Lisi Krall

What Every Conservation Biologist Should Know about Economic Theory

The last century has seen the ascendance of a core economic model, which we will refer to as Walrasian economics. This model is driven by the psychological assumptions that humans act only in a self-referential and narrowly rational way and that production can be described as a self-contained circular flow between firms and households. These assumptions have critical implications for the way economics is used to inform conservation biology. Yet the Walrasian model is inconsistent with a large body of empirical evidence about actual human behavior, and it violates a number of basic physical laws. Research in behavioral science and neuroscience shows that humans are uniquely social animals and not self-centered rational economic beings. Economic production is subject to physical laws including the laws of thermodynamics and mass balance. In addition, some contemporary economic theory, spurred by exciting new research in human behavior and a wealth of data about the negative global impact of the human economy on natural systems, is moving toward a world view that places consumption and production squarely in its behavioral and biophysical context. We argue that abandoning the straightjacket of the Walrasian core is essential to further progress in understanding the complex, coupled interactions between the human economy and the natural world. We call for a new framework for economic theory and policy that is consistent with observed human behavior, recognizes the complex and frequently irreversible interaction between human and natural systems, and directly confronts the cumulative negative effects of the human economy on the Earths life support systems. Biophysical economics and ecological economics are two emerging economic frameworks in this movement.

Gender differences in faculty pay and faculty salary compression

Abstract A recording distinction between cost-of-living and merit adjustments at a unionized, public liberal arts college allows us to examine several issues related to gender differences in faculty pay. For example, we find that annual fixed-dollar merit increases and similar starting salaries contribute to comparable salary growth rates for female and male faculty. In this setting, the male faculty earnings advantage is traced to higher rank and years of service. These results underscore the importance of gender-neutral salary-setting practices and equal access to promotion and retention for female faculty. The salary distinctions also allow us to determine the source of the seniority penalty. The economics literature is divided on whether the often-observed lower pay of senior faculty is deserved. We find that merit pay rises with additional years of seniority and that the seniority penalty is rooted in cost-of-living adjustments that fail to keep pace with market trends. These findings illustrate how the seniority penalty can be linked to budget considerations rather than the lower productivity of senior staff.

Thomas Jefferson's Agrarian Vision and the Changing Nature of Property

Those who labor in the earth are the chosen people of God, if ever He had a chosen people, whose breasts He has made His peculiar deposit for substantial and genuine virtue. It is the focus in which he keeps alive that sacred fire, which otherwise might escape from the face of the earth. Corruption of morals in the mass of cultivators is a phenomenon of which no age nor nation has furnished an example. It is the mark set on those, who, not looking up to heaven, to their own soil and industry, as does the husbandman, for their subsistence, depend for it on casualties and caprice of customers. Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition. Jefferson 1781-1785, 678)

Ecological economics and institutional change

Ecological economics remains unfinished in its effort to provide a framework for transforming the economy so that it is compatible with biophysical limits. Great strides have been made in valuing natural capital and ecosystem services and recognizing the need to limit the scale of economic activity, but the question of how to effectively transform the economy to limit the scale of economic activity remains unclear. To gain clarity about the institutional changes necessary to limit the scale of economic activity, it is essential that ecological economics understands the limitations of its neoclassical roots and expands its theoretical framework to include how markets are embedded in social and institutional structures. This has long been the domain of institutional economics and heterodox political economy.

An Institutional and Evolutionary Critique of Natural Capital

Sustainability, in the discourse of neoclassical economics,1 is thought of as maintaining a constant or increasing level of utility (consumption in the standard formulation) which depends, in turn, on maintaining the stock of capital assets generating that utility (Hartwick, 1977; Solow, 1974). In this way capital has been elevated to a central position in neoclassical discussions of sustainability. Ecological economists2 have refined and extended the discussion of sustainability by introducing and popularizing the concept of natural capital. Focusing on natural capital as distinct from man-made capital has brought the biophysical context of economic activity front and center (Krall and Klitgaard, 2011). As Costanza (1994, 394) put it over 20 years ago: ‘…we are now entering an era, thanks to the enormous increase of the human scale, in which natural capital is the limiting factor. Human activities can significantly reduce the capacity of natural capital to yield the flow of ecosystem goods and services upon which the very productivity of human-made capital depends’. In the ensuing years a considerable effort has been invested by ecological economists in sorting through the best way to account for natural capital. It is important to clarify our understanding and use of natural capital, especially given its centrality in the discourse and methodology of ecological economics.

Disengaging from the ultrasocial economy: The challenge of directing evolutionary change.

We appreciate the depth and breadth of comments we received. They reflect the interdisciplinary challenge of our inquiry and reassured us of its broad interest. We believe that our target article and the criticisms, elaborations, and extensions of the commentators can be an important contribution to establishing human ultrasociality as a new field of social science inquiry. A few of the commentators questioned our definition of ultrasociality, and we begin our response with an elaboration of that definition and a defense of our argument that human ultrasociality began with agriculture. We then respond to the second major area of controversy, namely, our use of group selection to explain the economic drivers behind the agricultural transition. We then focus on the issue of human intentionality raised by the phenomenon of collective intelligence. The intriguing question is to what extent can an entire culture change its own destiny? We then address the issue of the division of labor raised by a number of commentators. The complex division of labor was both a driver and a defining characteristic of ultrasociality, even though it was present in simpler forms in earlier societies. The remaining issues addressed include energy and complexity, expansion and sustainability, and the accelerating evolution of human ultrasociality. These were raised by only a few commentators, but their importance warrants further elaboration.

An Institutionalist Perspective on the Economy and Price of Oil

The price of oil historically has not reflected the emergence of absolute scarcity. Rather, in examining the secular price of oil since World War II (WWII), it is apparent that the institutions that control the price of oil disguise this reality. By “secular price of oil” we mean a trend line reflecting the business interest of the oil industry. The price trend of oil has served the business interest in the post WWII era, and it is not a timely indicator of absolute scarcity. To be sure, the history of the price of oil has been one of oscillation around this trend line. These oscillations have many explanations, such as geopolitical events, speculation, the value of the dollar, and technological improvements.