Coevolution of economic and ecological systems

This paper analyzes a model of economy–environment coevolution in which economic activities induce the genetic evolution of a biological species. This model is applied to the problem of pesticide resistance management. Just as in Munro (Environ Resour Econ, 9:429–449, 1997), we consider three main types of interactions: (1) a large pest population reduces economic revenues, (2) economic activities select for resistant genes and (3) the spread of resistant genes affects the size of the pest population. The model differs from Munro in that it includes evolutionary modeling of economic strategies. Economic agents are assumed to be boundedly rational, i.e they cannot compute the optimal level of pesticide use that minimizes resistance among pests. Economic evolution represents the change in the distribution of pesticide strategies in the population of economic agents and is modeled by a replicator dynamics equation. The interactions between economic evolution of pesticide strategies, pest population dynamics and genetic evolution of resistance of pests are studied in a system of three differential equations. We explore the dynamics and stability properties of the system using numerical simulations.     

Differences and similarities between ecological and economic models for biodiversity conservation

In this paper we investigate an important obstacle which substantially complicates co-operation between ecologists and economists but which has received little attention so far: differences between the modelling approaches in economics and ecology. To understand these differences, 60 models addressing issues relevant to biodiversity conservation have been selected randomly from eight international economic and ecological journals. The models have been compared according to a number of criteria including the models' level of generality; the mathematical techniques employed for formulation and solution of the models; the level of complexity and the way time, space and uncertainty are taken into account. The economic models sampled are formulated and analysed analytically, tend to be relatively simple and are mostly used to investigate general questions. Furthermore, they often ignore space, dynamics and uncertainty. Although some ecological models have similar properties, there is also a substantial number of another type of ecological models that are relatively complex and analysed by simulation. These models tend to be rather specific and often explicitly consider dynamics, space and uncertainty. The integrated ecological-economic models are observed to lie “in the middle” between ecological and economic models. An unexpected result is that they are not more complex than ecological and economic models (as one could have expected from a simple “merger” of models from both disciplines), but have an intermediate complexity.     

Climate threshold,financial hoarding and economic growth

We use an iterative finite difference method to establish theoretical models that reflect the relationships among climate threshold, financial hoarding and economic growth. We build a simultaneous equations model to conduct an empirical analysis based on China’s statistical data from 1979 to 2012. Our study yields the following results: China’s climate threshold has shown a zigzag-shaped rising trend since 1979; the main reasons for the rapid expansion of financial hoarding were high savings rate, savings leakage, higher marginal efficiency of financial hoarding compared to capital efficiency or higher internal creativity of the financial sector; there were positive cumulative effects between financial hoarding and economic growth, which were significantly inhibited by climate threshold; the climate threshold had discrepant influences on different industries. To achieve a balanced economy, more money should be invested in the real sector to appropriately reduce the rate of savings leakage; the financial sector should move from scale expansion to service efficiency improvements to increase its marginal contribution to the economy and to enhance capital efficiency; the real sector should improve technological innovation and speed up the adaptive adjustment in climate-sensitive industries to move from economic growth to advanced development.     

Potential ecological and economic impacts of sea lice from farmed salmon on wild salmon fisheries

This paper examines the possible ecological and economic effects of sea lice from salmon farms on wild salmon populations and fisheries. A bioeconomic model is developed incorporating an age-structured population dynamics model of wild pink and chum salmon with mortality caused by farm-derived sea lice. Our model incorporates capture fisheries under two management policy scenarios. Results suggest that the ecological and economic effects are minor when the sea lice induced mortality rate is below 20%, while they can be severe if the mortality is greater than 30%. Sea lice have greater ecological and economic impacts on pink salmon than on chum salmon. The impact of farm lice epizootics on wild salmon is greater under a fixed exploitation rate than under a target escapement policy. As a result, a precautionary principle should be adopted, and appropriate management schemes and policy strategies should be developed to minimize these effects.     

A study of economic development in Tibet of China based on the ecological economic mode

The purpose of this paper is to study the issues on keeping the continuous development of Tibetan economy and the relative stability of its ecosystem. Hence, in order to achieve the object, the study analyzes the status quo of economic development in Tibet and the problems of resource exploitation. It especially discusses frailty of Tibetan eco-environment, and evaluates the contradictions between the traditional economic developing mode and the safety of plateau＇s ecosystem. It concludes that there is an inevitable clash between the development of Tibetan economy and the safety of plateau＇s eco-system; this problem cannot be avoided by any decision maker, Therefore, the character of Tibetan econvironment and the requirement of its economic development strategy determine that ecological economy developing mode is the only choice for Tibet. This paper suggests that it should be compensated by the national government to assure that Tibetan economy can keep a higher developing speed. In accordance with the feature of plateau eco-economy system and demand of Tibetan economic development, this paper also suggests several methods to apply the ecoeconomy developing strategy of Tibet.     

