Ecology and Economics

Willem Buiter's Doubts on Continuing China/India's Meteoric Rise

After airing his positive Moring Coffee spin on China and India's remarkable growth, Brad DeLong highlights Willem Buiter's pessimism re: China and India's recent stellar rise. Buiter identifies financial "credit boom" risks, political risks, and most importantly environmental risks going forward. In follow-up commentary, DeLong adds a fourth, intertwined with Buiter's first: "The People's Bank of China is acting like the world's most enormous hedge fund in reverse."

Willem Buiter
[comment following Ft.Com Economists' forum post, 3/20/07]
Both India and China are in the terminal stages of a credit boom…. If the monetary and fiscal authorities act in time (they appear to be well behind the curve in both countries) and if they have the right instruments and the political will and freedom to use them (doubtful in both countries) the credit boom can end with a whimper. A hard landing seems more likely, however.

Second, a domestic political question mark… political risk to growth is seriously under-priced by the domestic and global communities of investors. In China economic liberalisation is proceeding side by side with continued political repression through the monopoly on political power of the Communist Party…. The sustainability of such a social-political-economic configuration has never been tested. India has had an open and representative form of government for sixty years. I believe this to be an important socio-political safety valve….

Third and probably most importantly, an environmental question mark. Environmental supply-side constraints on growth in Chindia… invalidates the growth accounting exercise by Bosworth and Collins, reported by Martin [Wolf]…. [O]utput is seriously mis-measured and a key input - the services yielded by the stock of environmental capital - is ignored completely. For Chindia, this omission matters even in the medium run…. It is the local (national) natural resources of clean fresh water and fertile land (some would add clean air as well) that are not only important domestic 'consumer durables' but also key inputs into the production of the goods and services that are captured by conventionally measured GDP indices…. The water constraint is likely to be the first one to become binding in both China and India, certainly within 10 years. It will impair even the production of those goods and services included in conventional GDP measures….

Chindia urgently needs to re-orients its growth policies towards environmental sustainability. Pricing all water and power use (including agricultural) at long-run marginal social cost would be a good start. Without such a radical re-orientation, the 21st century may well become the century of China and India for a very different reason from the one prophesied by the current uncritical Chindia cheerleaders…

Brad DeLong, again in follow-up comments to the FT.com Economists' Forum post, says:

Brad DeLong
I would add a fourth worry, in addition to the environmental, infrastructure, education, and political legitimacy worries that have already been aired. The People's Bank of China is acting like the world's most enormous hedge fund in reverse. Unless there is significant inflation in China or a rapid reversal of global imbalances, the PBoC is likely to have to write off the largest amount of capital of any institution anywhere, anytime, anyhow—with either China's savers or China's taxpayers holding the bag. The political consequences of that may be a further important source of risk.

Finally, a DeLong reader points to Bill McKibben's recent Mother Jones commentary, Reversal of Fortune, and highlights:

Bill McKibben
… If we do try to keep going, with the entire world aiming for an economy structured like America's, it won't be just oil that we'll run short of. Here are the numbers we have to contend with: Given current rates of growth in the Chinese economy, the 1.3 billion residents of that nation alone will, by 2031, be about as rich as we are. If they then eat meat, milk, and eggs at the rate that we do, calculates ecostatistician Lester Brown, they will consume 1,352 million tons of grain each year—equal to two-thirds of the world's entire 2004 grain harvest. They will use 99 million barrels of oil a day, 15 million more than the entire world consumes at present. They will use more steel than all the West combined, double the world's production of paper, and drive 1.1 billion cars—1.5 times as many as the current world total. And that's just China; by then, India will have a bigger population, and its economy is growing almost as fast. And then there's the rest of the world.

Trying to meet that kind of demand will stress the earth past its breaking point in an almost endless number of ways ….

So many environmental concerns, so little time!

[Posted from Economic Dreams-Nightmares]

Kenneth Arrow: Beyond Impossibility

Over at Natural Capital Rob Metcalfe points to a wide-ranging interview with Kenneth Arrow ([PDF], 2005), noting that "the future should be bright for env econ as it attempts to incorporate rational models with behavioural models and neuroeconomics." Juan Dubra introduces the interview: "Arrow argues that the biggest failures of economic theory are: our failure to explain the business cycle; the missing explanations for the size of fluctuations of prices; our failure to explain the causes of growth and the spread of innovation. He then discusses several … alternatives to the rational expectations paradigm."

