Environmental economics and policy

Post-Keynesian environmental economics provides a realistic view of the impact of different environmental policy instruments in modern capitalist economies and, in turn, guides the design of policy aimed at improving environmental conditions and reducing energy and material throughput. Post-Keynesian environmental economists criticize the orthodox approach to the environment and the framework of those ecological economists relying on neoclassical principles, since these models neglect fundamental uncertainty, endogenous preferences, path dependence, a foundational role for money, the distribution of income, non-ergodic processes, complex system dynamics, and economic power relations. These are the very factors, and particularly the last, that have led to the neglect of the environment in contemporary economic thought and economic systems. However, post-Keynesian environmental economics does support one of the founding principles of ecological economics - that production must adhere to the fundamental laws of nature. It also reinforces and enhances some other fundamental principles of ecological economics, such as the non-substitutability of natural and human-made capital and policy suggestions such as the precautionary principle. Unlike orthodox environmental economics that simply extends or completes orthodox welfare economics and is consequently often ignored when non-environmental economists develop models and policy, post-Keynesian environmental economics presents a challenge to post-Keynesian economics in general. With its focus on growth, development, and effective demand, post-Keynesian economics has been criticized as being subject to the same "growthmania" as the neoclassical school (Daly 2007, 26). Thus, post-Keynesian environmental economists utilize post-Keynesian principles and models and develop them to account for the environmental impact of production, improve the management of environmental resources, and shift economies to more sustainable growth paths while still maintaining a focus on full employment, growth, demand management, and income distribution. In doing so, post-Keynesian environmental economics should encourage all post-Keynesian economists to consider the environmental impact of policy conclusions. The chapter begins with a brief history of post-Keynesian environmental economics before addressing, in section 2, the reasons for the lack of attention devoted to environmental issues in post-Keynesian economics and exploring justifications for prioritizing environmental sustainability within post-Keynesian theory. In section 3 I discuss some of the ways the environment can be embedded within post-Keynesian theory before moving to a critique of orthodox environmental economic policy and a post-Keynesian alternative in section 4.