The threshold effect of longevity: life expectancy and economic growth

Differing from the nonlinear effect of life expectancy (LE) estimated by previous empirical studies based on a quadratic equation which may be inapplicable for asymmetric nonlinear relationships, this note uses dynamic threshold model to investigate the asymmetric threshold effect of LE. The results show that the significant positive effect of LE on income per capita can only be realized above the threshold, whereas there is an insignificant linkage between LE and economic growth below the threshold level when inflation is eliminated.     

A dynamic ecological–economic modeling approach for aquaculture management

This paper presents a Modeling Approach to Resource economics decision-maKing in EcoaquaculTure (MARKET model). The MARKET model was developed as a scenario-testing tool to provide insights on the ecological and economic interactions, which is a critical issue for sustainable aquaculture management. As a case study, the model was applied to simulate shellfish production in an embayment located in the East China Sea. A set of scenarios was used to compare the model outputs with expected trends and to test its capability to simulate relevant management scenarios. The comparison of simulated scenarios indicates that the MARKET model outputs followed the expected trends regarding both standard economic theory for consumption and production, and ecological economic theory. In all the scenarios we tested the area available for aquaculture was found to impose a limitation on production before it became less profitable to expand production. As such, in this case study, the production in the long run does not meet increasing demand. Reduction of the maximum cultivation area was simulated in one of the scenarios as an example of a conservation measure. As expected there was a reduction of the net profit of the farmers compared with the standard simulation. On the other hand, this scenario combined with an increase in price growth rate simulates a compensatory measure that led to a net profit in the same range as observed in the standard simulation. Overall the MARKET model provides insights and raises questions useful for the implementation of an ecosystem approach to aquaculture. Further developments include the simulation of waste generated by cultivated species in order to better support sustainable management objectives.     

Endogenous lifetime and economic growth

Endogenous mortality is introduced in a two-period overlapping generations model: probability of surviving from the first period to the next depends upon health capital that is augmented through public investment. High mortality societies do not grow fast since shorter lifespans discourage savings; development traps are possible. Productivity differences across nations result in persistent differences in capital-output ratios and relatively larger gaps in income and mortality. High mortality also reduces returns on education, where risks are undiversifiable. When human capital drives economic growth, countries differing in health capital do not converge to similar living standards, ‘threshold effects’ may also result.     

More than total economic value: How to combine economic valuation of biodiversity with ecological resilience

The assessment of total economic value has become a pragmatic and popular approach in nature valuation, yet criticisms have been raised. One major point of critique is that total economic value bases the monetary value of ecosystems purely on the flow of human benefits of services of ecosystems and consequently ignores questions of sustainable use of natural capital per se. This paper explains why total economic value by itself is in principle an inadequate concept to guide sustainable use of ecosystems and gives an overview of essential ecological theory that needs to be taken into account in addition to total economic value to fully include ecosystem sustainability. The paper concludes with a framework for combining ecological theory with economic valuation. The key elements here are theoretical ecological insights about ecosystem resilience and portfolio theory which offers an economic perspective on investment in biodiversity. Portfolio theory puts total economic value in a framework where investment in biodiversity is expanded to cover functional diversity and mobile link species in order to maintain ecosystem resilience and so fosters sustainable use of ecosystems.     

Organizational patterns of economies: an ecological perspective

A complex adaptive systems paradigm can be used to abridge theorizing in ecological and economic sciences. The paper discusses economic flows, connectivity and stability from the perspective of theoretical ecology. The global economy, by analogy with ecosystems, appears to self-organize as an ascendent system: most of the world trade is done among the tiny fraction of technologically advanced countries and trade interaction strength exhibits a power law with exponential decay. Small world behavior and preferential attachment characterizes interactions among economic agents. Industrial economies and the world economic system as a whole appear to evolve towards the ‘maximum power’ efficiency. Development that fosters efficiency in the maximum power sense (all the world becomes industrialized) implies a trade-off in socio-economic diversity, and may be antithetical to the stability of the global economy. If we take an ecological perspective, then the problem of global development does not reside in the realm of technology or global governance. It boils down to the question of required natural balance in living systems, the balance between organized complexity and overhead, the harmony between efficiency and adaptability.     