Although the interview is only tangentially related to environmental economics, I believe it important since env econ practitioners take their lead from practitioners in other fields of economics (and ecology, and many other of the "sciences", natural, biological, and social). Remember that it was Arrow who caused economics practitioners much soul-searching consternation with his Impossibility Theorem.

As I reflect on the interview, I find it odd that Arrow does not acknowledge the work of Hyman Minsky and other Post Keynesians who I argue (frequently at Economic Dreams … Nightmares) have dealt with (continue to deal with) all of Arrow's stated concerns in great detail. (Minsky overview here, or in-depth: The Economic Contributions of Hyman Minsky: Varieties of Capitalism and Institutional Reform.)

Oversights or deliberate omissions aside, the interview proves interesting as history and in suggesting paths forward. Arrow does point to the work of his under-study Brian Arthur in complexity theory (which I've followed for years), and to the work of Daniel Kahneman and Amos Tversky on inter-relating decision theory and psychology, here for example, and questioning "expected utiltity theory", here for example.

Finally, does anyone know if Arrow and Minsky had a falling out? Or are there other explanations for Arrow's seeming oversight re: Minsky and others who are (and have been) dealing with Arrow's "biggest failures of economic theory"?

Is Economics Still Relevant?

The question was addressed in Policy Options in April 1999, in Is Economics Still Relevant? What has become of the discussion since? Does anyone know who has picked up this ball since, other than those who belong to the Post-Autistic Economics Network. Here are abstracts and downloads:

• Mark Blaug, "Ugly Currents in Modern Economics"
  
• Lester C. Thurow, "The Strengths and Weaknesses of Economists"
  
• Robin Boadway, "Economic Theory Dictates a Rethinking of Policy"
  
• Daniel M. Hausman and Michael S. McPherson, "Beware of Economists Bearing Advice"
  
• Thomas Mayer, "On the Usefulness of Economics"
  
• Mark Setterfield, "Are Academic Economists Concerned About Public Policy?"
  
• Jack Mintz, "Economists Are Relevant And Could Be More So"
  
• Jon Mulberg, "Economics: Who Needs It?"
  
• David Longworth , "Economics at the Central Bank"
  
• David Mayes, "The New Zealand ‘Experiment’: Using Economic Theory to Drive Policy"
  
• Alex McLeod, "Government Deficits and Debt: Their Cause and Cure"
  
• C. Lloyd Brown-John, "Self-Determination and Separation"

Economists as Story Tellers

Phillip Ball's Financial Times' critique of economics, titled Baroque Fantasies of a Peculiar Science caused quite a stir recently in the economics blogs (particularly here and here). But last week the bickering subsided with Dave Altig (macroblog) and Phillip Ball seeming to have reached an accord.. At one point Altig said, "If you want, call economics an attempt to construct coherent stories about social phenomenon..." Sounds about right to me. We economists are indeed story tellers. Following this discussion, it seems clear that economists need to be much more open and honest about our assumptions and the linkages, such as they are and often are not to the real world of policy and action. No argument from me on that score. I've been arguing similarly for years.

For more critique, see Steve Cohn's August 2002 Telling Other Stories: Heterodox Critiques of Neoclassical Micro Principles Texts [PDF] wherein Cohn attacks the "'rhetoric' of neoclassical theory, …critiquing many of the stories told, the metaphors used, the analogies drawn, and the framing language deployed"

In addition, there have been many book-form critiques arguing that economists, particularly neoclassical economists have over-driven their headlights in much the same way that Bell argues. Here are six of my favorites (arranged by date of publication):

• J. de V. Graaff. Theoretical Welfare Economics. 1957
  

• Guy Routh. The Origin of Economic Ideas. 1975
  
• Mark Blaug. The Methodology of Economics: Or How Economists Explain. 1980
  
• Robert L. Heilbroner. Behind the Veil of Economics: Essays in the Worldly Philosophy. 1988
  
• Mark Sagoff. The Economy of the Earth: Philosophy, Law and the Environment. 1988
  
• Andrew Bard Schmookler. The Illusion of Choice: How the Market Economy Controls Our Destiny. 1993

Economic Fundamentalism: Too Many False Prophets

Fred Argy provides a refreshingly different point of view on the debate about economics and science. Argy argues that maybe all of us – whether or not economists – ought to be aiming attacks primarily at economic fundamentalism:

[Beware of Economic Fundamentalism, Australian Review of Public Affairs, Mar. 31,2003] … There are too many false prophets in our profession—the kind who like to assert policy opinions in black-and-white terms, such as 'there is only one right way' and 'no other way will do'. This is what I like to call 'economic fundamentalism'. And I believe it is wrong on all counts.

