Monday, December 1, 2008

Economics of the Environment

Economics of the Environment
Author: Prof James Blignaut ~ University of Pretoria, Director of Jabenzi, Beatus and affiliated to Green Growth Strategies

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Making two systems talk as one
The subject of Economics deals with the system of activities between producers and consumers. As in all systems, the outcome of this interactive process propels the system in a direction based on the flow of information through the system. The subject of Ecology, on the other hand, deals with the system of activities between various species and their habitats. As is in the case of Economics, the outcome of this interactive process propels the ecosystem dynamics based on the flow of information through this system. Both Economics and Ecology are hence self-organising systems that act and react to various information prompts. This implies that the future trajectory of both systems is therefore informed by what happened in the past. The agents of change (consumers and producers in Economics and species and habitats in Ecology) take note of what is happening within their respective systems and adapt to the changes. In adapting they are positioning themselves towards some future ideal.

It is most important within the context of sustainable development, however to understand that the Economic and Ecological systems do not function separately. On the contrary, they are imbedded within each other. Producers and consumers are not machines, and are therefore part of the ecosystem. Likewise, ecosystems provide resources and services to the economy and act as a wastebasket as well. So, ecosystems are also a part of the economy!

The biggest threat to the realisation of the sustainable development ideal is not in determining and understanding how Economics and Ecology as individual systems function, but how they operate as a single embedded system. Diagram 1 below shows this interaction in an extremely elementary way.

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