Green Economy Journal Issue 62

THOUGHT LEADERSHIP
THOUGHT LEADERSHIP
THE GREEN ECONOMY
Ecological economics
Ecological economics is both a transdisciplinary and an interdisciplinary
field of academic research that addresses the interdependence and
coevolution of economies and ecosystems (figure 2). More critically,
it treats the economy as a subsystem of Earth’s larger ecosystem and
emphasises the preservation of natural capital.
The constructed
environment also
has a role to play in
a just transition.
THE
green economy/
built environment
NEXUS
The introduction to the Green Economy Journal defines the green economy as one where
economic activity pursues the reduction of negative environmental and social impacts
while advancing positive ones. By implication, therefore, the green economy cuts across all
sectors and value chains: and is characterised by actions, services and projects that advance
environmental sustainability.
BY LLEWELLYN VAN WYK, B. ARCH; MSC (APPLIED), URBAN ANALYST
In a broader sense, an economy is a complex system of interrelated
extraction, production, distribution, consumption, disposal and
exchange within those activities that ultimately determines
how resources are allocated among all the participants (figure 1).
The term “economy” can denote careful management of available
resources: in this context, the production, consumption and
distribution of goods and services should combine to fulfil the
needs of all those living and operating within the economy while
supporting the natural environment.
THE BROWN ECONOMY
Conventional economic theory
Conventional economic theory, or orthodox economics, is a broad term
that refers to the dominant economic theories and models that have
been widely taught and accepted for many years. These theories form
the foundation of modern economics and are often based on classical
economic thought, neoclassical economics and Keynesian economics.
It is generally held that conventional economic theory is based on
several assumptions:
1. Rationality. People make decisions that maximise their self-interest.
2. Information. People have access to all relevant information and
can process it efficiently and effectively.
3. Maximisation. People always aim to maximise wealth and income.
4. Market efficiency. Markets are efficient, meaning that prices
reflect all available information and resources are allocated in
the most efficient manner.
Figure 2. Ecological economics. (Llewellyn van Wyk, 2023)
As argued by ecological economists like Malte Michael Faber
and Robert Costanza, ecological economics is defined by its focus
on nature, justice and time. Issues of intergenerational equity, the
irreversibility of environmental change, the uncertainty of long-term
outcomes and sustainable development guide ecological economic
analysis and valuation.
Here it is important to distinguish between “environmental
economics” and “ecological economics”: ecological economists argue
that environmental economics applies standard economic thinking to
the environment unlike ecological economic thinking which integrates
three interrelated goals namely sustainable scale, fair distribution and
efficient allocation into its consideration.
The question of scale – the first interrelated goal – has been
discussed in previous think-pieces (Green Economy Journal, Issue
61, 2023/24) Costanza argues that conventional economics does
not recognise the importance of scale – the fact that we live on a
finite planet or that the economy, as a subsystem, cannot grow
indefinitely into this larger, containing system. In short, there are
biophysical limits. Mainstream economics or the brown economy
does not recognise those limits, believing that technology can solve
resource constraint problems.
The second interrelated goal is distribution. This has many impacts,
Biophilic design focuses on human adaptations to nature.
including impacts on social capital and quality of life. The general
assumption is that the more we have of any one thing the more we
can spread it around. However, we are fast approaching the point
where distribution is a concern: we may not always have “more” to
spread around.
The third interrelated goal is allocation. The assumption that the
market is efficient at allocating resources only holds true while
externalities are excluded. Natural and social externalities are
clearly demonstrating that they are larger than the externalities
of what is going on in the market. The desire to build bigger and
better is cited by Costanza as an example of a social externality:
using the built environment as a metaphor, various organisations
and countries attach significant importance to building the tallest
skyscraper in the world, even if that building’s sewerage must be
collected by trucks because the bulk sewer system cannot cope
with the additional demand.
The green economy therefore emphasises the integration of
environmental and social considerations into economic policies and
practices. Key objectives of a green economy include:
• Environmental sustainability. Prioritising the conservation
of natural resources, eliminating pollution and neutralising the
environmental impact of economic activities.
Figure 1. Conventional economics/linear economy. (Llewellyn van Wyk, 2023)
These assumptions, however, are now challenged by various branches
of economics. Some critiques include its assumptions about human
behaviour, the role of institutions and its ability to address real-world
complexities and issues such as income inequality, environmental
sustainability and market failures. As a result, alternative economic
theories and approaches have gained attention, such as behavioural
economics, ecological economics and post-Keynesian economics,
offering different perspectives on economic phenomena. 1
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