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Lessons from Science: Need for a Rethink of Concepts in Economics
The recognition of two important concepts in science, namely, the assimilative capacity of nature (resilience) and the entropy law of thermodynamics enables the formulation of an alternative framework for factor utilisation in economics. This framework, which explicitly includes environmental capital as a factor, enables the llustration of the entropy law being the driver of diminishing marginal returns and the limited ranges of substitutability between factors. Such revisions have profound implications for policy formulation. Stabilising environmental capital becomes an important instrument of policy at all levels.
With the usual disclaimers, I remain grateful to an anonymous referee of EPW for providing v ery valuable comments besides those of T N Srinivasan, Geoffrey Harcourt, Azad Singh Bali and Krishnan Chandramohan. Further, the formulation of basic ideas in this article was feasible primarily due to collaboration with environmental scientists both at
the National University of Singapore and Macquarie University.
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