Earth, Inc. Shareholder Report: Views of Earth

“The gross national product [GNP] does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.”

~ Robert F. Kennedy, 1968

caption (Source: Authors)

People, cities, states, and nations all need indicators of their performance, telling them about the larger ecological and social dimensions of human communities, and the long-term sustainability of their activities. They need indicators that combine the diverse economic, environmental, and social elements into a common framework and indicating whether they are making real progress. To accomplish this, Earth, Inc. proposes a change in the way we understand the world, which aligns more closely with modern scientific understanding than outdated methods being employed today.

Earth as a ‘Closed’ System

caption (Source: Authors)

Our first step must be to understand our Earth’s place in the cosmos. The Earth can be thought of as a space ship traveling through the dark vacuum of space. Like a ship, inside the thin skin of the craft, life can survive, outside of it, life does not exist. Supplies for the ship are limited by what the ship can carry, and the only way to get ‘more’ is to resupply. Earth is not that unlike our imaginary space craft, actually, they are so alike that many have called our planet “Spaceship Earth”. In our case, the atmosphere is the thin skin separating us from space. Unlike a space craft, Earth cannot be resupplied when resources are consumed and begin to run low. We have a fixed budget of resources, and there is no room to overspend in our budget. What we can do is change our priorities in spending and use of our resources. The only ‘free’ resource that we do receive from outside is sunlight – the energy and light from our star, the Sun.

Ecology: The science of relationships between organisms and their environment, or the study of the detrimental effects of modern civilization on the environment.

We understand that the human economy exchanges ‘goods’ and energy with the larger, natural system of the Earth. The Earth does not exchange matter with the surrounding universe outside of our atmosphere. The Earth receives solar energy from outside and emits heat, and this energy flow keeps up the living and non-living processes of the system.

Humans have a tremendous role on the Earth. Through application of our technology on a large scale and by a massive global population, we have become major players in the complex global systems. We change the global environment (intentionally or not) to improve our access to energy, resources, so that we can provide our food, shelter, and recreation. These actions, which improve the quality of our lives, form the basis of our economy and provide livelihoods for billions around the globe. Ultimately our actions should lead to improved sense of satisfaction in our lives, as our infrastructure, human and social networks, and use of the Earth’s resources improve. But time and time again we see that this is not the case. We continue to experience famines, food and energy shortages, waste and pollution problems, scarcity of resources, lack of housing and social breakdown. Can this be explained in part by the fact that up until recently, we’ve had no way to examine and understand our world and our problems in a coherent framework?

Ecological Economics

The field of ecological economics has grown out of the basic view that the human economy and ecological systems are much more intertwined than originally recognized. No single established discipline is able to provide a sufficiently wide perspective to fully understand the interactions of the natural and human global economies. Hence, people from around the world, with diverse backgrounds and disciplines, have begun to collaborate in their research in hopes of understanding the complexity of total global economy as a way to understand existing environmental problems and their potential solutions.

Ecological economics recognizes that the human economy is embedded in nature and economic processes can also be seen as natural processes. This view is very different from the standard understanding of the relationship between the economy and nature, where they are seen as two discrete systems (in which nature provides free resources, sink capacity, and direct utility, for conversion and use in the economy).4

Ecological economics calls for an awareness of the inescapable human dependence on well-functioning ecosystems, which are the ‘engines’ that provide the basic life support for human societies. Essentially, nature is the economy’s (and by extension humanity’s) life-support system. 4

Empty World Economics

During the time of adventurers and cowboys exploring and colonizing lands without bounds or limits, an assumption took shape that we lived in a limitless world, a world where our actions were inconsequential on nature. That assumption has held over the centuries from when our economy was tiny in comparison to the vast expanses of land and water, and could absorb any damage we imparted on it. This view can be seen as the “pre-analytic vision”, a vision that was acceptable before our understanding of many of the modern sciences and how humans influence environmental conditions.

When we rely on empty world thinking, the main policy question becomes: ‘how much should we consume vs. invest in each time period in order to keep the economy growing at the ‘optimal’ (i.e. fastest possible) rate.

Our ‘pre-analytic vision’ of how the human economy and society relate to the rest of the natural world itself is changing. The human economy has passed from an ‘empty world’ era in which human-made capital was the limiting factor in economic development to the current ‘full world’ era in which remaining natural capital has become the limiting factor.

Full World Economics

Ecological economics argues that the human economy has evolved from an era when economic development was limited by human capital (knowledge, health) to a modern era where it is now limited by the remaining natural capital (resources, land, eco-services). Such a limitation would imply that we should strive to maximize the productivity of our remaining natural capital while attempting to increase its supply.

Comparison of "Empty" and "Full" World Economics

Assumptions about:

Empty-World Economics

Full-World Economics

Capital types contributing to human welfare

Assumes near-perfect substitutability between the factors of production (land, labor and capital) so the economy could continue growing indefinitely, even with no natural resources.

Limited substitutability between the basic forms of capital. Four capital types, with names that better reflect their roles (Built, Human, Natural and Social Capital).

