Diagram for a small planet: The Production and Ecosystem Possibilities Curve

With the development of the GPI there is now an ecological alternative to GDP for measuring a country's economic performance, but we still lack an ecological alternative to the PPC for illustrating a country's economic problem. The diagram suggested here illustrates a country's production and ecosystem possibilities - including climate stability, flood control, carbon sequestration, aquifer recharge, scenery, recreation, biological diversity, and so on. Burning a rainforest to clear the land shifts a country's PPC outward, giving the visual impression of an unmitigated improvement; but such development causes a movement along the country's PEPC, as ecosystem services are transformed into GDP. The slope of the PEPC is the marginal rate of transformation, which equals the ratio of the land's marginal marketable product to its marginal ecosystem product. Changes in technology create substitution and income effects that help explain the enclosure movement and the environmental Kuznets curve. Much as employment of the human resource can be restrained to allow more leisure, development of the natural resource can be restrained to preserve more ecosystem services. Commercial lobbying interests and rivalries for positional goods create distortions that move a country along its PEPC to a materialistic misallocation, with too little conservation. An idealistic misallocation is also possible, with too much preservation of the natural environment. Small is beautiful, up to a point, and that is evident in this diagram. Jacob Viner's [Viner, J., 1937. Studies in the Theory of International Trade. Harper and Brothers, New York] analytical objections to the PPC are revived.