A while back, John wrote a highly controversial post in which he called out ecological economists for the frauds that they are (OK, he didn't really say that, I was just trying to get your attention). Yesterday, a new Env-Econ commenter, Verdurous--welcome and you're welcome for the overwhelming flood of hits you're about to get-- wrote:
There seems to me to be a very fundamental difference. Is the economy a subset of Earth's ecology or is the environment a subset of the field of economics. Using the former lens seems more appropriate to me. Now more than ever it is important for economics to re-engage with other disciplines - rather than roll over the top of them as is currently occuring.
In response, frequent Env-Econ commenter, Dano wrote:
It is painfully obvious to too few: the economy is a subset of the environment. You can have an environment without an economy, but you can't have an economy without an environment.
I'm not sure if Dano was calling out environmental economists for assuming that the environment is a subset of the economy, but I took it that way and to that I respond--nice try. So I will go back to first principles to explain the position most economists I know take on the environment. I present to you, the Block-O model of an economy (more commonly known as the circular flow model).
This is a version of a simple model of an economy most principles of microeconomics instructors use to explain how the owners of productive resources (households) and the producers of productive resources (businesses) interact. In this simple world, households supply resources (land, labor, capital) to the input market, businesses demand resources that are then used to produce goods that are demanded by households. This circular flow of goods and services is represented by the black arrows.
Money flows in the opposite direction. Households pay for goods and services which provides revenues to the businesses, which are used to pay for the inputs, which returns to the households in the form of income. The money flow is represented by the gray arrows.
Surrounding the entire economy, in scarlet, is the environment. The environment serves two purposes: 1) It provides goods and services to actors in the economy--natural resources, recreation,... and 2) it acts as a receptor of waste.
Some version of this simple model is presented in most undergraduate classes in environmental economics. I even start my PhD environmental economics class with it--just to make sure. The economy acts within the environment and that is recognized by almost all well-trained economists. The relevant economic question in this simple economy is whether the economy captures all of the benefits and costs associated with the two functions of the environment.
Oh, and GO BUCKS!
