On Being the Right Size: A Framework for the Analytical Study of Scale, Economy, and Ecosystem

Abstract

If the economy is conceived as an open subsystem of the larger ecosystem, the physical size of the economy relative to the ecosystem that contains and sustains it becomes a salient feature of economic analysis. This key question of scale is therefore one of the central organizing principles of ecological economics. However, scale has mostly been used as a pedagogical device or a heuristic rather than as an empirical tool for environmental policy. The primary bottleneck has been the lack of well-dened theoretical frameworks to empirically measure scale, and to interpret measured values of scale. Our overarching research question is: how can scale be measured at dierent levels of economic-geographic aggregations? The seemingly simple question of `how large is the economy relative to the ecosystem' is fraught with several theoretical diculties. We develop a novel theoretical framework for empirical measurement of scale based on a simple analytical representation of the economy-ecosystem interaction in terms of stock, ows, funds, and uxes. We also develop theoretical frameworks to determine benchmark scale measures" that address the questions: how large can the economy be relative to the ecosystem, and how large should the economy be relative to the ecosystem? For scale measures to be useful as tools for environmental policy, a critical requirement, besides being able to empirically measure scale, is a consistent and objective ordinal ranking of two or more measured values of scale. Given two empirical measurements we need to be able to consistently rank the states of the world represented by the scale metric. We develop an axiomatic framework for consistent ordinal raking of scale measures. The framework developed here helps identify theoretical problems with extant empirical assessments of the biophysical size of economic activity. The biophysical assessments that we review in detail include the Material Flow Analysis methodology, Human Appropriation of the Products of Photosynthesis, and the Ecological Footprint.