might be 'acceptable noise levels in a city' –the real estate market; or the depletion of commercial fisheries – the food market; or the deterioration of 'air quality' –the real estate market and public health costs; or the closure of beaches because of 'polluted waters' – the tourism industry.
As Adam Smith, father of 'classical economics' would say, 'the invisible hand of the market' acted and environmental aspects have begun to affect the prices of goods and services.
There are two challenges in terms of the relationship between 'classic economics' and 'ecology' as the pure science of nature, isolated from human behaviour.
The first challenge is that environmental damages do not generally hit market performance immediately, but perhaps only years after pollution affected nature - a time lapse problem. No less important is the 'location problem': pollution events may occur kilometres away from the area where the larger ecosystem or human health is finally affected.
The second challenge is how to implement environmentally sensitive market regulations without performing 'major surgery' – which is to say, without triggering a mass market disruption and thus leaving many economic actors 'out of businesses'.
The recognition that ecosystems provide 'services' to human civilization was initially appreciated by the Sumerians, who prohibited the felling of trees in area around the Tigris-Euphrates basin. Plato, the Greek philosopher, also recognised environmental damage caused by deforestation. Environmental 'first mover' Alexander von Humboldt did the same in remarkable fashion in the early 1800s. Humboldt also recognised environmental issues such as monoculture and the misuse of superficial water for crop irrigation.
In 2005, the MEA or 'Millenium Ecosystem Assessment' was published. It is an in-depth report requested by the United Nations. In this report, it was recognized that, globally, ecosystems provide the following services to the global economy:
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