Pruebas no funcionales

The term “economics” was first introduced by the Greek writer, Xenophon, using it to refer to the art of household management.175 Extending the term to a national level, in 1776 Adam Smith published his seminal text “The Wealth of Nations”. Smith explored the nature and causes of economic progress and advocated the

significance of the “invisible hand”. The notion of the invisible hand dictates that under the right circumstances, society’s best interest will be served by leaving individuals free to pursue their own selfish interests.176 This became known as classical economics and dominated economics until the last quarter of the nineteenth century. Classical economists, particularly Malthus, believed that the long-run prospects for improving living standards were poor. This assumption was based on the belief that agricultural land’s production is limited and will not be able to sustain the growing human population.177 Thus, the environment, according to classical economists, set limits to economic expansion.

Classical economists regarded natural resources as distinct to analysis due to the important services it offered.178 These economists also regarded land as a non- substitutable production input, hence classical economics was widely known as the “dismal science”. This was because it adopted the notion particularly associated with Ricardo’s law on diminishing returns on land and Malthus’ ideas that the long-run prospects for improving living standards were poor. These views assumed fixity of the supply of agricultural land, together with the propensity of the human population to grow in size. This means that for the classical economist, the environment set limits to the expansion of economic activity so that the long-run tendency would be for the wages of workers to be driven down to subsistence level, which Mill predicted would cause the economy to reach a steady state.179 Appreciating this natural constraint, Malthus and economists alike recognised natural capital (in the form of land) as a core value in classical economic analysis. Although the direct use of land’s contribution was recognised, its intangible benefits were not, with Crocker reflecting that “...no economist of stature deliberated upon the life support and the amenity services that natural environments offer.” Figure 2-1 captures this view on wealth generation through land, with only direct benefits acknowledged.

Figure 2-1: Representation of Malthus view of wealth

Source: Adapted from Costanza et al, 1997 180

Tangible benefits Natural capital (land) Wealth

As classical economics evolved, economists began to recognise labour as the major force backing the production of wealth. This was clearly reflected in Smith’s Wealth of Nations, which describes the wealth of a particular society as the result of the labour it embodies. Regardless, Smith still regarded the timber of the woods, the pastures from rangelands and the yield of the soil as ‘natural production’. He did not consider the value from nature itself; rather the value from the rent derived from its appropriation was significant.

Classical economists did not create the link between nature’s services and exchange value. Rather, it was simply the end of production that was considered valuable to the classical economist. For instance, Say describes nature as: “…the wind which turns our mills and even the heat of the sun, work for us; but happily no one has yet been able to say, the wind and sun are mine, and the service which they render must be paid for”.181 Similarly, Ricardo denied that nature’s services contributed to the creation of market-based allocation of goods and services by stating that services “are serviceable to us…by adding value in its use; but as they perform their work gratuitously, as nothing is paid for the use of the air, of heat, and of water, the assistance which they afford us, adds nothing to value in exchange”. Figure 2-2 illustrates Ricardo’s view of wealth, placing labour as the core contributor to wealth.

Figure 2-2: Representation of Ricardo view of wealth

Adapted from Costanza et al (1997) 182

In contrast, the work by Marx is rich in ecological hints, offering some appreciation of the role nature plays in enhancing wealth. Inspired by Liebig’s and Moleschott’s analysis of the cycles of plant nutrients, Marx anticipated industrial ecology by a century using the concept of metabolism to analyse human-nature interaction. Marx believed that value emerges from the equal contribution from natural capital and labour, as illustrated in Figure 2-3, stating, that “Labour is not the source of all

Natural capital

Labour Wealth

Services from nature as ‘free’

Natural agents were only considered valuable in use

wealth. Nature is just as much the source of use values as labour, which itself is only the manifestation of a force of nature”. However, Marx still failed to see the services offered by ecosystems and dictated the need for nature together with labour to produce market-based allocation of goods and services.

Figure 2-3: Representation of Marx view of wealth

Adapted from Costanza et al (1997) 183

In the 19th century, driving forces such as the industrial revolution coupled with unprecedented technological development contradicted the dismal prediction by classical economists. As such, classical economics did not fare well and according to a new wave of emerging economists it was incorrect. This new wave of economists argued that classical economists such as Ricardo and Malthus were incorrect as they overlooked technological progress.184 This shift into the new economic paradigm saw the gradual dismissal of the role of nature and shifted from deriving value from its direct use to fixating on technological advancement to produce goods and services. This will be discussed in depth in the next section, neoclassical economics.