Austrian Ecology: Reconciling Dynamic Economics and Ecology

Tuesday, December 15, 2015

Published in the Journal of Law, Economics & Policy (Vol. 11. No. 2):

"Nature is not more complex than we think, but more complex than we can think." -Frank Egler

The development of mainstream ecological theory in many ways parallels the development of neoclassical economic theory. Both interpret the complex interactions of individuals through the lens of equilibrium analysis. The models used to understand ecosystems and economics are based on the assumption that each system achieves or exists in balance with itself. Ecologists, for instance, traditionally rely on models that assume an inherent balance of nature. Likewise, neoclassical economists study markets as if they exist in or rapidly attain a state of equilibrium. The assumptions of general equilibrium in economic theory are comparable to the balance-of-nature assumption that underlies most ecological theories. Over the last century, the standard practice of each field has been to formalize these equilibrium foundations into abstract mathematical theories. These equilibrium assumptions have important implications for both economic and environmental policy.

In addition to their parallel developments, modern ecological theory and neoclassical economic theory have received remarkably similar critiques from within of their assumptions and methodologies. Recent research in ecology has challenged traditional ecological theory in a manner similar to the Austrian critique of neoclassical economics. Ecologists are increasingly rejecting equilibrium analysis and adopting a view of ecosystem dynamics that is similar in many ways to the Austrian theory of the market process. According to each critique, a focus on points of equilibrium ignores the realities of human action and ecological interactions and distracts researchers from the dynamic forces that shape markets and ecosystems.

This paper explores the linkages between ecology and economics through the lens of Austrian economics. Drawing upon recent theoretical advancements in ecological theory, it considers how these ideas relate to the insights of Austrian economists and discusses the implications of a more dynamic and integrated perspective of economics and ecology. By linking the two together, this paper aims to address the interconnectedness between human action and the natural world and attempts to reconcile dynamic economics and ecology through a new lens of “Austrian ecology.”

An Austrian ecological perspective implies a new framing for questions of environmental policy, one that should be considered by ecologists and economists alike. Once we accept that nature is dynamic and profoundly shaped by and connected to human action, we are compelled to see environmental problems through a different lens. In this view, environmental problems cannot be thought of as simply the consequence of human violations on the balance of nature. A new generation of ecologists has rejected the notion of a natural harmony in ecosystems. Nor can environmental problems be solved by simply separating the natural environment from human influences. The notion of the Anthropocene suggests that doing so is impractical or even impossible. Instead, environmental problems become questions of how to resolve competing human demands on an ever-changing natural world. The central environmental question, then, is how the institutions that govern these competing demands connect dynamic human action to dynamic nature. 

To read the full text, click here [pdf].

Shawn Regan is a research fellow and PERC and the director of outreach and publications. He holds a M.S. in Applied Economics from Montana State University and degrees in economics and environmental science from Berry College. His writing has appeared in the Wall Street Journal, Quartz, High Country News, National Review, Reason, Regulation, Grist...
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