Environmental Resources, Scarcity and the Heterodox Production Model

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Information about Environmental Resources, Scarcity and the Heterodox Production Model
Economy & Finance

Published on October 15, 2014

Author: pkconference



Grad Students Honoring Fred Lee session at 12th International Conference

1. Environmental Resources, Scarcity and the Heterodox Production Model Christian Spanberger

2. A Discussion on Resource Scarcity • Ecological Economics (Daly, Georgescu- Roegen) – Laws of Thermodynamics, especially Entropy • Institutional Economists (DeGregory, Khalil, [Young]) – Resources as an anthropomorphic concept

3. Production • Physical: Production is the transformation of matter into different matter using energy. – Production is zero-sum in terms of quantity and loss-making in terms of quality. • Economic: Production is the way by which society materially provisions itself. – Production is (potentially) surplus-producing.

4. Who is Wrong? Who is Right? • EE is looking at the ‘natural’ system, IE at the economic system. – Both analyses are correct for as long as they remain put at their object of analysis. – Both (potentially) make too strong claims • Purpose of EE analysis – Showing that there are physical laws that all processes, including anthropomorphic ones, are subject too. • Purpose of IE analysis – Resources are produced means of production, not naturally given. – Prices are not scarcity-indices.

5. Who is Wrong? Who is Right? • IE cannot deny that there are real natural constraints –Absolute Limits: efficiency of heat engine, Irreversibility of economic processes, non-existence of 100 % recycling, .. –Resource constraints • Rate of resource use > rate of resource renewal (natural processes, production of synthetic resources, recycling) • Energy and time costs of regeneration • The limitedness of solar energy –Technology can expand (but also contract!) boundaries; but that does not imply that these boundaries cease to exist. – DeGregory’s empirical argument is problematic.

6. Who is Wrong? Who is Right? • EE cannot deny that entropy is just one characteristic defining the economic usefulness and availability of matter/entropy. – Production process often requires high entropy matter; example of recycling – If used as metaphor for economic availability, technology can have an absurd effect on objectivity of entropy concept.

7. Implications for Modelling the Productive Structure of the Economy • The Heterodox Production Model is designed to portray production in an economic, not physical way. • The implications of economic activity for the natural environment (and other way around, natural creation of resources) are much more productively analyzed from a physical perspective, can be integrated into an economic framework with the help of the social fabric matrix though.

8. Implications for Modelling the Productive Structure of the Economy • Modelling Natural Resources: – Difficult to model ‘resources become’, since model is based on a given state of technology. Modelling resources as produced means of production possible though. – KS, RRS : GÅ L → Q • RRS in all sectors? – Resources as part of the Q vector and included in G matrix.

9. Implications for Modelling the Productive Structure of the Economy • Modelling Natural Resources: – Waste as Resource • All economic activities (production, household social activities) produce waste, which means that waste has to be included as a byproduct to these activities. • Waste, for the purposes here, is to be considered an input into the production of economic resources as well. • They would hence enter the G matrix for those sectors producing resources.

10. Conclusion and Outlook • Both ecological and institutional discussions of scarcity are important for what they are able to show. • The ecological implications of economic activities are more fruitfully modelled in a ‘nature as a whole’ framework. • The institutional viewpoint on resources as produced means of production can be modelled through the heterodox production model. • The task ahead must be to integrate economic and ecological models of production processes – the linking structure for this can potentially be the social fabric matrix.

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