For one thing, economics does not lend itself to doctrinaire policy assertions. The technical complexities are too great, the behavioural reaction of human beings too changeable and unpredictable, and the market subject to many imperfections. … [Many economic] questions do not lend themselves to definitive answers. The honest economist can make an 'on balance' judgment, but should also acknowledge the uncertainties and the merits of alternative positions.

Another reason why doctrinaire policy positions are unwarranted is that much of the day-to-day policy debate is not simply about economic choices. It is about normative values—the appropriate weight society should give to conflicting goals, such as freedom of choice, individual responsibility and self-reliance, equality of opportunity (what Australians call 'a fair go for all'), protection of the environment, and a sense of community.

Frankly, we economists have no special wisdom to offer on what should be the right balance between such goals. We can point to the economic costs and benefits of each option, but to go further and assert that one option is indisputably superior to all others is presumptuous. For example, will wage deregulation and welfare cuts have a big or small impact on employment, and how much pain will it inflict on low wage earners? Can the same employment outcomes be achieved through labour market programs such as wage and training subsidies, without the regressive effect on low wage earners? Again, will tax cuts have a more positive impact on community wellbeing than an increase in government spending? These are questions that are hard for economists to resolve because the alternatives being offered have very different distributional effects.

True professionalism requires economists to spell out the distributional as well as economic effects of each policy option, and then leave it to politicians to choose between them in the light of community preferences. …

One major risk of economic fundamentalism is that, like other forms of fundamentalism, it often breeds policy extremism. …

Another risk … is that it tends to widen the already large gulf between economists and the wider community. It encourages our critics to say that we are so obsessed with efficient markets that we have become insensitive to social and environmental concerns. …

When economists seek market-based solutions, they are discussing better means to given ends. Economic liberalism is consistent with a wide spectrum of ethical and philosophical values, and a wide range of distributional outcomes. So we need not be apologetic about our faith in competitive markets as instruments of allocation (where these are sustainable and do not involve disproportionate externalities). It is our critics who have got it wrong. Unfortunately, when some of our fellow economists seek to change society while masquerading as market economists, they give our profession a bad name.

To sum up, we have a proud and honourable profession. We need to defend it against external critics (on both the Left and Right) who attack our devotion to competitive markets without really understanding what we are on about. But equally, we should be vigilant in exposing the small but vocal band of extremists within our profession who take doctrinaire economic positions or, worse still, who push their own values under the false guise of economics. This is particularly evident in the current policy debate on labour market deregulation and welfare reform. The famous British economist Joan Robinson saw the danger clearly. She said that 'the purpose of studying economics is to learn how to avoid being deceived by other economists'.

So my advice to budding economic policy advisers is this: by all means be decisive in your day to day work, but when discussing policy don’t be afraid to be called a two-handed economist—'on the one hand this, and on the other hand that'. Wear it as a badge of honour.

Two questions: 1. How does one distinguish between "economic fundamentalists" and other practicing economists? We economists all tend to throw stones at others who are ideologically and methodologically different from us. Perhaps Argy is right is suggesting that we label as fundamentalists those "who like to assert policy opinions in black-and-white terms, such as 'there is only one right way' and 'no other way will do'."

2. How does one practice economics w/o being libeled as a fundamentalist? Here again Argy gives some useful clues when he says "[Many economic] questions do not lend themselves to definitive answers. The honest economist can make an 'on balance' judgment, but should also acknowledge the uncertainties and the merits of alternative positions."

One place where I tend to depart from Argy is his statement that "We can point to the economic costs and benefits of each option,". I agree in principle, but argue that we need to be very, very careful in our adding up costs and benefits of policy proposals. There are just too many things that prove too uncertain or too "contested" to be added up in any closed form way. Still I strongly agree with the rest of Argy's sentence, "but to go further and assert that one option is indisputably superior to all others is presumptuous."

