The Natural Environment and The Human Economy:

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The Natural Environment and The Human Economy

• The Neoclassical Economic Perspective

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Fundamental Assumptions

• Environmental (natural) resources are essential
  factors of production. A certain minimum amount
  of natural resources is needed to produce goods
  and services.
• Environmental resources are of economic concern
  to the extent that they are scarce.
• The economic value of a natural resource
  (including the services of the natural
  ecosystems) is determined by consumers
  preferences, and these preferences are best
  expressed by a freely operating private market
  system.
• Market price can be used as a measure (indicator)
  of resource scarcity.

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• In both the production and the consumption
  sectors of an economy, a specific natural
  resource can always be replaced (partially or
  fully) by the use of other resources that are
  either man-made (manufactured) or natural.
• Technological advances continually augment the
  scarcity of natural resources.

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• Nothing is lost in treating the human economy in
  isolation of the natural ecosystems (the
  physical, chemical and biological surroundings
  that humans and other living species depend on as
  life support). That is, the natural ecosystem is
  treated as being outside the human economy and
  exogenously determined.

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IMPLICATIONS

• The human economy is composed of three entities
  people, social institutions, and commodities.
• Since the value of resources is assumed to
  emanate exclusively from their usefulness to
  human, the economic notion of resource is
  strictly anthropocentric, i.e., basic resources
  have no intrinsic value.

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• In the production sector of an economy, what is
  being continually created is value. Similarly, in
  the consumption sector, what is continually being
  created is an influx of utility from the final
  use (consumption) of good and services. Hence,
  in the human economy, matter and energy from the
  natural environment are continually transformed
  to create an immaterial (psychic) flow of value
  and utility.

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• No explicit consideration is given to the extent
  in which the material flow (commodities) in the
  human economy is dependent on the natural
  ecosystems. More specifically, the natural
  ecosystems are simply viewed as a gift of
  nature ready to be exploited by humans and in
  strict accordance of the laws of demand and
  supply.