Review of Environment, Energy and Economics - Re3 Ecology, Economics and the Management of Global Environmental Commons
 

 

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Feb
19
2015
 
Ecology, Economics and the Management of Global Environmental Commons
by Alessandro Tavoni
Environment - Articles
 

Approaching the complexities inherent in human behavior, and compounded by the increasingly multifaceted environment we live in, requires multiple angles of attack. Hence, combining theoretical investigations and applied techniques appears to be a promising approach to inform the scientific and policy debates about environmental management. Sustainably managing jointly determined ecological-economic systems requires not only an understanding of the environmental factors that affect them, but also knowledge of the interactions and feedback cycles that operate between resource dynamics and activities attributable to human intervention. The socio-economic dynamics, in turn, call for an investigation of the behavioral drivers behind human action. We argue that a multidisciplinary approach is needed in order to tackle the increasingly pressing and intertwined environmental challenges faced by modern societies. Specifically, fruitful new insights into the mechanisms that can promote cooperation among the end-users of the local and global commons can be achieved by establishing bridges between the economic, the ecological and the behavioral traditions.

Keywords: Environmental Economics, Climate Change, Cross-Disciplinary Collaborations, Complex Systems

JEL classification: Q50, C70, C90

Suggested citation: Tavoni, Alessandro, Ecology, Economics and the Management of Global Environmental Commons (February 19, 2015). Review of Environment, Energy and Economics (Re3), http://dx.doi.org/10.7711/feemre3.2015.02.001

 

In a recent paper [1], we have taken stock of an emergent body of cross-disciplinary  collaborations with the aim of inferring some lessons for the direction of academic work relating to environmental economics. We have focused on the case of climate change, which is exemplary of the need for integration between disciplines such as ecology and economics. A wealth of recipes for preserving the Earth’s climate from dangerous change has been  proposed by scholars and policy-makers in recent decades. The delayed negative effect of present emissions of greenhouse gases and their transboundary nature (independently of the source, all emissions increase the world’s stock of concentrations), aggravate the complexity and magnitude of the problem. Hence prescriptions for addressing the global external cost arising from human activity are bound to be multifaceted and to rely on various instruments and methodologies. After all we are in a situation where “mutual coercion, mutually agreed upon by the majority of the people affected” [2] is no easy task, given the temporal and spatial issues mentioned above. Moreover, the present lack of a supranational institution for regulating global carbon emissions sets the stage for free-riding, i.e. individual countries have an incentive to delay curbing emissions and rely on the mitigation efforts of others.

Therefore, fruitful lessons can be learned by exploring what the appropriate economic instruments are to deal with present-day environmental concerns such as the warming climate. To address  policy-relevant problems at the interface of different disciplines (i.e. economics, political science and ecology), a multidisciplinary effort is needed. The time is ripe for economists and ecologists to join effort to analyze individual and collective behavior with the lens which is most appropriate given the research question at hand, rather than on the grounds of disciplinary boundaries. The insular nature of the social sciences, and the especially tenuous academic link between economics and environmental sciences such as ecology (Figure 1), have hindered progress in understanding coupled social-ecological systems. The aim of this note is to identify some tools that have been succesfully employed both by theoretical ecologists and economists, and what areas have potential for further integration.

Shared methods
“Evolutionary game theory has been credited for redefining how institutions are integrated into the analysis, behavioral economics for shedding light on how rationality is treated and experimental economics for changing the way economists think about empirical work” [3]. The examples below show that while traditions are different (e.g. theory of optimization and externalities as opposed to systems as adaptive and path dependent), the methods are compatible. Similarly, the different orientation to efficiency vs. stability are not mutually exclusive, and can often be reconciled.

One example where differences are blurred and collaborations fruitful is the evolution of cooperation literature[4]. For instance, adaptive dynamics such as replicator dynamics have been used both by economists and biologists to study common pool resources [5, 6]. While equilibrium analysis is a principal tool for economists, evolutionary economics emphasizes off-equilibrium trajectories, without assuming that efficiency can be assessed disregarding distributional metrics [7].

Cooperation in global commons such as the climate can be analyzed with game theory, both theoretically and experimentally (e.g., in prisoner dilemma and public goods games. See [8, 9]). Further, the game theory of international environmental agreements (IEAs) has provided us with fundamental insights with respect to the provision of transboundary public goods, such as abatement of greenhouse gases [10]. Current efforts aim to enrich this literature by adding realistic features, and the attention catalyzed by Max Gladwell on tipping points has prompted much work on this topic, ranging from environmental cooperation to the presence of thresholds in antibiotic use, causing a disease agent to become drug resistant [11, 12, 13]. Another avenue of departure from prior literature is that of abandoning the country as the unit of analysis, and the notion that it maximizes net benefits as a monolithic entity. Disaggregating the welfare into relevant components, and building on the political economy literature on the relevance of special-interest groups for policy-making [14], Dietz et al. [15] account for the role played by lobby groups in affecting the size and breadth of an IEA.

