Ecological economics Explained

Ashly Chole Senior Finance Researcher

Last Updated 30 July 2025

Ecological economics

The study of ecological economics offers a fresh perspective on economic concerns based on ecological principles. It may be viewed as an interdisciplinary method for studying human economics and ecological systems that places a focus on activities that support the preservation of natural capital across time. To think about sustainability, one might use ecological economics as an organizational framework and examine its four pillars.

The core principle of ecological economics

Ecological economics' central thesis is that the biosphere, the atmosphere, and the oceans are all interrelated webs of ecosystems into which people are woven. They communicate by exchanging organisms with each other and with other biosphere regions (exchange) (interaction). Ecosystem economics is based on the premise that we can only live sustainably if we are aware of how ecosystems function; otherwise, we risk destroying or degrading them through our activities. It also entails realizing what it means for people to be a part of the world rather than merely an extra species on top of it. The necessity of comprehending how human economies are intertwined with environmental systems and how they are dependent upon them is another point made by ecological economists.

Environmental economists contend that we must comprehend how human economies are intertwined with and dependent upon environmental systems. They also emphasize how crucial it is to comprehend how ecosystems function to prevent further harm or deterioration caused by our actions. In this sense, ecological economics is an effort to combine the study of ecosystems with the study of human economies. Environmental economists contend that we must comprehend how human economies are intertwined with and dependent upon environmental systems.

It is believed that because of this interconnection, society must take several sustainability factors into account

Considering the interconnectedness and coevolution of human economies and natural ecosystems, ecological economics is a transdisciplinary area of academic study. This interdependence, it is believed, necessitates that communities take into account not just one facet of sustainability but all aspects simultaneously. Ecosystem services are characterized as 'the advantages humans derive from ecosystems' in ecological economics. For instance, it is possible to consider that wetlands and grasslands play a significant role in maintaining water quality, that forests and grasslands play a significant role in maintaining air quality, and that biodiversity plays a significant role in many other services like pollination and nutrient cycling. According to ecological economists, as people considerably benefit from these services, strategies for sustainable development or economic decision-making should take this into account. They should also be taken into consideration when planning for conservation.

Ecological economics is a relatively new topic, and it has drawn criticism for the lack of consensus among academics over its core principles. It does, however, possess a few distinctive qualities that set it apart from other economic topics. Secondly, ecological economists contend that, alongside financial capital, natural capital (such as air quality) should be listed as an asset on national balance sheets (e.g., buildings). Second, they contend that people can only change natural resources into new forms rather than consume them entirely.

They contend, thirdly, that the economy is entwined with and dependent upon the natural environment, which offers a vast range of commodities and services. Fourth, according to ecological economists, it is our responsibility to safeguard our natural resources so that present and future generations can reap their rewards. Finally, they contend that environmental benefits are not necessarily economic and that some economic expansion may even be harmful if it increases pollution or decreases biodiversity. Sixth, ecological economists highlight the necessity of laws that prevent natural capital from being depleted by making it more expensive to exhaust these resources.

The concept of ecosystem services

The term 'ecosystem services' is used to describe the genuine advantages that humans derive from ecosystems, such as the prevention of soil erosion, access to clean water, and the preservation of wilderness. Under the premise that ecosystems benefit people, ecosystem services are defined as those functions that an ecosystem provides. For instance, forests that store carbon help to reduce climate change and avoid droughts; biodiversity that produces food for humans; and nitrogen-fixing plants that play a crucial role in water resource conservation by limiting leakage into groundwater aquifers.

Additionally, ecosystems provide other necessities for human well-being, such as better air quality, cleaner water, pollination services (from bees, for example), species diversity in animals, and pest control methods like predators and parasites that can outcompete disease-causing organisms if they live in an area where there is intense competition between various species for space based on their needs at different stages of life cycles.

It also highlights how crucial it is to take steps to preserve natural capital throughout time

Also, ecological economics highlights the significance of maintaining natural capital throughout time and avoiding investments that may provide profits or create employment in the short term but have detrimental long-term effects on the environment (such as construction projects). Based on ecological principles, this branch of research offers a fresh perspective on economic problems. Ecological economics' central thesis is that the biosphere, the atmosphere, and the oceans are all interrelated webs of ecosystems into which people are woven. According to the argument, this interconnectivity necessitates that civilizations take into account all facets of sustainability, not just one.

The term 'ecosystem services' has been widely used to describe the actual benefits that humans derive from ecosystems, including the prevention of soil erosion, the provision of clean water, and the preservation of wilderness. These services are valued financially through market prices rather than by using more conventional methods like labor inputs or land area occupied. Thinking about the function of natural capital is the first step in comprehending the intricate interactions between people and ecosystems. Natural capital is the flow of goods and services that humans get from the environment, such as food, fiber, fuel, minerals, and genetic resources. These advantages are sometimes called ecosystem services. A complex web of interconnected species, communities, and their surroundings is what is known as an ecosystem. Humans are a component of this system and affect it through their consumption, resource usage, and waste-creation habits.

The study of ecological economics enables us to comprehend how to live sustainably

Our understanding of sustainable living is aided by ecological economics. The cornerstone of ecological economics is the notion that, as humans, we are part of a complex network of interrelated ecosystems and that our activities have an impact on not only other species but also the environment as a whole. The phrase 'ecosystem services' refers to the actual advantages that individuals derive from ecosystems. Clean air and water, food production (including pollination), provisioning services for animals such as predators or prey species, pest control, woody material for construction or energy generation, and many other activities are valued because they give us dependable access to resources like food and shelter. Environmental science, natural resource management, social science, and other fields of study are all included in the broad field of ecological economics. Environmental ethics and conservation biology are intimately tied to it.