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Economics & Finance

Research Article  |  Published 23 April 2019

The Need for, and the Growing Importance of, BioPhysical Economics

Charles Hall* and Kent Klitgaard

Department of Environmental and Forest Biology and Division of Environmental Sciences, State University of New York College of Environmental Science and Forestry, Syracuse, NY, USA
Department of Economics, Wells College, Aurora, NY, USA

Abstract

Actual economies are based upon a variety of processes whereby humans interact with nature: Extraction; production; distribution; consumption; and waste production. Material goods and energy-requiring services originate not in markets but in the Earth. But for the past 150 years, economics has been treated primarily as a social science. The conceptual model upon which mainstream (neoclassical) economics bases its analyses consist of a circular flow of income between producers and consumers, mediated by means of markets. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given to the flow of energy and materials from the environment and back again, and little account given to human interactions that take place outside of market processes. Analyses by natural scientists (and others) find that the conventional model is simply not credible. In this paper we bring to the attention of the readership of this new journal the approach of BioPhysical Economics, an important but not widely understood development in economic theory. We review these criticisms and offer the basic concepts to construct a completely new approach to economics, one that will probably be essential in our future that is likely to be highly constrained by climatic, other environmental, resource depletion and other BioPhysical issues.

Keywords:
BioPhysical, Economics, Energy, Thermodynamics, Natural science, Criticisms of neoclassical economics

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