Population dynamics in neoclassical vs. ecological economics

Background/Question/Methods

If an ecosystem has plenty of unused capacity, a species’ population is likely to grow fast; i.e., with a high growth rate (r). If left unchecked by density-dependent factors, the population may “explode,” ultimately breaching carrying capacity (K) and “crashing.” Species characterized by boom-and-bust episodes are “r-selected” species. “K-selected” species are those for which r declines as density-dependent factors come into play: eventually the population stops growing and fluctuates around K. In the economy of nature, we might consider a K-selected species to exhibit a steady state economy, with population and per capita consumption remaining relatively constant.

Such basics of population dynamics would seem a matter of common sense, as we see numerous examples in the real world and mass media (e.g., algal blooms and insect blights on one hand, and the plights of gorillas and rhinos on the other). Yet when economists opine on human prospects, they tend to express beliefs in perpetual population and (especially) economic growth. This has been controversial among ecologists for at least 50 years. Is the answer pure ecological ignorance, or political motivation, or conversely are ecologists missing some essential knowledge about the distinction between Homo sapiens and non-human species? I investigated conventional economic growth theory as well as the history of thought pertaining to economic growth to provide insights.

Results/Conclusions

Perpetual growth beliefs among economists appear to stem from a mixture of historical and technical reasons. An episode of corruption (pertaining to tax policy) during the development of neoclassical economics at the dawn of the 20^th century resulted in a marginalizing of land as a factor of (economic) production. Growth theory then revolved around a production function, Y = f {K,L}, meaning production is a function of capital and labor. Meanwhile research and development was thought to increase labor productivity without limit. Ironically, a perpetually increasing human population becomes necessary for unlimited efficiency gains, because a continually growing portion of the labor force (i.e., those conducting R&D) is required for keeping the returns to R&D positive. The economic logic is relatively valid, yet the hypothesis is unsound due to the faulty premise that production is a function exclusively of capital and labor. Reformation of the production function is perhaps the greatest improvement that ecology may bring to economics, and doing so should result in different policy implications, especially pertaining to the desirability of economic growth in the 21^st century.