The impact of international financial integration on economic growth: New evidence on threshold effects

Recent research highlights that countries differ with respect to their experience with capital flows and do not systematically gain from capital account liberalization. This paper contributes to the empirical literature that investigates the circumstances under which international financial integration (IFI) is growth-enhancing. Relying on non-linear dynamic panel techniques, we find that countries that are able to reap the benefits of IFI satisfy certain threshold conditions regarding the level of economic, institutional and financial development, and government spending. Our results also reveal a differentiated behavior of FDI and portfolio equity liabilities compared to other types of capital flows, with threshold conditions being systematically less restricting for the former and growth effects significantly larger.     

Efficient ecosystem services and naturalness in an ecological/economic model

In an integrated economic/ecological model, the economy benefits from ecosystem services that include: (1) the consumptive use of a harvested species, (2) the non-consumptive use of popular species, and (3) naturalness, i.e., the divergence of the ecosystem’s biodiversity from its natural steady state. The biological component of the model, which is applied to a nine-species Alaskan marine ecosystem, relies on individual optimizing behaviour by plants and animals to establish population dynamics. The biological component is used to define naturalness. By varying harvesting we arrive at different steady-state populations and humans choose from among these steady states. Welfare maximizing levels of the ecosystem services are derived, then it is shown that in the laissez-faire economy overharvesting occurs when the harvesting industry ignores ecosystem services (2) and (3). Lastly, we introduce efficiency restoring taxes and standards that internalize the ecosystem externalities.

Bio economic modeling for a sustainable management of biodiversity in agricultural lands

For several decades, significant changes in farmland biodiversity have been reported in Europe. Agriculture is a major driver of these modifications. Taking into account these environmental impacts, agriculture nowadays aims at a more sustainable way of producing which would reconcile its economic and ecological functions. The objective of this paper is to give insights into the impact of public policies on both conservation of biodiversity and farming production. We develop a macro-regional model combining community dynamics of 34 bird species impacted by agricultural land-uses and an economic decision model. The ecological dynamic model is calibrated with the STOC (French Breeding Bird Survey) and AGRESTE (French land-uses) databases while the economic model relies on the gross margins of the FADN (Farm Accountancy Data Network). We investigate the scenario based on subsidies and taxes. We show that simple economic instruments could be used to establish scenarios promoting economic performances and bird populations. It is pointed out how the sustainability of the policies is sensitive to the ecological and economic indicators used by the planner. The bio-economical analysis shows several solutions for the ecology-economy trade-off. These results suggest that many possibilities are available to develop multi-functional sustainable agriculture.     

Does too much government spending depress the economic development of transition economies? Evidences from dynamic panel threshold analysis

This paper investigates the relationship between government size and economic growth and determines the optimal level of government spending to maximize economic growth. The paper applies a dynamic panel data analysis based upon a threshold model to test the threshold effect of government spending in 26 transition economies over the period spanning 1993–2016. According to the analysis results, government expenditures have a threshold effect on economic growth, and there is a non-linear relationship depicted as an Armey curve in these transition economies. The findings indicate that a government size above the threshold government spending level adversely affects economic growth, while a government size below the threshold level has a positive effect. Furthermore, there is a statistically significant relationship between the two variables above and below that optimal level, even if we divide the sample into developed and developing countries. Our findings suggest that governments in transition economies should consider optimal government size at around the estimated threshold level to support sustainable economic growth.     

Modelling the nonlinear relationship between CO2 emissions from oil and economic growth

The purpose of this paper is to examine the relationship between carbon dioxide (CO2) emissions from oil and GDP, using panel data from 1971 to 2007 of 98 countries. Previous studies have discussed the environmental Kuznets curve (EKC) hypothesis, but little attention has been paid to the existence of a nonlinear relationship between these two variables. We argue that there exists a threshold effect between the two variables: different levels of economic growth bear different impacts on oil CO2 emissions. Our empirical results do not support the EKC hypothesis. Additionally, the results of short-term analyses of static and dynamic panel threshold estimations suggest the efficacy of a double-threshold (three-regime) model. In the low economic growth regime, economic growth negatively affects oil CO2 emissions growth; in the medium economic growth regime, however, economic growth positively impacts oil CO2 emissions growth; and in the high economic growth regime, the impact of economic growth is insignificant.     

Financial stress and economic activity in Germany

The financial crisis and the European sovereign debt crisis have shown that financial stress may be an important driver for economic activity. In this paper, I derive a financial stress index for Germany, using a dynamic approximate factor model that summarizes a stress component of various financial variables. Subsequently, I analyze the effects of financial stress on economic activity in a threshold vector autoregressive model. I find that if the index exceeds a certain threshold, an increase in financial stress causes economic activity to decelerate significantly, whereas if it is below this threshold, economic activity remains nearly unaffected.     