Is the problem, in the main, that we have too many economic fundamentalists, "too many false prophets" in our profession? Do we need to get much better at self-policing?

As to "ecology fundamentalists," we will leave that topic for another day...

Dave Altig on Phillip Ball's Rant on Neoclassical Economics

Dave Atlig (macroblog) has a good rejoinder to Phillip Ball's Criticism of Neoclassical Economic Theory. Here is a snip:

…It is true that neoclassical economists tend to be the methodological children of Milton Friedman, heirs to a positivist tradition that directly connects explanation and predictability. But predictability in this sense is conditional: If X occurs then, all else equal, Y will follow. As a matter of logic, large forecast errors may only prove that the arrival of X is especially uncertain, and that economists are not clairvoyant (a trait that I think is shared with physicists and other human beings).

To be fair, if Y equals a stock market crash, I cannot really tell you what X equals. I am unaware of any serious economist who claims they can. Even those economists who express knowledge of a "bubble" in some asset market or another shy from taking definitive stands on when and how the bubble will burst.

I do know this, however: Economists have devoted a lot of energy to thinking about the lessons delivered by the Great Depression. At least part of the conventional wisdom formed from that thinking is that it is a very bad idea to restrain liquidity when liquidity is most desired. For an example of that wisdom in practice, I refer to you to the actions of the Federal Reserve in the aftermath of the 1987 market crash in the United States. I'll stick my neck out and claim that the world was more pleasant as a result of putting that lesson into action.

[Ball]…The usual defence is that you have to start somewhere. But mainstream economists no longer consider their core theory to be a "start". The tenets are so firmly embedded that ... it is ... rigid dogma. To challenge these ideas is to invite blank stares of incomprehension – you might as well be telling a physicist that gravity does not exist.

That is disturbing because these things matter. Neoclassical idiocies persuaded many economists that market forces would create a robust post-Soviet economy in Russia (corrupt gangster economies do not exist in neoclassical theory)...

Economists accept -- insist, actually -- that institutions matter, and nobody would argue that market forces alone can create a "robust" economy absent well-defined property rights, functioning legal systems, and the like. If you doubt that, check out the latest John Bates Clark award.

[Ball]...Neoclassical economics asserts two things. First, in a free market, competition establishes a price equilibrium that is perfectly efficient: demand equals supply and no resources are squandered. Second, in equilibrium no one can be made better off without making someone else worse off.

Wrong. Mr. Ball is thinking of the concept of Pareto efficiency, which does indeed describe a situation in which "no one can be made better off without making someone else worse off." But there is no presumption among economists that free markets and competition will deliver such an outcome. Any time an economist speaks of asymmetric information (conditions in which one person knows something another does not), externalities (things like pollution that is not paid for by the polluters), inflexible prices or wages, or taxes on any sort of economic activity, he or she is starting from the presumption that the free-market outcome is not efficient. In fact, any time an economist speaks it is quite likely they are contemplating a world in which free-market outcomes are not efficient. To not recognize this is demonstrate a startling ignorance of what economics is actually about. …

There is more.. Go to to Dave's post and read on….
And if you are really a glutton for punishment, read Mark Thoma's post and as of now 110 follow-up comments that got things rolling.

Global Warming Problem Political, Not Economic

"...It is about politics—the politics of getting America to lead a global effort to mitigate the effects of climate change....

The Economist, Global Warming, Economic Cooling [10/30/06]: SIR NICHOLAS STERN, the head of the British Government Economic Service, has produced the world’s first big report on the economics of climate change. But his 700-page effort, although stuffed with figures, is not really about economics. It is about politics—the politics of getting America to lead a global effort to mitigate the effects of climate change.

The purpose of Sir Nicholas’s report—commissioned by Tony Blair—is to deal with the argument of people who accept that climate change is happening, but who say that trying to do anything about it would be a waste of money. This argument is heard occasionally in Europe and frequently in America, where, for added potency, it is combined with the notion that European attempts to tax carbon are part of a conspiracy by socialists determined to undermine the American way of life.

Sir Nicholas’s argument is that, far from undermining the American way of life, attempts to mitigate climate change may help preserve it. He argues this by setting the costs of allowing climate change to happen against the costs of mitigating climate change.

