Integrated Ecological Economic Modeling and Assessment

The emphasis on both (1) issues ofscale and limits to the carrying and assimilative capacity of ecological systems and (2) underlying dynamics of those systems imply the need for a new approach to the modeling ofjoint systems. It is not surprising that this is an active area ofresearch in ecological economics. Indeed, combining (sometimes implicit) models of ecological processes and economic decision models in a new that makes the feedbacks between the two sets of processes transparent is where we most expect new advances to be made as a result ofthe ongoing dialog between economists and ecologists.

Ecology and economics have long diverged both methodologically and conceptually. One reason for the difficulty in bridging the modeling gap is that economics, as a discipline, has developed almost no tools or concepts to handle spatial differentiation beyond the notions of transport cost and international trade. The spatial analysis of human activity has been seen as the domain of geographers, and has had remarkably little impact on the way economists have analyzed the allocation of resources. This makes collaboration between economists and disciplines based more directly on spatial analysis very difficult. Since the development of spatially explicit integrated models is one of the areas in which ecological economics is expected to develop most rapidly in the next few years, it would seem that geographers are likely to become an increasingly important part of the research agenda in ecological economics.

A second characteristic of ecological-economic models concerns the way in which the valuation of ecological functions and processes is reflected in the model structure. The point was made in the previous section that valuation by stated preference methods (estimation of willingness to pay or accept using contingent valuation or contingent ranking) may capture the strength of people's perceptions and their level of income and endowments (their ability to pay), but it generally fails to capture the impact of a change in ecosystem functions and processes on the output ofeconomically valued goods and services. Unless the role of nonmarketed ecological functions and processes in the production ofeconomically valued goods and services is explicitly modeled, it is hard to see how they can be properly accounted for in economic decision making.

A third characteristic concerns the role of integrated modeling in strategic decision making. One of the challenges to ecological economics has been to devise methods to address strategic 'what if' questions in a way that reflects the dynamics of the jointly determined system. The general problem confronting anyone attempting to model long-run dynamics explicitly is that ecological-economic systems are complex nonlinear systems. The dynamics of economic systems are not independent of the dynamics of the ecological systems which constitute their environment, and that as economies grow relative to their environment, the dynamics of the jointly determined system can become increasingly discontinuous. Indeed, the development of ecological economics can be thought of as part of a widespread reappraisal of such systems.

In ecology, this reappraisal has influenced recent research on scale, complexity, stability, and resilience, and is beginning to influence the theoretical treatment of the coevolution of species and systems. The results that are most important to the development of ecological economics concern the link between the spatial and temporal structure of coevolutionary hierarchical systems. Landscapes are conceptualized as hierarchies, each level of which involves a specific temporal and spatial scale. The dynamics of each level of the structure are predictable so long as the biotic potential of the level is consistent with bounds imposed by the remaining levels in the hierarchy. Change in either the structure of environmental constraints or the biotic potential of the level may induce threshold effects that lead to complete alteration in the state of the system.

In economics there is now considerable interest in the dynamics of complex nonlinear systems. Economists have paid less attention to spatial scale and its significance at or near system thresholds, but there is now a growing body of literature with roots in geography which seeks to inject a spatial dimension into nonlinear economic models. There is also an economic analog to the biologist's interest in evolution and the significance of co-dependence between gene landscapes. The steady accumulation of evidence that economic development is not a stationary process, that human understanding, preferences, and technology all change with development, and that such change is generally nonlinear and discontinuous, has prompted economists to seek to endogenize technological change. Although the adaptation of this work by environmental economists has been rather disappointing, the treatment of technology and consumption preferences as endogenous to the economic process is a fundamental change that brings economics much closer to ecology.

The challenge to ecological economics in the future is to develop models that capture these features well enough to incorporate at least the major risks in economic decisions that increase the level of stress on ecological systems.

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