Development |

Economics in Environmental Sustainability

The Brundtland Commission in its report titled Our Common Future in 1987 defined the concept of sustainable development as development addressed towards the needs of the future as well as towards the needs of the present policy architecture. The Brundtland Commission was shortly dissolved at the end of the same year. However, how can we have sustainable development given the rapid rate at which we are consuming the Earth’s resources?

How is Development Sustainable?

This definition in what is known as the Brundtland Report has remained somewhat vague in comprehensively encapsulating the concept of sustainable development. Indeed the concept of sustainable development without uniform international realization has remained an amorphous concept. The question in the concept of sustainable development is of how can development pursue production processes but at the same time return inputs or allocate practices into resource collection such that future generations might reap the benefits of abundant resources, without which production cannot occur. The concept of sustainable development thus ensues including development policies and innovations that sustain Earth’s resources for use by future generations.

Thus steadily, the concept of sustainable development has come to primarily mean in terms of an actionable framework the integration of economic and environmental policies in terms of developmental strategies such that a balance is achieved between economic development and the environment. This means that economic policies are designed and implemented such that the end of environmental protection is achieved to the highest possible degree so that future generations might benefit from environmental conservation to the greatest possible degree. To understand this more closely, we must look at the theory of ecological succession, most notably known for the contributions of Eugene Odum.

Ecological succession looks into ecosystem development as in how energy and materials follow cyclical paths within ecosystems. This aspect is what Odum (1969) explored in his paper ‘The Strategy of Ecosystem Development’. A key part of Odum’s analysis is that the strategies of man and nature are diametrically opposed. While the focus for man has primarily been high production out of nature, for example in terms of harvesting certain agricultural crops, reducing the total productive biomass, nature in its succession process goes for the reverse efficiency, thus favouring biomass production rather than production that largely wastes biomass, as in man’s approach.

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Nature thus manages to maintain a balance in its production process in sustainably producing biomass for procedural use while man’s production processes are not as all-roundly efficient or sustainable. A major environmental aspect of our time is indeed in moving towards an environmentally sustainable future. The discipline that is most entwined into the management of environmental resources is economics, closely followed by technology, which is a part of the economic superstructure.

While nature can participate in production and at the same time generate an output that feeds cyclically into the production process, human technology has not as yet evolved a cumulative production process that generates a cyclical output like nature. In human economies, what circulates cyclically into the production process is currency while capital investments such as natural resources and even human labour are extinguished in the production process.

Rather than a total cyclic system as in nature, in human economies the only economic good that circulates cyclically is currency. Currency in human economies moves from consumer to producer and then to consumers again as wages, following a cyclical path in the production process. When people consume goods produced during the production process, the producer is credited with currency received. However, when these same consumers participate in the production process as labour, they receive currency from the producers as wages, thus completing the cyclical process through which currency circulates in human economies.

However, the same is not true for other inputs into the production process. Natural resources extracted or even labour exchanged for currency is exhausted in the production process. Labour does not circulate in human economies as an end in itself thereby returning labour with more labour in return. Labour is compensated for and replaced by currency. Similarly natural resources occurring as capital are also exchanged for currency ultimately, and are exhausted in the production process such that the use of natural resources does not produce more natural resources. The aim in human economies is to use natural resources to produce currency.

The question that then arises in this scenario is as to how economies meant primarily to circulate currency can be environmentally sustainable? The question is one of how can natural resources be used in such a manner such that they can be replenished and also circulate cyclically in production processes to the greatest degree? If this end is realized whereby natural resources used in the production process by humanity are replenished and circulate cyclically, the possibility arises that natural resources could be used perpetually or at least for long periods of time into the future.

Thus the concept of sustainable development could work if humanity was able to circulate natural resources cyclically into production processes or use natural resources that are not expected to finish in the near future. This indeed is the engine behind the concept of sustainable development. This represents one massive method through which we can make development sustainable and is the focus for many policy-makers and scholars in rooting for environmentally sustainable development.

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Sustainable Systems

Although the concept of sustainable development is one of the great ideas of our contemporary time, its fruition leaves much to be desired. Of central importance in evaluating the concept of sustainable development is over how human societies can be geared to respond and adapt to the concept of sustainable development and its working. The concept of sustainable development would imbibe not just correct resource utilization in human economies, which still is an uphill task, but also societal changes in the form of a stronger regime of economic equity, or fairness, which needs to be intergenerational.

In nature, inputs into the production process are not under any form of conscious individual or collective ownership. These circulate freely into being transformed into one form of energy to the next, thus forming a co-dependent web of energy transfers. Nature forms a total system, and very little if any is wasted, which usually occurs once in a long period of time for an ecosystem, causing an evolutionary event. Analyzing the economic system, Pigou (1920) pointed out in his ‘The Economics of Welfare’ that the difference between marginal private costs and marginal social costs or benefits creates externalities such as transaction spillovers, costs or benefits unaccounted for, or wastages such as in the form of pollution. There is thus a private, a social and an environmental cost to economic transactions. The economy does not function as a harmonized system of transactions.

Economists Michael Porter and Claas van der Linde (1999) for example have cited pollution, saying that it is an example of the industrial system using resources inefficiently. In an economic system based on competitive advantage, it is inevitable that economic actions will generate costs not just within the economy, but also for society and the environment. However, competition also occurs in nature, in which energy transfers are balanced out and equilibrium is eventually achieved. The key difference here between the economy and nature is that nature returns its components back to its original categorical form whereas the economy converts natural resources into products that do not necessarily return to their original natural form. The case of plastic is a case in point.

There is thus necessary wastage by the economic system which generates costs and inequity. For example, the paper used to produce currency cannot be returned directly by the economic system to produce the trees that are used to produce paper such as the pine, fir, larch, eucalyptus, aspen and birch trees. The costs incurred in processing and procuring paper from the natural resources thus represent sunk costs and thus cannot be recovered. What are recovered are the investments made in procuring and producing paper products that are recovered after consumption as currency. It is therefore these sunk costs in procuring natural resources that present the greatest challenge to the economic system in going for environmental sustainability and towards thinking of the concept of sustainable development. These sunk costs are representative of one particular form of wastage – one for the economic system itself.

The economic system generates costs for society and for the environment as well as there are wastages. In looking from an economic point of view, these wastages can account for the sunk costs incurred by society and the environment. For example, the burning of fossil fuels is causing more and more greenhouse gases to accumulate in Earth’s atmosphere. If Climate Change is allowed a free reign as a result of these wastages, life on Earth shall bear sunk costs that are both societal and environmental as changes that are not recoverable. On the other hand however, if renewable sources of energy are adequately utilized, where there is much less wastage, there can be a much greater lack of sunk costs borne by society and environment on Earth.

The idea thus in the concept of sustainable development and in sustainable systems in terms of the economy is thus to reduce the wastage not just in procuring natural resources but also in reducing wastages for society and the environment. In such a scenario, there shall be less sunk costs borne in the economy as well as in the society and environment. This is a win-win for all, wherein the reduction in sunk costs and wastage can act to bring down overall costs in both aspects thus increasing equity overall, which can only be a boon to a healthy economy, to society and to the environment.

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