Problems With Conventional Economics

Problems arise with classical economics when it extends beyond the market system. Classical economics is intentionally anthropocentric; it was developed to deal with issues between humans and especially about goods and services that humans can provide, make, sell, and own. However, this is only a subset of human concerns because the environment enters into human affairs in many ways. The environment, which consists of natural energy sources and ecosystems, provides to humans many goods and services that are not accounted for by classical economics. Figure 8.3 illustrates this fact for an estuary where fish are harvested and sold by fishermen. The estuarine ecosystem produces fish through interactions with an energy signature of tide and sun. Fishing is a process that removes fish from the estuary through interaction with purchased inputs from the fisherman. Money, shown with the dashed line, flows into the system in proportion to sales of fish, and it flows out in proportion to the inputs used by the fisherman. The problem here is that the process of fishing is based on inputs both from the estuary and from the fisherman, but money only goes to compensate the fisherman and not the estuary. Thus, the inputs from the estuary are considered to be free and are not accounted for in the economic transaction. The market, which determines the price of fish, only considers part of the actual system that produces fish. This problem has serious consequences because the accounting system used for decision making (conventional economics) does not properly account for all of the value. Overfishing inevitably occurs in the case shown in Figure 8.3 because of an inadequate accounting of value, and it ultimately leads to the collapse of the fishery to the detriment of both the estuary and the fisherman! This is an example of the "tragedy of the commons" in which the estuary is a common property resource (Hardin, 1968).

Another example of the failure of classical economics to account for value is shown in Table 8.3. This table lists values to humans from wetland ecosystems in a hierarchical ranking. The market system adequately accounts for only the population level of values. This is the realm considered in the analysis by Raphael and

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