Comprehending environmental and economic sustainability: Comparative analysis of stability principles in the biosphere and free market economy

Victor G. Gorshkov, Anastassia M. Makarieva and Bai-Lian Li

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Abstract: Using the formalism of Lyapunov potential function it is shown that the stability principles for biomass in the ecosystem and for employment in economics are mathematically similar. The ecosystem is found to have a stable and an unstable stationary state with high (forest) and low (grasslands) biomass, respectively. In economics, there is a stable stationary state with high employment, which corresponds to mass production of conventional goods sold at low cost price, and an unstable stationary state with lower employment, which corresponds to production of novel goods appearing in the course of technological progress. An additional stable stationary state is described for economics, the one corresponding to very low employment in production of life essentials such as energy and raw materials. In this state the civilization currently pays 10% of global GDP for energy produced by a negligible minority of the working population (currently ~0.2%) and sold at prices greatly exceeding the cost price by 40 times. It is shown that economic ownership over energy sources is equivalent to equating measurable variables of different dimensions (stores and fluxes), which leads to effective violation of the laws of energy and matter conservation.

Date: 2010-11
New Economics Papers: this item is included in nep-env
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Published in Annals of the New York Academy of Sciences, 1195, E1-E18, 2010

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1011.5978

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