Grad Students Honoring Fred Lee session at 12th International Conference

1. Environmental Resources,
Scarcity and the Heterodox
Production Model
Christian Spanberger

2. A Discussion on Resource Scarcity
• Ecological Economics (Daly, Georgescu-
Roegen)
– Laws of Thermodynamics, especially Entropy
• Institutional Economists (DeGregory, Khalil,
[Young])
– Resources as an anthropomorphic concept

3. Production
• Physical: Production is the transformation of
matter into different matter using energy.
– Production is zero-sum in terms of quantity and loss-making
in terms of quality.
• Economic: Production is the way by which
society materially provisions itself.
– Production is (potentially) surplus-producing.

4. Who is Wrong? Who is Right?
• EE is looking at the ‘natural’ system, IE at the economic system.
– Both analyses are correct for as long as they remain put at their object
of analysis.
– Both (potentially) make too strong claims
• Purpose of EE analysis
– Showing that there are physical laws that all processes, including
anthropomorphic ones, are subject too.
• Purpose of IE analysis
– Resources are produced means of production, not naturally given.
– Prices are not scarcity-indices.

5. Who is Wrong? Who is Right?
• IE cannot deny that there are real natural constraints
–Absolute Limits: efficiency of heat engine, Irreversibility of
economic processes, non-existence of 100 % recycling, ..
–Resource constraints
• Rate of resource use > rate of resource renewal (natural processes,
production of synthetic resources, recycling)
• Energy and time costs of regeneration
• The limitedness of solar energy
–Technology can expand (but also contract!) boundaries; but that
does not imply that these boundaries cease to exist.
– DeGregory’s empirical argument is problematic.

6. Who is Wrong? Who is Right?
• EE cannot deny that entropy is just one characteristic
defining the economic usefulness and availability of
matter/entropy.
– Production process often requires high entropy matter; example
of recycling
– If used as metaphor for economic availability, technology can
have an absurd effect on objectivity of entropy concept.

7. Implications for Modelling the Productive
Structure of the Economy
• The Heterodox Production Model is designed to portray
production in an economic, not physical way.
• The implications of economic activity for the natural
environment (and other way around, natural creation of
resources) are much more productively analyzed from a
physical perspective, can be integrated into an economic
framework with the help of the social fabric matrix
though.

8. Implications for Modelling the Productive
Structure of the Economy
• Modelling Natural Resources:
– Difficult to model ‘resources become’, since model is based on a
given state of technology. Modelling resources as produced
means of production possible though.
– KS, RRS : GÅ L → Q
• RRS in all sectors?
– Resources as part of the Q vector and included in G matrix.

9. Implications for Modelling the Productive
Structure of the Economy
• Modelling Natural Resources:
– Waste as Resource
• All economic activities (production, household social activities) produce
waste, which means that waste has to be included as a byproduct to these
activities.
• Waste, for the purposes here, is to be considered an input into the
production of economic resources as well.
• They would hence enter the G matrix for those sectors producing resources.

10. Conclusion and Outlook
• Both ecological and institutional discussions of scarcity are
important for what they are able to show.
• The ecological implications of economic activities are more fruitfully
modelled in a ‘nature as a whole’ framework.
• The institutional viewpoint on resources as produced means of
production can be modelled through the heterodox production
model.
• The task ahead must be to integrate economic and ecological
models of production processes – the linking structure for this can
potentially be the social fabric matrix.