Finance:Regenerative economic theory

Regenerative economics is an economic system that works to regenerate capital assets. A capital asset is an asset that provides goods and/or services that are required for, or contribute to, our well-being. In standard economic theory, one can either “regenerate” one's capital assets or consume them until the point where the asset cannot produce a viable stream of goods and/or services. What sets regenerative economics apart from standard economic theory is that it takes into account -and gives hard economic value to - the principal or original capital assets: the earth and the sun. Most of regenerative economics focuses on the earth and the goods and services it supplies.

Regenerative economics is based on the notion of the earth as the original capital asset, and so places value on the environment. Proponents of regenerative economics believe that disregarding this value has created the unsustainable economic condition referred to as uneconomic growth, a phrase coined by leading ecological economist and steady-state theorist Herman Daly, as stated in the book Reshaping the Built Environment: Ecology, Ethics, and Economics. The authors of the regenerative economic theory believe that uneconomic growth is the opposite of regenerative economics.

Regenerative economics vs classical economics

Interdisciplinary Systems

Our world is a product of flow networks. Flow networks are interdependent on multiple components, such as energy and natural resources, and they are also known as systems. The health and viability of systems are determined by the resiliency of the subsystems within them. As such, a "regenerative" system is composed of subsystems are able to renew or sustain itself.

Economics

Economics is a discipline that studies the allocation of resources in the context of scarcity, and there are interdisciplinary application of economics, such as the environment. The most widespread definition of economics involves the allocation of wealth, in the context of the human monetary system. Economics rely on various subsystems, such as communities, businesses, resources, and money. Since economics rely on the world's natural resources, economic systems and ecosystems are interconnected.

Traditionally, economics in financial institutions do not account for all of the social costs human activities, which disrupts the circulation of resources within a system and causes externalities. The current economic system emphasizes continuous growth, which is not sustainable when accounting for the rest of the system which it is a part of.

Regenerative economics

Regenerative economics combines the concepts of economics and the values of a self-sustaining and self-renewing system. By doing so, it enhances the resiliency of the economic system. The regenerative economics works to account for social costs and values that may be traditionally unaccounted for, including:

1. Cross-scale circulation of resources and information
2. Adequate investment in capital
3. Emphasis on using renewable resources in a circular economy
4. Diversification of business sizes
5. Systemic benefits
6. Learning processes

There are four components of regenerative economics —circulation, organizational structure, relationships and values, and collective learning. Circulation refers to the flow of resources, such as money, information, and energy sources. Organization structure determines how the flow of circulation, either by enhancing or inhibiting flow. Relationships and values determine the operations and efficiency of circulation. Collective learning supports strength of the system. All four components are interdependent and encompassing, and contribute towards a regenerative economy.

Principles of Regenerative Economics

The following are the ten principles of regenerative economics.

1. Maintain robust, cross-scale circulation of critical flow
2. Regenerative re-investment
3. Maintain reliable inputs
4. Maintain healthy outputs
5. Maintain a healthy balance of integration of organizations of all sizes
6. Maintain a healthy balance of resilience and efficiency
7. Maintain sufficient diversity
8. Promote mutually-beneficial relationships and common-cause values
9. Promote constructive activity and limit overly-extractive and speculative processes
10. Promote effective, adaptive, collective learning

Regenerative economics works to strengthen of the world's systems by systemic issues, driving innovation, and learning.

Sustainability Goals

Regenerative economists believe that the most important ways to achieve sustainability are to restructure the economy and to create a widespread culture that promotes sustainable activity and cooperation. Unlike more conventional approaches to conservation and sustainability, it focuses less on mitigating the effects of human activity and more on changing human behavior to minimize impact. Specifically, it states there needs to be a focus not only in addressing systematic problems but also to strength human and ecological wellbeing. Transforming the economic system to become more sustainable requires more than just reallocating the money supply or strengthening the roles of financial regulators. It involves challenging the socio-ecological system — concentration of resources, transparency of financial systems, governance structures, and the health of the planet.

Alternative frameworks

There are other frameworks to address the challenges the current economic system.

Ecological economics is also an interdisciplinary field used to address environmental and economic problems. It focuses on setting systematic limits to the current economic system, unlike regenerative economics' focus on reproduction of life in nature.

Circular economy is an economic model that emphasizes maximizes the use of resources for as long as possible.

Also see

• Circular economy

External links

• Capital Institute
• Center for the Advancement of the Steady State Economy
• Net energy analysis Encyclopedia of Earth