Previous estimates of the costs of climate change—as a result of more hurricanes, more floods and rising sea levels, for instance—have been somewhere between nothing and 2% of global GDP. But Sir Nicholas says those figures were wrong, for two reasons. First, the science has changed, and global warming seems to be happening faster than was previously believed. Second, those estimates have looked only at the likeliest outcomes from climate change, not at the outlying catastrophic possibilities. As a result, Sir Nicholas maintains that if greenhouse gas emissions go on increasing at their present rate, global output is likely to be between 5% and 20% lower over the next two centuries than it otherwise would have been.

Compared with those figures, the costs of mitigating climate change look quite moderate. Sir Nicholas reckons that stabilising concentrations of greenhouse gas equivalent at 550 parts per million (ppm) is a reasonable objective (current levels are at around 380ppm). He reckons that, partly because of falling alternative energy costs, the world could achieve that at a moderate cost. Global output is likely to be around 1% lower by 2050 than it otherwise would have been.

The choice does not look like a difficult one: costs of 5%-20% of global GDP versus costs of 1% of global GDP. Unfortunately, that’s not the difficult bit. The difficult bit is the politics. Climate change is an exceedingly hard issue. It is uncertain: nobody really knows how much it is going to cost. It crosses generations: this generation will have to bear some of the costs while the benefits will accrue to future generations. It crosses boundaries: no one country can solve the problem.

But there is one country towards which Sir Nicholas gestures when he writes of the need for “demonstrating leadership” and “working to build trust”, without which all efforts to deal with the problem will fail: America. (China may well become a bigger polluter than America, but persuading it to do something about climate change will be near impossible if America does not act first). Sir Nicholas does not explain how to solve the difficulty of getting America on board. But if he succeeds in persuading policymakers that the American way of life is better preserved by dealing with climate change than by ignoring it, he himself might be part of the solution.

New Economist adds: The Stern Review's earlier discussion paper, What is the Economics of Climate Change? (PDF) ... argues climate change is a serious and urgent problem, global in its cause and consequences. Current actions are not enough "if we are to stabilise greenhouse gases at any acceptable level". The "economic challenges are complex", and will require a long-term international collaboration to tackle them.

UPDATE: Dissenters are beginning to weigh in:

Neoclassical Theory under Fire from the Sciences

There is a very good discussion right now on Mark Thoma's Economists View about neoclassical and other economics and linkages to science, theology, ideology, etc. I'll update this post with a bit more in a few hours, but right now I'm just intrigued with the excellent commentary being generated. {Update: I plucked a few comments from Mark's discussion and appended them in the extended portion of this message}

This is Philip Ball, "consultant editor of Nature and the author of Critical Mass," with a criticism of neoclassical theory: Baroque fantasies of a most peculiar science, by Philip Ball, Commentary, Financial Times (free): It is easy to mock economic theory. Any fool can see that the world of neoclassical economics, which dominates the academic field today, is a gross caricature in which every trader or company acts in the same self-interested way – rational, cool, omniscient. The theory has not foreseen a single stock market crash and has evidently failed to make the world any fairer or more pleasant.

The usual defence is that you have to start somewhere. But mainstream economists no longer consider their core theory to be a “start”. The tenets are so firmly embedded that ... it is ... rigid dogma. To challenge these ideas is to invite blank stares of incomprehension – you might as well be telling a physicist that gravity does not exist.

That is disturbing because these things matter. Neoclassical idiocies persuaded many economists that market forces would create a robust post-Soviet economy in Russia (corrupt gangster economies do not exist in neoclassical theory). Neoclassical ideas ... may determine ... how we run our schools, hospitals and welfare system. If mainstream economic theory is fundamentally flawed, we are no better than doctors diagnosing with astrology.

Neoclassical economics asserts two things. First, in a free market, competition establishes a price equilibrium that is perfectly efficient: demand equals supply and no resources are squandered. Second, in equilibrium no one can be made better off without making someone else worse off.

The conclusions are a snug fit with rightwing convictions. So it is tempting to infer that the dominance of neoclassical theory has political origins. But ... the truth goes deeper. Economics arose in the 18th century in a climate of Newtonian mechanistic science, with its belief in forces in balance. And the foundations of neoclassical theory were laid when scientists were exploring the notion of thermodynamic equilibrium. Economics borrowed wrong ideas from physics, and is now reluctant to give them up.