Physical functioning of the economy, energy, materials, and waste

The economy and environment are two independent but loosely connected systems. No ‘waste’ occurs in the empty world model. It is a perpetual motion machine that can run forever on its own output. We know that this is a scientific impossibility (based on the physical laws of thermodynamics).

Earth receives solar energy from the sun. The human economy uses this energy and produces lower quality energy or waste heat. The economy also needs material inputs, which break down over time. We can recycle matter, but not with 100% efficiency (in line with the physical laws of thermodynamics). Waste contributes negatively to human welfare, capital, and ecosystem services.

Non-monetary contributions to well-being

Ignores direct, non-monetary contributions to human welfare by factors such as ecosystem services, a fulfilling job, and family and community social relationships.

Natural capital contributes to the production of marketed and non-marketed goods and services, which affect human well-being. Social capital is an important contributor to welfare.

Basis for human economic decision making

Assumes humans are "rational actors" with fixed preferences and perfect information in the marketplace. They value things according to their relative ability to satisfy their preferences, which are assumed to always be "more is better."

People have limited knowledge and ‘rationality’ and limited ability to process the information they do have. The value of things has to do with their contribution to broader human well-being, rather than just maximizing consumption.

Consumer tastes and preferences

Assumes that tastes and preferences are fixed and given, when it is well known that they evolve and change in response to various influences, including advertising.{Norton, 1998 #116}

Preferences are adapting and changing but basic human needs are constant. Human well-being is a function of much more than the absolute level of consumption of goods and services. Welfare involves consumption relative to perceived peers (Kahneman, 1999 #115; Kasser, 2002 #95), participation in decisions, a sense of fairness about the distribution of resources, non-marketed benefits from ecosystem services, social interactions at many scales, and other factors.

Property rights

Simplistic view of property rights, ignoring success of many forms of community ownership in different contexts. Ignores the distribution of property rights as a problem that is outside the boundaries of economics.

Property right regimes are complex and flexible, spanning the range from individual to common to public property. Fairness should be an important consideration in assigning property rights.

Ecosystem Goods & Services

caption Table 1. Ecosystem services and functions used in this study. (Source: Authors)

Ecosystem functions are “the capacity of natural processes and components to provide goods and services that satisfy human needs, directly or indirectly”. Each ecosystem function is the result of the processes of nature running its course. These natural processes, in turn, are the result of complex interactions between living (biotic) organisms, non living (abiotic) chemicals, and physical components of ecosystems (such as water, heat, waves, minerals).

Ecosystem goods (such as food) and services (such as waste assimilation) represent the benefits that human derive directly or indirectly from ecosystem function. Together, these can be called ecosystem services. Human life is impossible in the absence of any one of these function groups.

Ecosystem services occur at many scales in time and space, from climate regulation at the global scale, to flood and storm protection, soil formation, nutrient cycling, recreation, and aesthetic services at the local and regional scales. At any point in time, human uses of ecosystem services may or may not leave the original capital stock intact.

Ecosystems provide many resources, which range from the basics needed for human survival, such as oxygen, water, food, medicinal, and genetic resources, to energy sources and materials used for clothing and building. It is important to highlight the difference between the use of ‘biotic’ resources (i.e. products from living plants and animals) and ‘abiotic’ resources (non-living; mainly minerals). The most important difference to note is their renewability. Generally speaking, biotic resources are renewable (new resources will grow again), while most abiotic resources are not renewable (although proper product design may make it possible to fully recycle them back into useful materials).

As we’ve seen, ecosystem functions and services are complex systems. To make it easier to understand ecosystems and resources at the human scale, we can consider them in terms of four capitals.

Further Reading

  • Robert Costanza, Jon Erickson, Karen Fligger et al., Ecological Economics 51 (1-2), 139 (2004).
  • Robert Costanza, Ralph d'Arge, Rudolph de Groot et al., Nature 387, 253 (1997).
  • Robert Costanza, in A Guide to What's Wrong with Economics, edited by Edward. Fullbrook (Anthem Press, London, 2004), pp. 237.
  • Herman E. Daly, John B. Cobb, and Clifford W. Cobb, For the common good : redirecting the economy toward community, the environment, and a sustainable future. (Beacon Press, Boston, 1989).
  • Rudolph. S. De Groot, Functions of Nature: Evaluation of Nature in Environmental Planning, Management and Decision Making. (Wolters-Noordhoff, Groningen, 1992).
  • R. S. De Groot, M. A. Wilson, and R. M. J. Boumans, Ecological Economics 41, 393 (2002).
  • P. Ekins, in Real-Life Economics: Understanding Wealth Creation, edited by P. Ekins and Manfred Max-Neef (Routledge, London, 1992), pp. 147.
  • Inge Ropke, Ecological Economics 55 (2), 262 (2005).

This is a chapter from Earth, Inc. Shareholder Report (e-book).
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Inc., E. (2007). Earth, Inc. Shareholder Report: Views of Earth. Retrieved from


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