economics growth sustainability

The three rules of ecological economics

Amidst the politics and ideology, it’s easy to lose sight of the basic principles of an environmentally sustainable economy. So here are Herman Daly’s three golden rules for keeping the economy safely within the boundaries of the biosphere:

  1. Exploit renewable resources no faster than they can be regenerated.
  2. Deplete non-renewable resources no faster than the rate at which renewable substitutes can be developed.
  3. Emit wastes no faster than they can be safely assimilated by ecosystems.

The first refers to things such as water, timber or fish, natural products which we can draw from, but need to steward carefully to keep stocks in balance. We’re not very good at that at the moment, since overfishing and deforestation create profits today and good stewardship can only promise profits tomorrow. The role of economics here is to find ways of valuing those natural resources. Those natural assets need to move onto the balance sheet, so that when timber is gained, the loss of the forest is measured and accounted for.

The second principle refers to managing depleting resources. There aren’t very many of these, and the most important ones are fossil fuels. One of the key messages of peak oil is that we need to use the last decades of oil to fuel the transition beyond it, and put the infrastructure in place to do without it. The case of helium is a smaller scale example of the problem of managing declining stocks and encouraging alternatives.

So far progress is pretty slow on moving beyond fossil fuels, but oil and gas have been very cheap for a long time. Prices have risen steeply in the last decade or so, and the alternatives are being developed. Since there is no direct substitute to oil however, this is more complicated and it won’t be solved by markets alone. There will need to be incentives to move into renewable energy, and deliberate planning to create new transport infrastructure.

The third principle is where we’ve blown it most seriously, on CO2 in particular. The earth can absorb a vast quantity of CO2 into the oceans and the forests. Unfortunately we’re not only emitting more carbon than can be absorbed, we’re also eroding the planet’s capacity to absorb it through deforestation and ocean acidity.

The nitrogen cycle is also out of balance, but less well known. Run-off from industrial farming creates unnaturally nutrient-rich waters, where algae blooms so prolifically that it crowds out everything else. The result is ‘dead zones’ in the oceans. Currently this kind of damage is an externality, off the balance sheet and unconsidered. Ecological damage needs to priced into the equation – Australia’s recent carbon tax is one way to do that.

Those three rules aren’t an exhaustive list for a sustainable economy. There are economic or social limits such as debt or inequality too – but these are the ecological ones in a nutshell.


    1. jeffmowatt – I haven’t had time to read it all yet but the study guide looks good. We have no chance of successful fix it solutions without looking at the truths that have led us and keeping them firmly in view.

  1. It’s a little cold hearted, but I’ve come to see people as a renewable resource. In other words, if economic activity in any way damages their life, culture or environment then it is breaking the first rule.

    1. @britesprite, As you”ll see that point is made in the presentations I describe above, about he people who become disposable . It derives from the 1996 paper on people-centered economics and perhaps above all this statement:

      “This is a long-term permanently sustainable program, the basis for “people-centered” economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine’s poorest and most desperate citizens, rather than a “top-down” approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first — not secondarily, along the way or by the way. ” :

      1. The profession known as ‘human resources management’ would agree with you. If it helps us to account for people in our economic activity, I can live with the indignity of being called a resource.

        1. ‘Wow! The Corporation’ – I’m viewing it from jeffmowatt’s link (above).

          I daresay we are all aware of the situation explained in it, but it is stated so effectively isn’t it? And what does it bring to our attention in such an evident way – For me, it is that ‘They’ (The Corporations), have wholeheartedly committed the two cardinal terrors of not caring for the earth and its inhabitants. They lead us into love of money and its consequences.

          As Noam Chomsky said, we are all capable of falling into that temptation and no doubt all have/do to a lesser scale. But it is the scale at which ‘they’ consume us all which separates ‘them’ from ‘us’. These are giant monsters gobbling us all up and taking us faster to the cliff edge than we ought to be. As criminals, we would have long since put them in jail. But it feels we can do little to stop ‘them’. I think we are a resource to be accounted for, but only as a renewable commodity to be used and replaced until this corporation machine, (run by people), has run out of one necessity or another for the unnatural purposes which destroy the main essential good that we have on earth. And with what unmentionable consequences? Doom and gloom or reality? Who knows for sure? But can economics, technology, and rules fill us with hope, try though we will.

          I truly hope that this quote given by jeffmowatt above, can be achieved:

          “This is a long-term permanently sustainable program, the basis for “people-centered” economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether.

          Some of the thoughts and words that I took from the video:
          – as if we have created a doom machine that’s going to destroy us. It does not enter our psyche until the environment itself becomes a commodity; whether you obey the law or not is just a question of whether it is cost effective.
          – The Corporation is under pressure to deliver the ‘goods’ and to shed the costs elsewhere while this unwary or uncaring public allows it.
          – The Corporations are predators. Corporate profit is killing us.
          – ‘We (The Corporation) have been a plunderer – of something that is not mine but belongs to every individual on earth – I thought someday this must be made illegal.’

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