This error does not make neoclassical economic theory simple. Far from it. It is one of the most mathematically complicated subjects among the “sciences”, as difficult as quantum physics. That is part of the problem: it is such an elaborate contrivance that there is too much at stake to abandon it.

It is almost impossible to talk about economics today without endorsing its myths. Take the business cycle: there is no business cycle in any meaningful sense. In every other scientific discipline, a cycle is something that repeats periodically. Yet there is no absolute evidence for periodicity in economic fluctuations. Prices sometimes rise and sometimes fall. That is not a cycle; it is noise. Yet talk of cycles has led economists to hallucinate all kinds of fictitious oscillations in economic markets. Meanwhile, the Nobel-winning neoclassical theory of the so-called business cycle “explains” it by blaming events outside the market. This salvages the precious idea of equilibrium, and thus of market efficiency. Analysts talk of market “corrections”, as though there is some ideal state that it is trying to attain. But in reality the market is intrinsically prone to leap and lurch.

One can go through economic theory systematically demolishing all the cherished principles that students learn... [I]t is abundantly clear that herding – irrational, copycat buying and selling – provokes market fluctuations.

There are ways of dealing with the variety and irrationality of real agents in economic theory. But not in mainstream economics journals, because the models defy neoclassical assumptions.

There is no other “science” in such a peculiar state. A demonstrably false conceptual core is sustained by inertia alone. This core, “the Citadel”, remains impregnable while its adherents fashion an increasingly baroque fantasy. As Alan Kirman, a progressive economist, said: “No amount of attention to the walls will prevent the Citadel from being empty.” ...

Samples from a New Blog: Transdisciplanary Journeys

Last night via email Roderic Gill, who directs the Centre for Ecological Economics and Water Policy Research (CEEWPR), introduced me to the new Transdisciplinary Journeys Blog. Gill suggested that our blog journeys seemed to be on parallel paths. After looking at their introductory posts, I agree. Here's a sampler. I also linked them up on our sidebar. Nice to see this thinking getting more air time.

Transdisciplinary Thinking, posted by Roderic Gill

In my view, there is a general tendency in the ecological economics community to spend little time with its core and underlying philosophy of transdisciplinarianism. To me, the transdisciplinary focus is at the heart and root of ecological economics. Little attention though, seems to be devoted to really coming to grips with what the word really means and implies. It is a very powerful concept. And a major challenge for application and procedure. In essence, the ecological economics transdisciplinary focus implies a synergistic alliance between and across conventional disciplinary boundaries. Transdisciplinary is more fundamentally participative than multi-disciplinary (where the agenda for problem definition and the management of cooperation still resides with a disciplinary instigator). The transdisciplinary approach implies cooperation from beginning to end; cooperation at the problem or issue interpretation stage through to the cooperative implementation of results. …

Sustainability and Resilience, posted by Leo Dutra

The goal of sustainable development is to create and maintain ‘prosperous’ social, economic, and ecological systems. These systems are intimately linked: humanity depends on services of ecosystems for its wealth and security and humans can transform ecosystems into more or less desirable conditions. Ecosystem services include provision of clean water and air, food production, fuel, and others. Yet human action can render ecosystems unable to provide these services, with consequences for human livelihoods, vulnerability, and security. Such negative shifts represent loss of resilience.

In operationalising resilience, managing for sustainability in socio-economic systems means not pushing the system to its limits but maintaining diversity and variability, leaving some slack and flexibility, and not trying to optimise some parts of the system but maintaining redundancy. It also means learning how to enhance adaptability, and understanding when and where it is possible to intervene in management. These ‘soft’ management approaches are necessary because ‘hard’ management approaches involving quantitative targets for resource production often do not work. Linear models on which ‘hard’ management depends tend to be incomplete or even misleading in the management of the ecosystems of the world. Equilibrium-based predictive models do not perform well with complex social-ecological systems.

This particular view of resilience is in accordance with the Ecological Economics thinking on sustainability. Sustainable futures are inherently unpredictable and reinforce the idea (proposed by CEEWPR researchers Tony Meppem and Roderic Gill) that sustainability cannot be planned in a rational fashion. In the absence of a linear, mechanical universe that would have permitted simple, rational measures, the best bet for sustainability involves capability for self-organisation and capacity for learning and adaptation.

