Ecological Economics, Model-Based Theory Building
This paper demonstrates the usefulness of the system dynamics approach to the development of ecological economics, the study of the interactions between economic systems and ecological systems. We build and analyze an ecological economic model: an extension of a population–resource dynamics model developed by Brander and Taylor and published in American Economic Review in 1998. The focus of the present paper is on the model building and analysis to contribute to theory building rather than eliciting policy implications from the model. Hence, this is an example of model-based theory building using system dynamics. Our analysis sheds light on several problems with this type of ecological economics model that can be attributed to three commonly taken approaches to model building and analysis by traditional economics: simplification through the use of exogenous variables, equilibrium thinking, and a focus on the so-called balanced growth path. To solve these problems ecological economic models should adopt approaches that are not prevalent in traditional economics such as taking an endogenous point of view and allowing for out-of-equilibrium (adaptation) which are key principles of the system dynamics method.
Uehara, T., Y. Nagase and W. Wakeland. “Using system dynamics to contribute to ecological economics” Proc. 30th Int’l Conf. System Dynamics Society, St. Gallen, Switzerland, July 2012.