Introduction

For practical purposes it is fair to say that wealth, which underlies welfare, is based on stocks of material goods (including land).1 From an economic perspective, welfare is a consequence of consumption, which is essentially that part of economic activity that is not productive of more wealth or simply destructive (such as warfare). The productive component of wealth is known as (industrial) capital, whereas the consumption-related part, consisting of residential housing and durable consumer goods, is not usually counted as part of capital stock, even though some have argued that it should be so counted. What matters for this chapter is that both production and consumption require flows of material goods, as well as energy (or at least energy carriers) such as fuels and electricity. These flows can be characterized as industrial metabolism.

Technology (or knowledge) is not an element of wealth per se except to the extent that it can be protected and exchanged. Technology may be productive and therefore worth investing in, either for purposes of increasing skills and 'know-how' or - as R&D - in order to promote discovery, invention and innovation. But the knowledge base of an individual, or a firm, is rarely transferable or usable by others, except by means of a cooperative effort of teaching and learning. Hence it is not a component of wealth.

On the other hand, material goods that are either portable or transferable to different owners by exchange of title are certainly a component of wealth as the term is understood. Evidently the raw materials from which economically valuable goods are produced (by the systematic application of knowledge and useful work) must be extracted directly from the earth or from biomass, sorted into separable components, refined, converted, recombined into useful intermediate substances, formed, in the case of solids, into useful shapes and assembled into useful devices or structures. From the first law of thermodynamics, better known as the law of conservation of mass,2 it follows that all materials extracted from the earth or atmosphere must ultimately return to the natural environment as fertilizers, wastes or accumulate in the human-built environment, or anthroposphere (Ayres et al. 1970; Ayres and Kneese 1969). This yields the mass-balance principle, which is a very useful accounting tool with more applications than most people realize.

To form a coherent picture of all of these separation, conversion and recombination relationships, it is helpful to view the flow of materials through a sequence of processes as a 'life cycle', sometimes characterized as 'cradle to grave'. Energy carriers (fuels, electricity) must have an original material basis. Similarly material goods, in turn, constitute the basis of most final services (even haircuts require scissors). It is only the final services themselves that are immaterial.

Waste flows quantitatively approximate extraction flows, inasmuch as only a small fraction of the total mass of materials extracted from the earth is ultimately embodied in the anthroposphere (mostly in structures). Not all wastes are captured or treated. In fact the greater part overall consists of carbon dioxide and water vapor from combustion processes, which are currently discharged directly into the atmosphere. Wastes that are not treated can cause harm to the environment, health damage to humans or directly to other goods (for example, via corrosion). Those wastes that are captured and treated (in the industrialized countries), including sewage, municipal refuse, toxic industrial wastes and combustion wastes such as fly-ash, sulfur oxides (SOX), nitrogen oxides (NOX), and par-ticulates, nevertheless require a considerable application of capital, labor, knowledge and thermodynamic work which could otherwise be utilized productively.

Consequently, waste flows can be characterized as 'bads' from an economic perspective (in contrast with 'goods') and the costs of treatment or the unpaid costs of harm done must be regarded as 'value-subtracted' (in contrast to 'value-added'). The costs or value subtractions associated with materials extraction, processing and use are - in a very broad sense - proportional to the overall quantities of material flows. On the other hand, it is also true that the waste flows associated with the material economy are reflections of the inefficiencies in the system. The more efficient the conversion (especially energy conversion) processes the less the waste flows and the environmental harm, other things being equal.

Thus aggregate material flows are also related to long-run sustainability. It is in this context that the notion of 'dematerialization' has become a topic of some interest in recent years. This chapter addresses several of these topics, beginning with mass flows.

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