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Environmental Economics & Sustainability

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by Jennifer Dever on 26 November 2013

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Transcript of Environmental Economics & Sustainability

Environmental Economics & Sustainability
Economics (production, distribution & consumption of goods and services)
Command economies
Central control of production of goods & services - government ownership of virtually all the means of production—farms, factories, scientific laboratories, shops, and so forth—and organization of those assets into firms managed by employees of the state.
Market economies
Monetary signals control the production and distribution of goods & services
Adam Smith –”possible to pursue private gain in ways that would further not just the interests of the individual but those of society as a whole.”
Smith said that the combination of self-interest, private property, and competition among sellers in markets will lead producers “as by an invisible hand” to an end that they did not intend, namely, the well-being of society.


Environmental impact of the market economy
Environmental Economics - a new world view
BASIC TENETS:
Manufacture capitol ≠is not equal to natural capitol
Human economy is dependent upon the environment
Human economy must increasingly make environmental constraints a more explicit consideration in production & waste disposal
Economic activity should be practiced on a sustainable scale

How about limiting wealth and steering away from the "growth" mentality?
More realistic approach for long-term:
Have a smaller economy which better matches the availability of resources
Limit wealth: People would enjoy the fruits of their savings once they had attained an acceptable standard of living
Don't aspire to “growth”, rather “development” therefore focuses on increasingly efficient use of stock (capital) and increasing the quality of stock itself
Deter unsustainable resource use, incentavize sustainable resource use
Price water and other common resources to reflect scarcity and encourage conservation

“A nation which desires true wealth, desires it moderately, and can therefore distribute it with kindness, and possess it with pleasure; but one which desires false wealth, desires it immoderately, and can neither dispense it with justice, nor enjoy it in peace.” -John Ruskin, 1883 (English economist)

Capitalism = economic system in which private individuals and business firms carry on the production and exchange of goods and services through a complex network of prices and markets.
Development & Growth
Economic Development:
improvements in efficiency & organization, but not necessarily increases in resource consumption

Economic Growth:
increase in the capacity for an economy to produce goods and services

Benefits of development & Growth:
Increases the “standard of living”
Stimulates higher employment
Provides fiscal dividends to the government
Increases the accelerator effect (investment in R&D)
Boosts confidence

Pursuit of economic wealth results in rampant resource consumption, which is accompanied by massive environmental destruction
Economic decision making fails to take environmental considerations into account and thus results in production systems that run roughshod over the Earth

Specific problems with the market economy:
Short-term planning
Single-minded dependence upon the law of supply and demand to determine prices (no consideration given to long-term supplies)
Narrow notions of the inputs and outputs of an economy
Single minded dedication to measuring success by the GNP

Myths about the economy and the environment:
Environmental protection is bad for the economy
Environmental protection is about quality of life and economics is about survival
Economic growth is good, indeed essential

False Assumptions:
The ROLE OF THE ENVIRONMENT IN SUPPLYING MATERIALS, SERVICES AND WASTE SINKS (which together make the human economy possible), IS LARGELY IGNORED.

ASSUMED THAT HUMAN-MADE CAPITAL CAN BE SUBSTITUTED FOR NATURAL RESOURCES ACROSS THE BOARD.

REJECTION OF ANY LIMITS ON GROWTH. Unceasing growth is seen as not only possible, but as the best, and perhaps the only, solution to poverty and environmental degradation.

Human welfare is best served by the view of people acting as “human molecules” who, by pursuing their own interests through the market, inevitably promote the general good.

EXTERNALITIES:
Phenomenon external to markets and hence does not affect how the market operates, yet should
Examples: waste & pollution
Costs incurred may not be included in the price of the good/service… rather must be shared by all who live in the system.

COMMON ACCESS RESOURCES
Goods that cannot be charged for because of open access and use by many people…
NOT protected by traditional property rights, nor exchanged in markets where price would be set by supply and demand.
ETHICAL PROBLEMS
Economic growth will be perpetually driven by consumer demand.
No incentive to make choices based on any entity but the individual

For environmental economics to work:
Redefinition of “growth” and a differentiation among types of growth
Explicit determination & measurement of environmental constraints on economic growth
Definition of the functions of the environment & natural resources
Creation of markets for environmental goods + environmental valuation for natural capitol
Full cost pricing
Alternative measures of human well-being

How is the market economy working in the US?
Having the economy in equilibrium [SUSTAINABLE]
Limits for population size, consumption, and the gathering of personal wealth
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