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The Second Coming of Copernicus

Is the environment is part of the economy — or the economy is part of the environment?

December 9, 2001

Is the environment is part of the economy — or the economy is part of the environment?

In 1543, Polish astronomer Nicolaus Copernicus published his famous treatise, “On the Revolutions of the Celestial Spheres.” His book challenged the then prevailing view that the sun revolved around the earth. Instead, he argued it was earth that revolved around the sun. With his new model of the solar system, he began a wide-ranging debate among scientists, theologians, and others.

After Copernicus outlined his revolutionary theory, there were two very different views of the world. Those who retained the so-called Ptolemaic view of the world saw one world — and those who accepted the Copernican view saw a quite different one. The same is true today of the disparate worldviews of economists and ecologists.

These differences between ecology and economics are no less fundamental than the ones faced at the time of Copernicus’ reshaping of our entire global outlook. For example, ecologists worry about limits, while economists tend not to recognize any such constraints.

Ecologists, taking their cue from nature, think in terms of cycles, while economists are more likely to think in terms of linear, or curvi-linear developments. Economists have a great faith in the market, while ecologists often fail to appreciate the market adequately.

The gap between economists and ecologists in their perception of the world as the 21st century begins could not be wider. Economists look at the unprecedented growth of the global economy and of international trade and investment — and they see a promising future with more of the same.

They note with justifiable pride that the global economy has expanded seven-fold since 1950, raising output from $6 trillion of goods and services to $43 trillion in 2000, boosting living standards to levels not dreamed of before.

Ecologists look at this same growth — and they realize that it is the product of burning vast quantities of artificially cheap fossil fuels. They know that this process is destabilizing the climate.

They also look ahead and see more intense heat waves, more destructive storms, melting ice caps and a rising sea level that will shrink the land area even as the world population continues to grow.

Where economists see booming economic indicators, ecologists see an economy that is altering the climate with consequences that no one can foresee.

In short, economists see the environment as a subset of the economy. Ecologists, on the other hand, see the economy as a subset of the environment.

Economists rely on the market to guide their decisionmaking. They respect the market because it can allocate resources with an efficiency that a central planner can never match (as the Soviets learned at great expense).

Ecologists view the market with less reverence because they see a market that is not telling the truth. For example, when buying a gallon of gasoline, customers in effect pay to get the oil out of the ground, refine it into gasoline, and deliver it to the local service station. But they do not pay the health care costs of treating respiratory illness from air pollution or the costs of climate disruption.

Like Ptolemy’s view of the solar system, which had the earth at the center of the universe, the economists’ view is confusing efforts to understand our modern world. It has created an economy that is out of sync with the ecosystem on which it ultimately depends.

For all their depth and range, economic theory and economic indicators do not explain how the economy is disrupting and destroying the earth’s natural systems. Economic theory does not explain why Arctic Sea ice is melting. It does not explain why grasslands are turning into desert in northwestern China, why coral reefs are dying in the South Pacific — or why the Newfoundland cod fishery collapsed.

Nor does it explain why we are in the early stages of the greatest extinction of plants and animals since the dinosaurs disappeared 65 million years ago. And yet, economics is essential to measuring the cost to society of these excesses.

These trends, which mark an increasingly stressed relationship between the economy and the earth’s ecosystem, are taking a growing economic toll. At some point, this could overwhelm the world wide forces of progress, leading to economic decline.

The challenge for our generation is to reverse these trends before environmental deterioration leads to long-term economic decline, as it did for so many earlier civilizations.

These increasingly visible trends indicate that if the operation of the subsystem, the economy, is not compatible with the behavior of the larger system — the earth’s ecosystem — both will eventually suffer. The larger the economy becomes relative to the ecosystem, and the more it presses against the earth’s natural limits, the more destructive this incompatibility will be.

On a fundamental level, an environmentally sustainable economy — an eco-economy — requires two shifts: first, that the principles of ecology establish the framework for the formulation of economic policy and second, that economists and ecologists work together to fashion the new economy.

Ecologists, after all, understand that all economic activity, indeed all life, depends on the earth’s ecosystem — the complex of individual species living together, interacting with each other and their physical habitat.

These millions of species exist in an intricate balance, woven together by food chains, nutrient cycles, the hydrological cycle and the climate system. Economists, for their part, know how to translate goals into policy. Economists and ecologists working together can design and build an eco-economy, one that can sustain progress.

In conclusion, just as recognition that the earth was not the center of the solar system set the stage for advances in astronomy, physics, and related sciences, so will recognition that the economy is not the center of our world create the conditions to sustain economic progress and improve the human condition.

Just as Copernicus had to formulate a new astronomical worldview after several decades of celestial observations and mathematical calculations, we too must formulate a new economic worldview based on several decades of environmental observations and analyses.

December 9, 2001