Environmental Engineering Reference
In-Depth Information
Neoclassical Economics and Ecological Restoration
The basic premises of neoclassical economics include methodological individualism,
rationality, and marginalism (Venkatachalam 2007). In other words, individuals act-
ing as economic agents are only interested in their own utility and are able to make ra-
tional choices that provide maximum utility to them by comparing marginal utility
with marginal cost. Although these premises have proven useful for gaining sharp an-
alytical focus in economic studies, ecological economists have been questioning the
limits of their usefulness. These perspectives, which we will discuss, can be summa-
rized as follows: (1) methodological individualism, (2) neoclassical rationality, (3)
marginalism, and (4) reactivity and proactivity.
METHODOLOGICAL INDIVIDUALISM
Economic theory posits that the optimal choices we make in a perfect market as indi-
vidual consumers result in the best outcome for society—the most economically effi-
cient outcome. The market will guide us like “the invisible hand” to the allocation
where marginal cost meets marginal benefit, and where collective net benefit is max-
imized. Mark Sagoff (1988) has effectively argued that this is a flawed assumption be-
cause individuals have different and conflicting “preference maps” as citizens and as
consumers. In other words, even if we accept that the neoclassical economics per-
spective of a consumer having a complete and continuously ordered sequence of
wants and needs is correct, we cannot deny that the same individual, when acting as a
citizen in a community, may have an entirely different set of ordering. These often in-
compatible preferences cannot be combined in any logical order. An individual is a
parent, citizen, and consumer, and employs different sets of preference maps for dif-
ferent purposes. The preference ordering that we use when we shop is not the same
one we express when we vote. Like Sagoff, we dislike having smoke from prescribed
fires and long-lasting slash piles on our favorite hiking trails. Nonetheless, we fully
support the public policy that would encourage more smoke and slash piles for the
“recovery of damaged ecosystems.” Basing our ecological restoration decisions on eco-
nomic methods, such as cost-benefit analysis (a sum of our wants and desires as indi-
viduals), may not result in what we think we should do collectively.
NEOCLASSICAL RATIONALITY
Rationality is another basic premise in neoclassic economics. It presumes that indi-
viduals and institutions always make rational choices when deciding about economic
matters. Ecological economics see it differently. For example, Gary Snider and his
colleagues (2006) showed that the cost of fire suppression itself exceeds the cost of
proactive thinning treatments in the American Southwest. Assuming one-third of the
forests in Arizona and New Mexico require thinning treatments, these researchers es-
timated that treating just 5 percent of the required acreage (163,000 acres) annually
would reduce fire suppression costs by $600 million over time. Thus, they concluded
