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How do you define WellBeing? Bridget O’Donoghue and Molly O’Connor 1 Social Well-Being V Cx G U1 C x G U 2 C x ... G U N C x V Cx i G U i C x N • • • • • V = Social Well-Being C = Consumption x = Social state G = Equity or Distribution term U = Individual Well-Being Dasgupta, Partha (2010) 2 Individual Well-Being Well-Being as a State of Mind • Pleasure vs. Contentment Well-Being as a State of the World • i.e. GDP, Birth rate, Death rate, Political stability Well-Being as Human Capability •Doing vs. Being Well-Being as the Satisfaction of Underlying Needs • Maslow’s Hierarchy of Needs Dodds, Steve (1997) 3 Maslow’s Hierarchy of Needs 4 Relative Well-Being V(C(x)) Support Base Well-Being V(C(x))?? 5 Well-Being Across Generations Maximized Present Value Criterion • Current and Future Utility Consumption is Maximized The Sustainability Criterion • The change in wellbeing over time must be greater than zero dV/dt ≥ 0 Arrow, Kenneth et al (2004) 6 Why is human well-being increasing as ecosystem services degrade? Sara Avila and Christina Nolfo 7 Environment HUMANS Well-being Shadow Prices Environment Why is human well-being increasing as ecosystem services degrade? 8 human well-being ecosystem services From: Raudsepp-Hearne, et.al. 1. Not measured adequately 2. Some services (food) are so important that increase well being 3. Technology and social innovation 4. Time lag 9 HYPOTHESIS 1. Not measured adequately BIOSCIENCE (RaudseppHearne, et.al.) HDI and GDP are OK OUR CHAPTER (Dasguptq and others) Definition of wellbeing is rather defined as inclusive wealth. GDP and HDI do not consider the degradation of the productive base. 3. Technology and social innovation Reject decoupling and support the efficiency of technology Included in the definition of wealth and productive base. R&D enhanced via prices 10 Inclusive Wealth (Dasgupta, et.al. Old Chapter 4 & 5) INCLUSIVE WEALTH Present value of assets such as: Buildings Roads Machines Present value of assets such as: Wetlands Coastal waters Forests 11 Productive Base (Dasgupta, et.al. Old Chapter 4 & 5) Productive Base CAPITAL ASSETS: Manufactured capital Human capital Population Knowledge Natural capital INSTITUTIONS: Formal institutions Informal institutions 12 HYPOTHESIS BIOSCIENCE (RaudseppHearne, et.al.) 2. Some services (food) are so important that increase well being Supported 4. Time lag mixed OUR CHAPTER (Dasguptq and others) Food is important and other ecosystem services are important too; their impact in wellbeing needs to be measured. If irreversibility and uncertainty are present, Shadow prices 13 How can shadow prices be implemented feasibly? Christine O’Connell, Nathan Mueller, and Katie Lundquist 14 Elucidating Shadow Prices: Terms • Externality? The cost or benefit of a good not incurred by the parties involved in the transaction (e.g. cost of increased asthma treatment due to coal plant emissions) • Market Price? • Shadow Price? 15 Graphical Representation: Externality MEC = marginal external cost = MSC – MPC e.g. cost of increased asthma treatment due to coal plant emissions 16 Elucidating Shadow Prices: Terms • Externality? • • The cost or benefit of a good not incurred by the parties involved in the transaction (e.g. cost of increased asthma treatment due to coal plant emissions) Market The price atnot which buyers and sellers trade; does incorporate external costs (MPC line to the right; the price of coal asPrice? it trades) Shadow Price? 17 Graphical Representation: Market Price Market Price = price at the equilibrium between MPC and demand curve (here, Q1=quantity1 at P2); the price of coal as it trades Market price = P2 18 Elucidating Shadow Prices: Terms • Externality? • • The cost or benefit of a good not incurred by the parties involved in the transaction (e.g. cost of increased asthma treatment due to coal plant emissions) Market The price atnot which buyers and sellers trade; does incorporate external costs (MPC line to the right; the price of coal asPrice? it trades) Shadow Price? This isofthe marginal social price of the an additional unit ofMSC a unit product (the derivative of the to right, price using each ofthe more coal if you’re incorporating asthma, etc.) 19 Graphical Representation: Shadow Prices Shadow Prices = marginal social price (the price of each unit of more coal if you’re incorporating asthma, etc.); so, here, the shape of the MSC 20 How Shadow Pricing Calculation Could Work •From Tol (2009); calculated price carbon ($/tC) using enumerative method 21 How Shadow Pricing Implementation Could Work •SO2 cap-and-trade allowances (Acid Rain Program, 1990 Clean Air Act); two-phased tightening of allowances (1995, 2000) •Goal is to reach 50% of 1980 emissions; as of 2005 at 40% below 1980 levels (Natl. Acid Precip. Assessment 22 23 24 25