Several of my colleagues in the UMaine School of Economics and I have had the same experience. When we meet someone new and tell them we are economists, we are asked for investment advice or an opinion on when the Federal Reserve is likely to raise interest rates. There is often a look of disbelief when we tell them that we do not do that kind of economics. The common assumption is that economics is only about business or finance. The reality is that there are many types of economics just like there are many types of biology. You would no more ask a botanist for help with genetic testing for cancer treatment than you would ask an ecological economist (that’s me) for business cycle forecasting.
Like in other disciplines, economics is a big and diverse field with both complementary and competing theories and practices. There are financial economics, resource economics, macroeconomics, behavioral economics, experimental economics, environmental economics, welfare economics, Marxist economics, and so on. I am always puzzled when people are surprised that there are so many different parts to the discipline.
It is common to assume that economics is economics. Like in other disciplines, there are sets of assumptions and practices (called paradigms) that at times come to dominate economics. In the mid-20th Century such a dominant paradigm took hold called neo-classical economics. The paradigm assumed, among other things, that humans behave rationally, that markets are effective ways to allocate scarce resources among competing uses, and that trade usually benefits both trading partners. The application of the neo-classical model in public policy yielded dramatic population and economic growth in the post-World War II era. The material quality of the lives we lead today came from those policies.
It was not far into the application of neo-classical economics before economists began to worry about the effects of this model in several dimensions, but particularly in terms of the effects of growth on natural resources and the environment. The first manifestation of this concern was the establishment of Resources for the Future (RFF) in Washington, D.C. in 1952. Economists were anxious about the adequacy of natural resources to support the growth that was occurring in the global economy.
Along with the establishment of RFF was the development of new types of economics, such as natural resource economics and environmental economics. From this came well-developed theories of externalities (explained in my blog post Do You Have a Problem With Gas?). Population growth and economic growth create pervasive “external effects,” costs that spill over from one consumer to the rest of society. Natural resource and environmental economics became a major part of the discipline and a challenge to some of the assumptions of the neo-classical paradigm. Markets can and do often fail and collective intervention is needed to fix this failure and protect us from its adverse effects. Vast work was done on the economic theory and practice of resource use and environmental protection.
Ecological economics developed in the 1980s out of a recognition by some economists and ecologists that resource and environmental economics did not go far enough in questioning the assumptions of the dominant paradigm. This new sub-discipline was rooted in the earlier work of economists Nicholas Georgescu-Roegen (The Entropy Law and Economic Process) and Herman Daly, sometimes called the father of ecological economics. The basic idea was that some parts of the natural world are qualitatively different from other resources in the economic system. In particular, energy needed to be accounted for by more than just its price in markets, even if that price was adjusted to reflect externalities. This is an understanding that the economy is a human system nested within a larger natural system whose laws matter for the economy.
Ecological economics also poses fundamental questions for the idea of economic and population growth, starting with the groundbreaking work of Herman Daly on the steady state economy (see my survey of this topic in the Encyclopedia of Sustainability). This led to a fundamental questioning of the idea that economic growth will inevitably lead to human wellbeing, “a rising tide lifts all boats.” This idea has now evolved into the concept of sustainable de-growth, addressing the question of how to provide human wellbeing on a finite planet.
Ecological economics is now firmly established as an important part of the disciplinary landscape of economics. There is an International Society for Ecological Economics, several national societies around the world, and its own academic journal, Ecological Economics. In fact, this journal has so influenced the discipline that it is now ranked by Journal Citation Reports as the 25th most impactful economics journal out of a total of 589 in the discipline. Ecological economics and other parts of the discipline are effectively challenging the dominant paradigm, evidence that economists are still learning.
Stereotypes are often misleading. This is certainly true in economics and in other academic disciplines. The next time you meet and economist see if, rather than getting investment advice, you can learn ways to help save the planet.