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turn to our example of the bowling alley. If lower interest rates induce itto expand, it will not expand into a void and may expand into someecosystem—a wetland, for example—that currently provides valuablenonmarket services to the local community. As we discussed earlier, suchnegative externalities are an inevitable outcome of market production.Therefore, if our policy objective is sustainable scale, monetary expansionis very problematic. Even if the economic scale is well within the constraintsimposed by the ecosystem, monetary expansion acts on marketgoods, which do not always offer the highest marginal contribution tohuman well-being. The microeconomic law of the equimarginal principleof maximization thus applies not only to the scale of the economic systemrelative to the ecosystem that sustains it but also to the division of marketand nonmarket goods produced by an economy. In ecological economics,macro-allocation takes precedence over micro-allocation.Theoretically, government money in a democratic society will be directedtoward the goods and services that provide the greatest marginalutility for society as a whole. As we have discussed, an important role ofgovernment expenditure is to provide nonmarket goods.It is important to distinguish between two classes of nonmarket goods,which have different effects on scale. Manmade nonmarket goods affectscale to the same degree as market goods. If the government project in thebowling alley town is a big government building, it may also encroachupon some valuable ecosystem and destroy the services it provides. Incontrast, the government could restore wetlands that sustain biodiversity,promote seafood production, and protect against catastrophic stormsurges such as those that devastated New Orleans. Protecting and restoringthe ecosystems that provide nonmarket environmental services can effectivelydecrease scale, or at least help ensure that we do not surpassoptimal scale. As the world becomes more full, the marginal benefits fromprotecting and restoring ecosystem funds, and hence the nonmarket servicesthey provide, will increase relative to those from market goods andmanmade public goods. As this happens, and if politicians come to understandthe benefits and public good nature of ecosystem services better,more and more federal money should be allocated toward providing suchservices.It is important to recognize, however, that government expenditure onecosystem funds can still increase scale. How is this so? Once the initialexpenditure enters the economy, multiplier effect occurs. Money spent torestore ecosystem funds will in turn be spent by its recipients on marketgoods—workers restoring the wetland may spend their money on bowling,pressuring the bowling alley to expand; construction workers expandingthe bowling alley may spend their additional income on TVs,causing that industry to expand; and so on. The larger the multiplier, theChapter 17 The IS-LM Model • 343