Guide Preserving Capital - Strategies Beyond the Mainstream

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Ecological economists may begin by estimating how to maintain a stable environment before assessing the cost in dollar terms. The work was criticized by articles in Ecological Economics Volume 25, Issue 1, but the critics acknowledged the positive potential for economic valuation of the global ecosystem. The Earth's carrying capacity is a central issue in ecological economics. Early economists such as Thomas Malthus pointed out the finite carrying capacity of the earth, which was also central to the MIT study Limits to Growth.

Diminishing returns suggest that productivity increases will slow if major technological progress is not made. Food production may become a problem, as erosion , an impending water crisis , and soil salinity from irrigation reduce the productivity of agriculture. Ecological economists argue that industrial agriculture , which exacerbates these problems, is not sustainable agriculture , and are generally inclined favorably to organic farming , which also reduces the output of carbon.

Global wild fisheries are believed to have peaked and begun a decline, with valuable habitat such as estuaries in critical condition. Studies have shown that salmon farming has major negative impacts on wild salmon, as well as the forage fish that need to be caught to feed them. Since animals are higher on the trophic level , they are less efficient sources of food energy. Reduced consumption of meat would reduce the demand for food, but as nations develop, they tend to adopt high-meat diets similar to that of the United States.

Global warming is now widely acknowledged as a major issue, with all national scientific academies expressing agreement on the importance of the issue. As the population growth intensifies and energy demand increases, the world faces an energy crisis. Some economists and scientists forecast a global ecological crisis if energy use is not contained — the Stern report is an example. The disagreement has sparked a vigorous debate on issue of discounting and intergenerational equity. Mainstream economics has attempted to become a value-free ' hard science ', but ecological economists argue that value-free economics is generally not realistic.

Ecological economics is more willing to entertain alternative conceptions of utility , efficiency , and cost-benefits such as positional analysis or multi-criteria analysis. Ecological economics is typically viewed as economics for sustainable development , [42] and may have goals similar to green politics. In international, regional, and national policy circles, the concept of the green economy grew in popularity as a response to the financial predicament at first then became a vehicle for growth and development.

As an indispensable requirement and vital precondition to realizing sustainable development, the Green Economy adherents robustly promote good governance.

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To boost local investments and foreign ventures, it is crucial to have a constant and foreseeable macroeconomic atmosphere. Likewise, such an environment will also need to be transparent and accountable. In the absence of a substantial and solid governance structure, the prospect of shifting towards a sustainable development route would be insignificant.

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In achieving a green economy, competent institutions and governance systems are vital in guaranteeing the efficient execution of strategies, guidelines, campaigns, and programmes. Shifting to a Green Economy demands a fresh mindset and an innovative outlook of doing business. It likewise necessitates new capacities, skills set from labor and professionals who can competently function across sectors, and able to work as effective components within multi-disciplinary teams.

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To achieve this goal, vocational training packages must be developed with focus on greening the sectors. Simultaneously, the educational system needs to be assessed as well in order to fit in the environmental and social considerations of various disciplines. Among the topics addressed by ecological economics are methodology, allocation of resources, weak versus strong sustainability, energy economics, energy accounting and balance, environmental services, cost shifting, modeling, and monetary policy.

A primary objective of ecological economics EE is to ground economic thinking and practice in physical reality, especially in the laws of physics particularly the laws of thermodynamics and in knowledge of biological systems. It accepts as a goal the improvement of human well-being through development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. Of course the terms development and sustainable development are far from lacking controversy. Richard B. Norgaard argues traditional economics has hi-jacked the development terminology in his book Development Betrayed.

Well-being in ecological economics is also differentiated from welfare as found in mainstream economics and the 'new welfare economics' from the s which informs resource and environmental economics. This entails a limited preference utilitarian conception of value i. Ecological economics is distinguishable from neoclassical economics primarily by its assertion that the economy is embedded within an environmental system. Ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system. Ecological economists argue that neoclassical economics has ignored the environment, at best considering it to be a subset of the human economy.