More resilient social-ecological systems are able to absorb larger shocks without changing in fundamental ways. When massive transformation is inevitable, resilient systems contain the components needed for renewal and reorganisation; they can cope with, adapt to, or reorganise without sacrificing the provision of ecosystem services. Resilience is often associated with diversity—of species, of human opportunity, and of economic options—that maintains and encourages both adaptation and learning.

Social-ecological systems are constantly changing and the design of sustainable futures should encompass this changing nature. Resilience emphasises systems including ‘humans-in-nature’, describing, therefore, a more holistic approach toward sustainability.

Resilience is a useful sub theme of sustainability in that it focuses on bringing together thinking about human systems (short time horizons) with long-term outcomes (ecological systems such as coral reefs). Management that builds resilience can sustain social-ecological systems in the face of surprise, unpredictability, and complexity. Resilience-building management is flexible and open to learning. It attends to slowly changing, fundamental variables that create memory, legacy, diversity, and the capacity to innovate in both social and ecological components of the system. It also conserves and nurtures the diverse elements that are necessary to reorganise and adapt to novel, unexpected, and transformative circumstances. Thus, it increases the range of surprises with which a socio-economic-ecological system can cope.

The concept of resilience shifts policies from those that aspire to control change in systems assumed to be stable, to managing the capacity of social-ecological systems to cope with, adapt to, and shape change. Resilience emphasises adaptability of systems and is thus a useful focus for sustainability. Impacts on ecological resilience will affect socio-cultural and economic resilience as well. The decline of cod fisheries in Newfoundland and Labrador (North America) is an example of the resilience links among ‘panarchical’ cycles of socio-economical and ecological variables. The elimination of the cod stock in the North Atlantic led to the collapse of the economy of the region. After 600 years of profitable fishing in that region, local fishermen nowadays rely on government help for livelihood. The traditions around cod fisheries and the techniques utilised by traditional fishermen may be lost when (and if) the cod stock recover.

Resilience is, therefore, not only an issue of sustainability and options for development, in the present and future, but also an issue of environmental, social and economic security.

Building social-ecological resilience requires understanding of ecosystems that incorporate the knowledge of local users. Thus, the ecological ignorance of some contemporary societies undermines resilience. Technological developments and economic activities based on the perception of decoupled social and ecological systems further contribute to the erosion of resilience. This can be counteracted by understanding the complex connections between people and nature, which create opportunity for technological innovations and economic policies aimed at building resilience.

Two useful tools for resilience-building in social-ecological systems are: (i) structured scenarios and; (ii) active adaptive management. People use scenarios to envision alternative futures and the pathways by which they might be reached. Active adaptive management views policy as a set of experiments designed to reveal processes that build or sustain resilience. It requires, and facilitates, a social context with flexible and open institutions and multi-level governance systems that allow for learning and increase adaptive capacity without foreclosing future development options.

Managing for resilience embraces sustainability outcomes in relation to the social-ecological system. A changing, uncertain world in transformation demands action to build the resilience of the social-ecological systems, which embrace all of humanity.

New Online Journal: International Journal of Transdisciplinary Research!

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International Journal of Transdisciplinary Research! A journal in favor of an economic paradigm shift and for research on society, economy, and ecology.

Current Issue: Volume 1, Issue 1

1. Transdisciplinary Research: Moving Forward [PDF]
   John M. Polimeni
   
2. The Need for a New Biophysical-based Paradigm in Economics for the Second Half of the Age of Oil [PDF]
   Charles A. Hall and Kent A. Klitgaard
   
3. Production Theory and Peak Oil: Collapse or Sustainability? [PDF]
   John M. Gowdy
   
4. Knowledge Representation and Mediation for Transdisciplinary Frameworks: Tools to Inform Debates, Dialogues & Deliberations [PDF]
   Ângela Guimarães Pereira and Silvio Funtowicz
   
5. Can Biofuels Replace Fossil Energy Fuels? A Multi-scale Integrated Analysis Based on the Concept of Societal and Ecosystem Metabolism: Part 1 [PDF]
   Mario Giampietro, Kozo Mayumi, and Jesus Ramos-Martin
   
6. Systems Thinking and Common Ground [PDF]
   John Peet
   
7. Economic Efficiency in Fisheries and Aquaculture [PDF]
   Paul Molyneaux