Principles of Environmental Economics: Economics, Ecology and Public Policy

In Part Three, we observed that, from a purely physical viewpoint, natural resources are finite. Furthermore, we learned that the transformation and regenerative capacity of these resources are governed by certain immutable natural laws. For example, the flow of energy is always unidirectional. That is, energy resources cannot be recycled. Another example of these laws is the transformation of matter-energy, which always increases entropy. Hence, pollution is an inevitable by-product of any economic activity. Furthermore, Part Four also showed the formidable economic problems associated with environmental issues. From these two examples alone, it is not hard to envision a situation where, in a finite world, economic growth can be adversely affected (or limited) by either emerging scarcity of terrestrial energy resources or excessive pollution of the natural environment. In other words, there could be ecologically imposed limits to economic growth.

In Part Five, we will systematically explore the association of ecological limits and economic growth. The main questions I would like to address are: Can we expect unlimited economic growth in a world endowed with “finite” resources? If ecological limits are important factors in determining future trends of economic growth, what steps or precautions should be taken in order to avoid transgressing these biophysical limits? Clearly, the key issue here is scale—the size of human economy relative to the natural environment. To that extent, the focus is not on efficiency but on sustainability.

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