The neoclassical view ignores much of what the natural sciences have taught us about the contributions of nature to the creation of wealth e. There has then been a move to regard such things as natural capital and ecosystems functions as goods and services. This has been referred to as ecologists 'selling out on Nature'.

Resource and neoclassical economics focus primarily on the efficient allocation of resources and less on the two other problems of importance to ecological economics: distribution equity , and the scale of the economy relative to the ecosystems upon which it relies. Ecological economists point out that beyond modest levels, increased per-capita consumption the typical economic measure of "standard of living" may not always lead to improvement in human well-being, but may have harmful effects on the environment and broader societal well-being.

This situation is sometimes referred to as uneconomic growth see diagram above. Ecological economics challenges the conventional approach towards natural resources, claiming that it undervalues natural capital by considering it as interchangeable with human-made capital—labor and technology. The impending depletion of natural resources and increase of climate-changing greenhouse gasses should motivate us to examine how political, economic and social policies can benefit from alternative energy.

Shifting dependence on fossil fuels with specific interest within just one of the above-mentioned factors easily benefits at least one other. The potential for the substitution of man-made capital for natural capital is an important debate in ecological economics and the economics of sustainability.

There is a continuum of views among economists between the strongly neoclassical positions of Robert Solow and Martin Weitzman , at one extreme and the 'entropy pessimists' , notably Nicholas Georgescu-Roegen and Herman Daly , at the other. Neoclassical economists tend to maintain that man-made capital can, in principle, replace all types of natural capital. This is known as the weak sustainability view, essentially that every technology can be improved upon or replaced by innovation, and that there is a substitute for any and all scarce materials.

At the other extreme, the strong sustainability view argues that the stock of natural resources and ecological functions are irreplaceable. From the premises of strong sustainability, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that sustainable development must therefore take a different approach to valuing natural resources and ecological functions.

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Recently, Stanislav Shmelev developed a new methodology for the assessment of progress at the macro scale based on multi-criteria methods, which allows consideration of different perspectives, including strong and weak sustainability or conservationists vs industrialists and aims to search for a 'middle way' by providing a strong neo-Keynesian economic push without putting excessive pressure on the natural resources, including water or producing emissions, both directly and indirectly.

A key concept of energy economics is net energy gain , which recognizes that all energy requires energy to produce. The net energy gain from production coal, oil and gas has declined over time as the easiest to produce sources have been most heavily depleted. Ecological economics generally rejects the view of energy economics that growth in the energy supply is related directly to well being, focusing instead on biodiversity and creativity - or natural capital and individual capital , in the terminology sometimes adopted to describe these economically.

In practice, ecological economics focuses primarily on the key issues of uneconomic growth and quality of life. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests an interdisciplinary approach combining social and natural sciences as a means to address this.

Thermoeconomics is based on the proposition that the role of energy in biological evolution should be defined and understood through the second law of thermodynamics , but also in terms of such economic criteria as productivity , efficiency , and especially the costs and benefits or profitability of the various mechanisms for capturing and utilizing available energy to build biomass and do work.

Exergy analysis is performed in the field of industrial ecology to use energy more efficiently. Willard Gibbs. In recent decades, utilization of exergy has spread outside of physics and engineering to the fields of industrial ecology, ecological economics, systems ecology , and energetics. An energy balance can be used to track energy through a system, and is a very useful tool for determining resource use and environmental impacts, using the First and Second laws of thermodynamics , to determine how much energy is needed at each point in a system, and in what form that energy is a cost in various environmental issues.

Scientists have written and speculated on different aspects of energy accounting. Ecological economists agree that ecosystems produce enormous flows of goods and services to human beings, playing a key role in producing well-being. At the same time, there is intense debate about how and when to place values on these benefits.

