Scale, prices, and biophysical assessments

In a recent forum on biophysical assessments, a number of ecological econom ists expressed serious reservations about the use of prices to assess the a ppropriate scale of macroeconomic systems. While such reservations are warr anted, the preference for biophysical assessments over prices indicates tha t many ecological economists are focussing on one notion of scale and negle cting another altogether. There are two notions of scale that are critical to achieving sustainable development (SD). One is the maximum sustainable m acroeconomic scale; the other is the optimal macroeconomic scale. The maxim um sustainable scale is the largest macroeconomic scale that can be sustain ed by a throughput of matter-energy that is within the ecosphere's regenera tive and waste assimilative capacities. The optimal scale is a preferable m acroeconomic scale and is one that is not only sustainable, but one that ma ximises the net benefits of economic activity. Biophysical assessments are needed to determine the maximum sustainable scale because ecological sustai nability is a biophysical problem, not an economic problem. Thus. it is thr ough biophysical assessments that the necessary restrictions on the incomin g resource flow can be calculated and imposed. However, since the achieveme nt of an optimal macroeconomic scale is an economic problem - albeit a cons trained economic problem - relative prices are required to efficiently allo cate the sustainable resource flow so the macroeconomy can adjust to the op timum. Failure to recognise the two notions of scale and the most appropria te means of their assessment is likely to thwart rather than advance the mo vement toward SD. (C) 2001 Elsevier Science B.V. All rights reserved.