Comparison between current economic model, green economy model and ecological economic model

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The basic characteristics of the current economic model, the green economy model, and the ecological economics model. Looking for sustainable lifetysle in Malaysia? Click here to know more!

Current Economic Model Green Economy Model Ecological Economics Model
Primary Policy Goals More: Economic growth

in the conventional sense,

as measured by GDP.

The assumption is that

growth will ultimately

allow the solution of all

other problems. More is

always better.

More but with lower

environmental impact:

GDP growth

decoupled from

carbon and from other

material and energy

impacts.

Better: Focus must shift from

merely growth to “development”

in the real sense of improvement

in sustainable human well-being,

recognizing that growth has

significant negative by-products.

Primary measure

of progress

 

GDP Still GDP, but

recognizing impacts

on natural capital.

 

Index of Sustainable Economic

Welfare (ISEW), Genuine Progress

Indicator (GPI), or other

improved measures of real welfare.

Scale/carrying

capacity/role of

environment

 

Not an issue, since

markets are assumed to

be able to overcome any

resource limits via new

technology, and

substitutes for resources

are always available.

 

Recognized, but

assumed to be solvable

via decoupling.

 

A primary concern as a

determinant of ecological

sustainability. Natural capital and

ecosystem services are not

infinitely substitutable and real

limits exist.

Principles of

governance

 

Laissez-faire market

capitalism.

 

Recognition of the

need for government.

 

Lisbon principles of sustainable

governance.

Economic

efficiency/

allocation

The primary concern,

but generally including

only marketed goods and

services (GDP) and

market institutions.

Recognized to

include natural capital

and the need to

incorporate the value

of natural capital into

market incentives.

A primary concern, but including

both market and nonmarket

goods and services, and effects.

Emphasis on the need to

incorporate the value of natural

and social capital to achieve true

allocative efficiency.

Source: Adapted from Costanza et al. (2014a).

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Ecological Economics Model

green forest

The shortcomings and the critics of the current model are excessive.

A coherent and viable alternative is sorely needed to sketch a framework for a new model of the economy based on the world-view and principles of ecological economics (Costanza 1991; Costanza et al. 1997; Daly and Farley 2004).

These include the following ideas:

  1. Our material economy is embedded in society which is embedded in our ecological life support system, and that we cannot understand or manage our economy without understanding the whole, interconnected system.
  2. Growth and development are not always linked and that true development must be defined in terms of the improvement of sustainable human well-being, not merely improvement in material consumption.
  3. A balance of four basic types of assets (capital) are necessary for sustainable human wellbeing: built, human, social, and natural capital (financial capital is merely a marker for real capital and must be managed as such).

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Green growth, more green growth please!

plant inside light bulb

OECD defined Green Growth as fostering economic growth and development, and at the same time ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies.

According to Wikipedia, Green growth is a term to describe a path of economic growth that is environmentally sustainable.

Green growth is based on the understanding that as long as economic growth remains a predominant goal, decoupling of economic growth from resource use and adverse environmental impacts is required.

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Are we really into sustainable development?

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What is sustainable development?

The original definition of sustainable development coined by the World Commission on Environment and Development, better known as the Brundtland Commission (WCED 1987:43) “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

It contains within it two key concepts:

  • The concept of needs, in particular the essential needs of the world’s poor, to which overriding priority should be given;
  • The idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs.

What are the indicators to sustainability?

Sustainability indicators are technical means for monitoring trends relevant to sustainable development, and if combined with politically set targets, to assess distance to the target and the progress in getting closer to it.

The choice of targets and indicators is influenced if not determined by the sustainability concept that the respective agent holds and/ or promotes, resulting in a diverse array of indicators and assumptions on which they rest. Indicators designed for different purposes will have different characteristics. In order to measure sustainability, first an operational concept is needed, defining what to measure. Then a methodology (indicators) has to be defined, standardizing how to measure it, according to quality criteria.

 

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Ecological economics and sustainable development

hand holding world globe

Capitalism

We are living in a world that is relatively full of humans and capital infrastructure. This has call for a need to re-conceptualize what the economy is and what it is for in this new context of economy.

euro coins
What is the new model of economy?

It is worth remember that the goal of the economy should be to sustainably improve human well-being and quality of life, and that material consumption and GDP are merely means to that end, not ends in themselves. Check out what is sustainable development, click here!

Materialistic vs Well-being

We have to recognize, as both ancient wisdom and new psychological research tell us, that too much of a focus on material consumption can actually reduce our well-being (Kasser 2002).

We have to better understand what really does contribute to sustainable human well-being and recognize the substantial contributions of natural and social capital, which are now the limiting factors to improving that well-being in many countries.

What is “Green Economy”?

There are different basic characteristics of the current economic model, the green economy model, and the ecological economics model. There is some argument that minor adjustments to the current economic model will produce the desired results.

For example, it is argued that by adequately pricing the depletion of natural capital (E.g. putting a price on carbon emissions) we can address many of the problems of the current economy while still allowing growth to continue. This approach is called the “green economy” (GE) model. Some of the areas of intervention promoted by GE advocates, such as investing in natural capital. This is necessary and we should pursue them. However, it is not sufficient to achieve sustainable human well-being.

Paradigm shift: New model of economy

We need a more fundamental change, a change of our goals and paradigm. Both the shortcomings and the critics of the current model are massive, and a coherent and viable alternative is needed. Thus, a new model of the economy based on the world-view and principles of ecological economics are coming up with the following ideas:

  1. Our material economy is embedded in society which is embedded in our ecological life-support system, and that we cannot understand or manage our economy without understanding the whole, interconnected system.
  2. Growth and development are not always linked and that true development must be defined in terms of the improvement of sustainable human well-being, not merely improvement in material consumption.
  3. A balance of four basic types of assets (capital) are necessary for sustainable human well-being: built, human, social, and natural capital (financial capital is merely a marker for real capital and must be managed as such).

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