Ecological Limit—Economy

When dealing with an economy's total outputs, ENL's approach assumes the output mix remains the same, and the economy's scale changes by increasing and decreasing this fixed output combination.

With this in mind, ecological constraints apply to an economy's total outputs in much the same way as they do to a single output. The only difference is that the constraints are based on environmental budgets instead of budget shares.

When an economy's scale increases, it will eventually exhaust an environmental budget. The scale at this point is called the economy's budget limit with respect to this flow. Because numerous outputs are produced by an economy, it will have numerous budgets and budget limits.

The budget limit currently associated with the lowest economic scale establishes the economy's maximum allowable scale, and is therefore the economy's ecological limit. See the following figure.

Budget limits and ecological limit
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The economy as a whole has many budget limits. The lowest of these is the ecological limit for the economy’s scale. "EV" and "IC" indicate effectual value and input cost respectively.

As this economy increases in scale, its total outputs will sooner or later exhaust the economy's first budget limit, which is the economy's current ecological limit.

Scale cannot increase beyond this point until the flow is no longer used or the budget limit is increased, as with share limits for individual outputs. If this should happen, the second budget limit will set the ecological limit, and so forth.

It should be noted that the violation of an economy's ecological limit is essentially a local version of global overshoot. In fact, global overshoot has occurred because numerous rich countries have drastically overstepped the ecological limits of their economies. This broader topic is addressed in detail as part of ENL's approach to reversing overshoot.

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