Reshaping the Relationship between Environment and Development: A Theoretical Framework under the Paradigm of Eco-civilization and Its Policy Implications

Abstract This study investigates the sustainability implications of the theoretical models of industrialization and urbanization pioneered by Dixit and Stiglitz 1 so to open the theoretical “black box” of the unsustainability of the traditional industrialization mode, and shows how to reshape the relationship between the environment and development under the paradigm of ecological civilization. It finds that the theoretical models that “perfectly” simulate the traditional industrialization mode all have the implicit consequence of environmental unsustainability. Nonetheless, this limitation is not due to the problems of the models themselves but is more a result of the limitations of the traditional developmental and neoclassical economics paradigms of the industrial era. Therefore, the consequences of unsustainability cannot simply be avoided through external policies such as technological progress and environmental regulations, nor can they be prevented by simply adjusting some parameters in these theoretical models. Instead, a shift is required in both the developmental and the economics paradigms formed in the traditional industrial era. From an ecological civilization perspective, this study rethinks the basic issues of economics along the two lines of the ends (what) and the means (how) of development; briefly reviews the history of economic thought; and uses a conceptual framework to reorganize the relevant intellectual profundities that are neglected in standard neoclassical economics. The study further formalizes the conceptual framework in a general form model and shows how a paradigm shift in development could shift the trade-offs from the multiple goals of the economy, the environment, and well-being in the traditional industrial era to mutual reinforcement in eco-civilization.