Getting Biophysical

I studied ecological economics with Herman Daly in grad school; indeed, in addition to my master's degree, I have a little certificate from the University of Maryland in ecological economics, based on some courses I took. Generally, I find ecological economics to be pretty influential on my thinking. Despite that, I typically hold at arm's length arguments from ecological economics explaining current events. Why is that? A commenter at Matt Yglesias' blog summarizes it pretty well:

The [il]logic of the argument is that all criticisms of economic orthodoxy are equally valid.

That is, attempts to, say, explain the financial crisis as a consequence of humanity running up against natural limits to growth don't ring true to me. Yes, in general terms we should be concerned about the expansion of money and debt beyond the ability of the real economy (including the natural resources on which the real economy depends) to service it, but that line of argument doesn't offer much explanatory power, compared to more conventional accounts (e.g., Carmen Reinhart and Kenneth Rogoff's placement of the current mess in the long history of financial crises, dating back even to pre-industrial times).

So the NYT's profile of the "biophysical economics" school, which is essentially ecological economics by another name, was interesting to read, no doubt; but I find myself agreeing with Ryan Avent (or whomever is the Washington blogger for Free Exchange) that the biophysicals' focus on energy return on investment (EROI), or the amount of energy gained minus the energy used to extract it, can be misleading. At the risk of overgeneralizing, we're a long way from wringing out all the inefficiencies in our energy regime. Moreover, even in a world in which oil and coal are harder and harder to produce, a prosperous economy is still possible, even if certain avenues for achieving that are closed off (e.g., auto-centric transportation).

This isn't to say, however, that there isn't some truth to the argument from EROI. Entropy is an unavoidable fact of this world, and while Avent is right that there is an abundance of energy available to humanity, harnessing that energy in ways that are useful to us isn't so easy. (David McKay's excellent book on clean energy is a great place to start on this subject.) One advantage of oil, coal, and (to an extent) natural gas is that they're fairly convenient: They can be easily transported and stored for when we need it. At present, renewable sources like wind and solar don't offer quite the same convenience -- though if we get a more intelligent grid up and running and some advances in battery technology, that may no longer be an issue.

The ecological economic outlook, I think, has more value when looking at the whole range of ecological problems, in particular degradation of ecosystems, for which finding substitutes is harder than with energy. If we lose all of the earth's fish populations in the next 50 years, as has been predicted, it's not as if we can pay to get them back or develop some technological workaround. And in general, I find understanding the value of the natural capital that the earth provides us gives us a much better sense of why we need to preserve it.