From ecological footprint to ecological rent: An economic indicator for resource constraints

This paper takes as a starting point a combination of an input-output model with a national Ecological Footprint account for Germany in the spirit of Wiedmann et al. [Wiedmann, T., Minx, J., Barrett, J., Wackernagel, M., 2006. Allocating ecological footprints to final consumption categories with input-output analysis. Ecological Economics. 56, 28-48]. Footprint as well as Biocapacity is dealt with at the industry level. Gross output of each industry and final demand for each industry can then be split up into a share that is reconcilable with Biocapacity and another share that corresponds to the ‘Ecological Deficit’. The Ecological Footprint concept is extended in this study by introducing the additional biocapacity necessary for sustaining the given level of economic activity. It is assumed that each industry had to rent the corresponding areas and to apply a given technology in order to make this additional land biophysically productive. That results in an additional technology for each industry leading to an increase in costs and prices. The new price level is directly linked to the share of output that corresponds to Biocapacity overshooting, which is defined by the ‘Ecological Deficit’. Economic indicators can be derived by measuring the income difference brought about by the price increase. This difference corresponds to a Ricardian rent which is due to resource constraints on output growth.     

Learning-by-doing in R&D, knowledge threshold, and technological divide

This paper presents a simple R&D-based growth model of the “technological divide,” in which learning-by-doing (investing) in R&D and a threshold level of technological knowledge jointly determine the pattern of economic growth. Specifically, the model generates differences in the growth pattern primarily by modifying the underlying parameters that govern the evolution of economy-wide technological competence or dynamic R&D productivity. The technological divide arises at the threshold level of technological knowledge, which is largely affected by the quality of socio-technological infrastructure. Government policies aimed at enhancing the quality of socio-technological infrastructure can help countries escape from the “technology divide” trap by lowering the knowledge threshold. While the model preserves the spirit of the R&D-based endogenous growth model in the sense of its policy effects and the endogenous evolution of technological competence, the model does not need to reach the scale effect directly, where an increase in the size of an economy generates more rapid growth.     

Dynamic modeling of environmental amenity-driven migration with ecological feedbacks

Environmental amenity-driven migration presents a double-edged sword to policy makers concerned with both economic and ecological sustainability. Clearly the protection of environmental amenities is important, but what is the right balance between ecosystem protection and regional economic processes that simultaneously respond to and degrade ecological resources? We consider this question in the context of households that are attracted to a region by urban and lake amenities and a lake ecosystem that becomes degraded by land development. An analytical expression for the time evolution of population is derived from households' and firms' optimizing behaviors. Numerical methods with phase plane diagrams are used to study the steady state and transient dynamics of the resulting population-phosphorus coupled system. The system is found to be bi-stable under a range of parameter values with one attractor corresponding to a desired “balanced” economy-ecology state and the other to a very small population base with fully restored ecology. We examine the dynamics and quantify the resilience of the system in and away from the balanced steady state using phase plane diagrams that demarcate the two domains of attraction. Economic-ecological interactions fundamentally alter regional economic dynamics and influence the resilience of the balanced domain of attraction. For example, a one percent increase in the loadings coefficient associated with residential land development generates a three percent decline in the resilience of the balanced state. We find that economic feedbacks often increase system resilience. Initial increases in the attraction of urban amenities spur greater population growth that increases the resilience of the balanced state. In addition, price feedbacks that arise from capitalized (dis)amenities increase the resilience of the system to bad ecological shocks.     

Why economic dynamics matter in assessing climate change damages: Illustration on extreme events

Extreme events are one of the main channels through which climate and socioeconomic systems interact, and it is likely that climate change will modify the probability distribution of the losses they generate. The long-term growth models used in climate change assessments, however, cannot capture the effects of such short-term shocks. To investigate this issue, a non-equilibrium dynamic model (NEDyM) is used to assess the macroeconomic consequences of extreme events. This exercise allowed us to define the economic amplification ratio, as the ratio of the overall production loss due to an event to its direct costs. This ratio could be used to improve the cost-benefit analysis of prevention measures. We found also that, unlike a Solow-like model, NEDyM exhibits a bifurcation in GDP losses: for each value of the capacity to fund reconstruction, GDP losses remain moderate if the intensity and frequency of extremes remain under a threshold value, beyond which GDP losses increase sharply. This bifurcation may partly explain why some poor countries that experience repeated natural disasters cannot develop. Applied to the specific issue of climate change, this model highlights the importance of short-term constraints in the assessment of long-term damages, and shows that changes in the distribution of extremes may entail significant GDP losses in absence of specific adaptation. It suggests, therefore, that to avoid inaccurately low assessments of damages, researchers must take into account the distribution of extremes instead of their average cost and make explicit assumptions on the organization of future economies.