In addition to game theory, other tools that are increasingly employed to study social-ecological systems are dyamical systems theory, network theory, simulations and agent based modeling [16]. These are useful complements to parsimonious analytical efforts that, while illuminating to analyze basic  incentives, may not be best suited to investigate more complex interactions. The ability of an agent to win trust and reciprocate the efforts of others is seen as key to explaining cooperation in a variety of empirical studies, from real cases to experiments and agent-based models. In the context of climate cooperation, Elinor Ostrom has observed that agents at levels below the nation-state can also be important to international climate change policy [17]. She and Vincent Ostrom have suggested that the trust gained and lessons learned by many parallel actions, by agents at various scales (‘polycentric governance’), are more likely to bring about progress than is waiting for a comprehensive international treaty between states [18].

Another area of complementarity between economics and ecology is sustainable development and the physical dimensions of the economy [19, 20, 21, 22]. Ecologists have traditionally been concerned with scale, population dynamics and ecosystem stability [23]; these concepts have been used by some economists (e.g. in the subfield of new economic geography). Moreover, ecology models have been incorporated in the theory of renewable resources in environmental economics, while novel ones have been utilized for the analysis of exhaustible resources [24, 25].

New developments
Modern science is less confined within strict disciplinary boundaries. The last decades have witnessed what some have termed the complexity revolution in  economics [26]; the authors claim that “modern economics can no longer usefully be described as ‘neoclassical’, but is much better described as complexity economics”, which  “embraces rather than assumes away the complexities of social interaction.” This section  presents some examples of progress along these lines that is already under way.

Figure 1 - Overview of all citation flow coming in or out of the field of Economics (the inset displays the limited exchange with the field of Ecology & Evolution). The segments of the inner ring represent the individual journals, scaled by Eigenfactor Score, while line size and opacity represent connection strength.



Source: http://well-formed.eigenfactor.org, based on citation data from Thomson Reuters’ Journal Citation Reports 1997–2007. More charts can be found in [1].

Economics has lately devoted much attention to threshold effects in environmental responses to human activities. Much can be learned from ecology and the literature on regime shifts and early warning mechanisms [27, 16, 28]. Furthermore, the concept of resilience is highly relevant for ecological dynamics [29], economy-environment dynamics [30, 31], as well as such as networked (interdependent) socioeconomic systems [32].

Recent cross-disciplinary efforts have started to tackle the complex interactions between the human system and the environmental system. As Arrow and colleagues point out, measuring the ecosystem services provided by different resources is a complex task [33], contributing to to the underpricing and unsustainable utilization of resources such as fresh water and the atmosphere as a carbon sink. Most practical attempts to evaluate policies while accounting for coupled ecosystem and economic dynamics fall under the ’environmental impact assessment’ label, a “management tool which has the ultimate objective of providing decision-makers with an indication of the likely consequences of their decisions relating to new projects” [34, Preface].

In the absence of enforcement mechanisms, conventional game theory utilizing one-shot or repeated  interactions predicts that the temptation to defect leads individuals to resource overuse, hence justifying Hardin’s prediction of the tragedy of the commons. A growing body of knowledge, however, demonstrates that in many situations there is more to human behavior than selfishness: findings from behavioral and experimental economics, as well as from  neuroscience have argued that human choice is a social phenomenon [35]. Recent empirical studies show that social norms and framing of options significantly influence behavior, often effectively restraining agents from overuse [36, 37]. In particular, ethics and prosociality are increasingly relevant for ecologists and economists, as environmental sustainability is  intrinsically linked to ethical considerations [38].

Will the prospect of acting as a leader in green technologies fuel a global ’green race’ among industries and countries [39]? Should policy-makers whose goal is to steer their economies away from fossil fuels then focus on subsidies to nascent green markets, rather than on achieving efficiency via taxation? The interaction between bottom-up drivers of environmental management (such as market incumbency) and the top-down incentives arising from global architectures to curb greenhouse gas emissions, has just begun to be analyzed. Social and natural scientists could profitably pool their respective expertise and shed light on how cooperation unfolds when mutually influenced local and global drivers are considered. [Note 1]

Concluding remarks
Socio-economic systems and the ecosystems on which we depend cannot be analyzed in isolation, due to the inherent complexities and feedback processes operating across systems [40]. In addition, many of these processes exhibit nonlinearities, so ignoring feedback cycles and focusing on more tractable linear dynamics may come at the cost of missing important and potentially irreversible patterns. Some of the limitations of theoretical ecology and  economics have been resolved within their respective frameworks, often by incorporating relevant insights from the other discipline. Focusing on the management of global  environmental commons [1], we have identified areas that call for further integration, as well as topics where the bridging of the gap between the two scholarly foci has already begun.
 

Notes

[Note 1] An example of a framework that allows to embed both scales of analysis has been provided in the methodological section, when referring to the Ostroms’ work on polycentric governance.

 

References

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Alessandro Tavoni is a Research Fellow at the Grantham Research Institute of the London School Economics and Associate Researcher at FEEM
   
 
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