A study was carried out by Costanza and colleagues [62] to determine the 'value' of the services provided by the environment. This was determined by averaging values obtained from a range of studies conducted in very specific context and then transferring these without regard to that context. Dollar figures were averaged to a per hectare number for different types of ecosystem e. A total was then produced which came out at 33 trillion US dollars values , more than twice the total GDP of the world at the time of the study.

This study was criticized by pre-ecological and even some environmental economists - for being inconsistent with assumptions of financial capital valuation - and ecological economists - for being inconsistent with an ecological economics focus on biological and physical indicators. The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains controversial. A common objection [64] [65] [66] is that life is precious or priceless, but this demonstrably degrades to it being worthless within cost-benefit analysis and other standard economic methods.

Reducing human bodies to financial values is a necessary part of mainstream economics and not always in the direct terms of insurance or wages. Economics, in principle, assumes that conflict is reduced by agreeing on voluntary contractual relations and prices instead of simply fighting or coercing or tricking others into providing goods or services. In doing so, a provider agrees to surrender time and take bodily risks and other reputation, financial risks.

Ecosystems are no different from other bodies economically except insofar as they are far less replaceable than typical labour or commodities. Despite these issues, many ecologists and conservation biologists are pursuing ecosystem valuation. Biodiversity measures in particular appear to be the most promising way to reconcile financial and ecological values, and there are many active efforts in this regard.

The growing field of biodiversity finance [67] began to emerge in in response to many specific proposals such as the Ecuadoran Yasuni proposal [68] [69] or similar ones in the Congo. US news outlets treated the stories as a "threat" [70] to "drill a park" [71] reflecting a previously dominant view that NGOs and governments had the primary responsibility to protect ecosystems.

How to Mainstream Natural Capital Accounting

Commodification of other ecological relations as in carbon credit and direct payments to farmers to preserve ecosystem services are likewise examples that enable private parties to play more direct roles protecting biodiversity, but is also controversial in ecological economics. The holdouts were all English-speaking countries that export GMOs and promote " free trade " agreements that facilitate their own control of the world transport network: The US, UK, Canada and Australia.

Ecological economics is founded upon the view that the neoclassical economics NCE assumption that environmental and community costs and benefits are mutually canceling " externalities " is not warranted. Joan Martinez Alier , [75] for instance shows that the bulk of consumers are automatically excluded from having an impact upon the prices of commodities, as these consumers are future generations who have not been born yet.

The assumptions behind future discounting, which assume that future goods will be cheaper than present goods, has been criticized by David Pearce [76] and by the recent Stern Report although the Stern report itself does employ discounting and has been criticized for this and other reasons by ecological economists such as Clive Spash. Concerning these externalities, some like the eco-businessman Paul Hawken argue an orthodox economic line that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to a hidden subsidy, paid by the non-monetized human environment, community or future generations.

In contrast, ecological economists, like Joan Martinez-Alier, appeal to a different line of reasoning. The work by Karl William Kapp explains why the concept of "externality" is a misnomer. Mathematical modeling is a powerful tool that is used in ecological economic analysis.

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  5. Various approaches and techniques include: [85] [86] evolutionary , input-output , neo-Austrian modeling, entropy and thermodynamic models, [87] multi-criteria , and agent-based modeling, the environmental Kuznets curve , and Stock-Flow consistent model frameworks. System dynamics and GIS are techniques applied, among other, to spatial dynamic landscape simulation modeling. Ecological economics draws upon its work on resource allocation and strong sustainability to address monetary policy.

    Drawing upon a transdisciplinary literature, ecological economics roots its policy work in monetary theory and its goals of sustainable scale, just distribution, and efficient allocation. The field considers questions such as the growth imperative of interest-bearing debt, the nature of money, and alternative policy proposals such as alternative currencies and public banking. Assigning monetary value to natural resources such as biodiversity , and the emergent ecosystem services is often viewed as a key process in influencing economic practices, policy, and decision-making.

    McCauley argues that ecological economics and the resulting ecosystem service based conservation can be harmful.