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SCHOOLS OF ECONOMIC THOUGHT
ON ENVIRONMENTAL SUSTAINABILITY
Tamas Kocsis
The chapter examines how economists from the 18" century to the present day
have viewed the relationship between humans and the natural environment, and
to what extent they have incorporated, or ignored, the scientific and other findings
while elaborating their systems. This article combines neoclassical environmental
economics (NEO) and ecological economics (ECO), the two major contemporary
schools of economic thought in the foreground of environmental sustainability.
A historical overview!
The concept of nature in classical economics
Already in 1651, Thomas Hobbes pointed out that the material basis of welfare
evolves in the economy in a similar way to the circulation of nutritive materials
in the blood veins. Materials and nutrients extracted from the soil or the sea become
the subjects of money exchange, and circulate through diverse transformational
and commercial channels. Though his ideas were forgotten for some time, the
forerunners and representatives of the classical model of economics, William Petty,
Richard Cantillon, the French Physiocrats (e.g. Francois Quesnay), Adam Smith,
and their 19% century followers held similar ideas on the material basis of production
and prices (Christensen 1989: 19; cf. 1991: 76-77). First the Physiocrats and then
Smith, differentiated between agriculture and artisanry, regarding farming as
productive, because compared to the material input, its activity results in some
surplus, while the crafts only transform the raw materials without producing
material surplus (Christensen 1989: 20). They also laid down the law of diminishing
returns manifested in agriculture, which means that the increasingly intensive
cultivation of a given piece of land results in a steady decrease in the ever rising
yield. In contrast, for the industrial sectors, they found that the law of increasing
returns applied: they noticed, for example, that twice as much work (capital)
resulted in more than twice as much output (Christensen 1991: 82).
The researchers of British industrial development in the early 19" century also
realized the importance of energy in addition to the role of pure material. In
McCulloch’s view, the British nation owed its industrial upswing to the utilization
‘This is not a systematic review of the history of economics. The outstanding thinkers and theories
of the field have relevance here insomuch as they are concerned with certain elements of the
relationship between the natural environment and society. This chapter relies mainly on works
now considered classical, such as those by Edward B. Barbier (1989), Paul P. Christensen (1989,
1991), and David W. Pearce and R. Kerry Turner (1990).