the 1950s: watershed of global sustainability

The human economy is a subsystem of a finite global ecosystem. Population and capital are the driving forces behind exponential growth in the world economy. Its potentials cannot be realized without a constant flow or throughput from the planetary sources of materials and energy, through the economic system, to the planetary sinks where wastes and pollutants end up (see Figure 17.1).

The World Bank economist Herman Daly has pointed out that capital and labor are substitutable for each other to a considerable degree, because their qualitative function in production is the same: They are both agents of the transformation of flows of raw materials into finished products. But the qualitative roles of energy and capital are totally different in the physical process of production, as different as transformer and transformed, as different as stock and flow. Environmental economists consider energy to be an independent third factor of production besides labor and capital. There are close relationships among the volume of manufacturing, the use of fossil fuels, and the accumulation of waste and pollutants in the environment. The more fossil fuel that economic activities use (this holds also for consumption), the more emissions they produce.