Economic Abstraction

When combined with analytical and geographical scope, ENL's economic abstraction fully defines the range of topics that constitute its analytical universe.

Systematic thought about any complex reality requires that we ignore minor details and focus on significant features. The distinction between the minor and the significant sets the stage for all subsequent development and is thus of central importance.

The abstraction used by ENL is depicted in the following diagram. The components are briefly described below and treated more fully throughout this wiki.

ENL's economic abstraction
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The key economic factors covered by ENL’s terms, concepts, and tools.

The diagram uses solid lines to depict flows that are predominantly physical, and dashed lines to depict flows that are predominantly non-physical. It divides the economic world into three major components: humankind, nature, and the economy itself.

(It is true that, considered in physical terms, an economy is part of the environment in which it is embedded. However, they can be represented separately in a conceptual diagram in order to understand the logical relationships between them.)

There is a highly significant relationship among the abstraction's three major components: the economy is the means for achieving humankind's ends, subject to nature's constraints.

This set of relationships is fundamental, and recognizing it is indispensable not only for ENL, but for any other guiding framework that might be developed in the future.

The economy exists for people rather than the other way around. Stating this clearly and making it a central part of the economic abstraction should ensure that we will never treat the economy as an end in itself, but will instead focus on the human requirements that—within natural limits—justify its existence.

The other pitfall that must be sidestepped is to confuse an economy's goal with the constraints to be respected while striving to meet this goal. Undeniably, an economy must operate within its environmental limits. But this restriction is not the economy's purpose — the economy is there to meet humankind's needs for shelter, sustenance, etc.

If this is unclear, think about driving a car. We don't do this to avoid accidents, but to get to our destination. In getting to our destination, however, it is extremely important that we avoid accidents. Getting there is the goal, whereas avoiding accidents is the constraint on our driving behavior.

This distinction is not a semantic subtlety — it is critical to our economic orientation. For example, the North Korean economy could be the most sustainable one on Earth, but if its people are living in misery and ill-health, then it is far from being the world's most successful one.

We don't want to emulate such an economy as a whole, but we do want to duplicate its sustainability while creating a bountiful economy. However, environmental sustainability has been misidentified as an economic goal by several modes of environmental thought, including many proponents of ecological economics.

Humankind is at the heart of ENL's economic concerns, and it is therefore placed at the top of the abstraction diagram. As can be seen from the arrows, people interact with the economy in three main ways: through the consumption of final outputs, the provision of labor, and the health effects associated with the environmental consequences of production.

The fact that humankind provides labor raises an important point: humankind, like nature when it provides natural resources, is part of the economy. In other words, humankind and nature each have two distinct economic roles. Humankind is the economy's end, but as workers we are also part of that economy, and thus participate in the means to satisfy the end.

Similarly, nature establishes the economy's constraints, but as a set of resources it too is part of the economy, and therefore part of the means to attain human objectives.

It is important to recognize these dual roles.

A final output is one that is directly consumed, and therefore includes such things as houses, books, meals, and manicures.

Any other output is called an intermediate output.

Some outputs can be both, depending on their application: a train can be used for leisure travel or to deliver cargo; a computer can be used to play games or to write business reports. Because many final outputs are physical objects, consumption is shown as a solid line.

Labor is not a physical flow and is therefore shown as a dashed line.

Inside the box marked "Nature" are renewable and nonrenewable resources, which flow from nature into the economy. Nature also includes the capacity to absorb wastes and the potential for habitat destruction. These are represented by arrows going the other way—from the economy to nature.

Renewables are resources associated with the sun's radiation: the organic components of the biosphere plus the hydrological and atmospheric phenomena resulting from solar energy. Although independent of the sun, the geothermal energy from the earth's interior is also included in this category.

Nonrenewables are materials found in the earth's crust that are not regenerated over time periods that are meaningful to humankind. These include minerals, fossil fuels,18 topsoil for agriculture, and to some degree water. Such natural assets are stored, in finite amounts, in accumulations called stocks.

Habitat destruction refers to the degradation of living conditions for non-human species as a consequence of humankind's economic activities. This can result in the weakening of species and eventually their extinction.

Wastes, which are the material residues of economic activities, include the various types of pollution, materials discarded during production, and outputs that are thrown away at the end of their useful lives.

The four main interactions between nature and an economy—habitat destruction, wastes, renewables, and nonrenewables—are referred to in ENL as natural flows.

The first three of these have a biological basis and are therefore called biological flows. Such flows, which are associated with ecological degradation and threshold effects, are used to set production limits.

The fourth type of natural flow, nonrenewables, does not have a biological basis. These resources are subject to depletion, but not to degradation or thresholds, and are therefore ignored when production limits are established.

In the box marked "Economy" are final outputs and intermediate outputs. Intermediate outputs are used in the production of other outputs. Included in this category are the components of a final output, such as the cabinets and paint used in producing a house, as well as machines and other productive assets, such as buildings and trucks.

The distinction between final and intermediate outputs is crucial because our consumption desires are met only by final outputs. Producing intermediate outputs may be good for some businesses, but from ENL’s perspective they are simply a means to an end—the production of final outputs that can enhance human well-being.

The abstraction helps define the extent of ENL's analytical universe. The framework's purpose is to develop methods that permit us to estimate rational quantities and rates for all the economic components shown in the diagram, plus the population level.

However, the abstraction also defines the limits to this universe. For example, while the framework proposes a method for limiting waste flows in general, it does not consider specific waste flows such as carbon dioxide or cyanide. Such details are in the realm of the physical sciences, which must be consulted in conjunction with ENL and functional theories to address concrete environmental issues.

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