DOI
10.1080/08941920.2015.1024369

Summary
Drawing upon his original ecological approach to evolutionary economics, Kenneth Boulding developed a systems-theoretic reconstruction of the neoclassical supplyand-demand framework. He located the systems-theoretic meaning of the neoclassical concept of opportunity costs in the limits of the environmental carrying capacity, which are centrally emphasized by ecological economists and sustainability scholars. An implication of his argument is that the neoclassical supply-and-demand framework presents a variety of the general systems theory that suffers from being grounded in the attenuated concept of the environment. This article explores the options for broadening this concept by revisiting the work of Niklas Luhmann and C. West Churchman. Their ideas are shown to underlie an alternative systemstheoretic framework that is capable of incorporating the contemporary concerns about the societal and ecological sustainability of economic activity.

Relevance for Complex Systems Knowledge
The article discusses the systems-theoretic significance of the neoclassical supply-and-demand framework and draws out implications for understanding the nature of the modern sustainability challenge. According to Kenneth Boulding, economic interaction is regulated by the constraints of the carrying capacity of the environment which consists of all the other populations. Further, he argues that the concept of ecological equilibrium translates well into that of market equilibrium in the Marshallian supply-and-demand framework. Boulding links the concept of opportunity costs to absolute scarcity. This systems theoretic account of opportunity costs highlights their generic role as an expression of the ultimate environmental constraints faced by interacting populations, including the populations of the ‘‘commodity species.’’ This is contested in the modern sustainability scholarship makes it clear that the environmental constraints conveyed by the categories of supply and opportunity costs fail to adequately reflect the limits of the carrying capacity of the natural and societal environment. The modern challenge of sustainability casts doubts on the ability of this framework itself to do justice to the complex embeddedness of the real-world economies into the encompassing natural and societal environment. still, the innovative contribution of Boulding’s approach can be discerned as twofold. First, Boulding insightfully represented the interplay between supply and demand as a special case of system–environment interaction. Second, by elaborating on the systems-theoretic notion of opportunity costs, Boulding showed that there is a limited and qualified sense in which one can speak about an inverse relation between system and environment.

The obvious challenge for further research is whether the systems-theoretic literature today has sufficient tools to ‘‘upgrade’’ Boulding’s framework in order to make it more sensitive to the materiality of the environment located beyond the confines of the encompassing ecosystem. The contributions of Luhmann and Churchman link the considerations of precariousness and embeddedness in a novel systems-theoretic understanding of sustainability, an understanding that is simultaneously congruent with the systems-theoretic logic of the Marshallian supply-and-demand framework.  Luhmanns concept of operational closure sheds light on the apparent contradiction between the restrictive effects of the limited carrying capacity of the environment on the one hand, and systemic insensitivity to these effects on the other. In the Luhmannian theory, however, the environment does not exercise a strict constraining influence on the existing systems, a loose control differing from Bouldings strict control by the environment on the system. The Luhmannian contribution to this literature is that systemic epistemological constructions of the environment may well affect the causal structure of the system–environment relations in such a way as to render these relations highly precarious. This presents the key evolutionary epistemological problem of the neoclassical supply-and-demand framework.

In Churchmans view, systems try to solve problems on their own basis without a critical examination of their environment. Churchman argued that these limitations can be compensated by ethics, or in his words, ‘‘the ethics of whole systems’’. This stands in stark contrast to the Luhmannian vision of social systems as complexity-reducing devices. Luhmann conceptualizes systemic boundaries from within the system, whereas Churchman’s ‘‘ethics of whole systems’’ does this from outside.

The baseline idea is that the systems maintain their identity by being only limitedly sensitive to their environment. At the same time, in order to remain sustainable, they must not overstrain the environmental carrying capacity. The imperative of sustainability per se does not contradict the limited systemic sensitivity to the environment; it merely requires systems not to be insensitive to those environmental aspects that are critically involved in the capacity of the environment to carry the concerned system. The identification of certain environment factors as ‘‘critical’’ is context dependent. What environmental aspects are considered as critical depends on the purpose of discussion.

Point of Strength
This article is a highly theoretical work that may contribute to advanced students ability to create solid arguments from apparently polarized ideas. The article clearly demonstrates how such arguments can be built. It alo contributes to a deeper understanding of how systems theory can be applied in fields that are seemingly distant from systems thinking.