I have seen the enemy,and he is an economist

Economic lessons for the ecologically literate

Jon D. EricksonRubenstein School of

Environment and Natural ResourcesUniversity of Vermont

Academic Autism

Autism, a disorder characterized by:• Absorption in self-centered subjective

mental activity (such as daydreams, fantasies, delusions, and hallucinations)

• Marked deficits in communication and social interaction

• Marked withdrawal from reality• Abnormal behavior, such as . . . excessive

attachment to certain objects

Pareto Efficiency

When no one can be made better off without harming someone else

Fundamental Theorems ofWelfare Economics

1. Pareto Efficiency implied by:a. Maximization of consumer preferences

under budget constraints.

b. Maximization of profits under technology constraints.

2. Any Pareto Efficient outcome can be supported with lump sum transfers.

Policy Implications

Theorem 1 Exhaust Pareto Improvements

Theorem 2 Exhaust Potential Pareto Improvements

MB = MC

Organization of Society

Maximize individual well-being (utility)Maximize per capita consumption Maximize per capita GDP (production) Maximize GDP Specialization & exchange Free market capitalism World trade Globalization Maximize GWP

Pillars of the First Theorem

1. A theory of human behavior based on an isolated, rational, self-maximizing individual at a point in time

2. A theory of firm behavior based on perfect competition, production as allocating fixed resources, and exogeneous technical change

The Efficiency Criterion requires we:

• Ignore interpersonal, intergenerational, and interspecies comparisons

• Accept the rational actor model of human behavior

• Accept perfect competition

• Accept an economic system devoted to material production, free of social and biophysical constraints

The Ecological Economics Umbrella

• Human economy as a social system embedded in a biophysical universe

• Efficiency as a third-tier goal, behind sustainable scale and equitable distribution

• Allocation of scarce means among alternative desirable ends