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Environment & Economy
• Econ Systems
• Economists:
– Conventional
– Ecological
• Indicators
– GDP vs. GPI
Resources
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Human
Manufactured
Financial
Natural
Cultivated
Basic Economic Questions
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What to produce?
How?
How many?
Who gets
– To Purchase Products?
– The Revenues?
Pure Economic Systems?
Pure Command
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No Markets
All Decisions Top- Bottom
Planning
Centralization
Legislation
Pure Economic Systems?
Free Market
• Supply and Demand
• Perfect Competition
• Perfect Information
• No Regulations
– Taxes
– Subsidies
– Barriers to Trade
• No Barriers to
Investing
Actually Existing Capitalism
• Drive out
competition
• Subsidies
• Tax Breaks
• Withhold
Information
• Externalize Costs
• No Social Obligations
• Maximize Profits
No Pure Economies
• Market Oriented
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United States
Japan
Europe
Asian “Tigers”
Latin America
South Africa
• Command Oriented
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China
North Korea
Viet Nam
Cuba
Other African Countries
There are No Pure Economies
• All Exhibit Environmental Problems
• Brought to You By….
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Technologies
Inequality
Consumerism
Poverty
Others?
Conventional vs. Ecological
Economics
Conventional Economics
Conventional Economics
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Economy is the Total System
Nature is a subsystem
Growth as Ultimate Goal
Poverty (who gets to purchase, who
profits) is an individual choice
• Technological Optimism provided that
• We let markets work freely
• Nature is Substitutable
Ecological Economics
• Economy is a Subsystem of Society
• Society is a Subsystem of Nature
• Growth has environmental limits
– Goal is “Steady State”
• Technological Skepticism
• Markets ok but not always (Govt. needed)
• Nature is not Substitutable
1st May 2002
p
The economy from the point of view of ECOLOGICAL ECONOMICS
Natural resources
NATURAL ENVIRONMENT Natural sinks and material cycles
Earth’s energy
SOCIETY
Institutional context (political & organisational system, etc.)
Property rights distribution
Non-market caring services
Culture (traditions, ethical values, etc.)
Technologies and know-how
Information and Knowledge
ECONOMIC SYSTEM
Natural Resources
Goods and Services (human-made)
Material Wastes and Emissions
Money
Direct Solar Energy
Enterprises
Homes
Money
Dissipated Heat
Earth’s Energy
Information and Knowledge
Labour force and other
production factors
Open system: human production processes
Open system: human societies
Closed system: Earth
Isolated system?: Universe
Growth
Steady State
Indicators
• GDP vs. GPI
• Gross Domestic Product
– Value of all goods & services produced in the
economy in one year
– Business leaders, Experts, Governments use it
as indicator of well being or progress
– The higher the GDP the “better off we are”
Problems with GDP
• Not Good as Indicator of Well Being
• Fails to Distinguish Between Goods & Bads
• “Defensive” Expenditures add to GDP
– Pollution control devices
– Crime control devices (alarms, locks, surveillance)
– Divorce Lawyer Services, Cholesterol Medicines
• Resource Depletion and Degradation Adds
Problems with GDP
• Does not count
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Food we grow ourselves
Unpaid Services we provide to our families
Volunteer & domestic work
Unpaid labor (family health/child care)
• Says nothing about Income Distribution
GPI
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Genuine Progress Index
Developed by Redefining Progress
www.rprogress.com
Other Indicators
– Human Development Index (UNDP)
– Ecological Footprint
– HANPP: Human Appropriation of Net Primary
Production
GPI Adjusts GDP
• negative adjustments for
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growing ECONOMIC inequality
Underemployment
loss of leisure time
Pollution
Resource depletion
Crime
family breakdown
longer commuting times (and traffic jams)
auto accidents
GPI Adjusts GDP
• Positive Adjustments for
– Unpaid work at home
• Child care, parenting
• health care, maintenance, cleaning
– “Do it ourselves” Work
• Construction, lawn mowing, etc.
– Services of consumer durables, highways etc.
Ecological Indicators
• Ecological Footprint (page 11, textbook)
– Amount of land needed to produce resources
consumed average person, in Hectares
– India 1 ha (1 billion)
– The Netherlands 5.9 (94 million)
– US 10.9 (3 billion)
Ecological Indicators
• HANPP
– Human Appropriation of Net Primary Production
– Primary Producers support all other living things
– Mainly Plants and Phytoplankton
– (pages 85-87 textbook )
– World uses an estimated 40% of land base NPP
– About 25 % of land and aquatic combined
Ecological Indicators
• Material and energy flow accounting (MEFA)
– Tons of minerals extracted and wasted
– Energy Produced, used and wasted
– ALL relative to GDP
Uncertainty: Which Indicator?
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Many Ecological Indicators
Different Trends
Opposite Trends
How do we (should we) make decisions?
Averages do not consider inequality
– Rich and Poor are affected Differently
Ecological Indicators:
transport issues
Ecological Indicators:
energy issues
Ecological Indicators
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Ambiguous Trends
Unclear Messages, Plus
Translating Indicators into $ not easy
Unexpected Things Happens
– CFCs, Asbestos, Agrochemicals, GMOs?
– Take Precautions: Technological Skepticism
• How do we (should we) make decisions?
How should we make decisions?
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Ecological Economic Indicators Help but..
Who decides among indicators?
We need Democracy
Citizen Participation
Integrate Multiple Opinions
Experts don’t Always Know Better
Indicators can’t do the job for us!!
Inequality and Environment
• Poverty
– Environmental-poverty trap
– Lack resources to restore / conserve nature
• Too much Wealth
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Nature as just One among many Resources
Cash Cows, Deplete and Invest Elsewhere
Consumerism
Power to Impose Costs on Others
Ecological Debt
• Rich owe the Poor ?
• High Income Countries owe Low Income
Countries?
• Poor people bear the burden?
• Environmental Justice
• If you use more your logical, fair share of
natural resources you run-up an
ecological debt..
Ecological Debt
• Carbon Debt
• Biopiracy
– Medicinal
– Agricultural (farmer’s rights)
• Environmental Dumping
– Prices do not internalize environmental costs
– Not Paying for local externalities (e.g. Texaco)
• Toxic Trade
Ecological Debt
• Bridge Poverty Gap
– Between countries
– Within Countries