The recognition that both ecology and economics are grounded in common biophysical foundations has a long tradition. This biophysical foundation is represented by the continual interplay of sunlight, photosynthesis, chemical energy, air, soil, water, and organic matter.
Traditionally, both ecology and economics address only non-human and human interdependencies, respectively. Consequently, environmental problems arising out of industrial pollution have been termed “externalities” by economists, even though they are quite internal to the world we depend on. An excellent quote in this respect is probably that of biologist Marston Bates given by Daly (1968):
“Then we come to man and his place in the system of life. We could have left man out, playing the ecological game of ‘let’s pretend man doesn’t exist’. But this seems as unfair as the corresponding game of the economists, ‘let’s pretend that nature doesn’t exist’. The economy of nature and ecology of man are inseparable and attempts to separate them are more than misleading, they are dangerous. Man’s destiny is tied to nature’s destiny and the arrogance of the engineering mind does not change this. Man may be a very peculiar animal, but he is still a part of the system of nature.”
Daly also cites work by Alfred Marshall and other authors dating back to the 1920s that contains references to ecological analogies in economics. As of the former, comparisons have been made at varying scales, ranging from individuals, via living ecosystems to animate and inanimate nature (Tab. 1).
Economic landscape of the Australian economy, in terms of greenhouse gas emissions.
- Upstream convergence and cross-overs in ranking and benchmarking: As impacts propagate in an upstream direction through economic systems, their magnitude diminishes, and the total impact converges to a final value, representing system completeness. There is strong evidence for differential convergence of impacts towards system completeness. This differential convergence can cause cross-overs at second- and higher-order upstream production layers in the ranking of impacts for products, projects or companies (see the example below for the employment impact associated with the alternative options of buying a new car versus car repairs). The exclusion of higher-order upstream impacts can be responsible for these ranking cross-overs going unnoticed. In this case, an incomplete conventional process-type assessment of two alternative products, projects or companies can result in preferences and recommendations to decision-makers that are different from preferences and recommendations concluded from a complete, whole-supply-chain assessment. In order to provide fair comparisons and benchmarking, misleading effects of ranking crossovers have to be detected. This is only possible if the entire upstream supply chain of products, projects or companies is taken into consideration.