Economics, Environment, and Sustainability
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Economics, Environment, and Sustainability






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    Economics, Environment, and Sustainability Economics, Environment, and Sustainability Presentation Transcript

    • Economics, Environment, and Sustainability G. Tyler Miller’s Living in the Environment 15 th Edition Chapter 26
    • Objectives
      • What are economic systems and how do they work?
      • How do economists differ in their views of economic systems, pollution control, and resource management?
      • How can we monitor economic and environmental progress?
      • What is full-cost pricing?
      • What economic tools can we use to help us shift to full-cost pricing?
      • How does poverty reduce environmental quality, and how can we reduce poverty?
      • How can we shift to more environmentally sustainable economies over the next few decades?
    • Economic Resources and Systems
      • An economic system produces and distributes goods and services by using natural, human, and physical resources.
      • An economic system produces, distributes, and consumes goods and services.
      • Three types of resources are used to produce:
      • natural resources,
      • human resources (labor and skills), and physical or manufactured resources (tools, machinery, etc.).
    • Free Market System
      • A purely free-market system is a theoretical ideal where buyers and sellers interact in markets without government or other interference.
      • In the ideal, all economic decisions are governed by demand and supply as well as price.
      • Profit or loss is the difference between the cost of production and the price buyers are willing to pay.
      • The market price equilibrium shifts when either supply goes down or demand increases , so it may rise or fall depending on the changes that occur in the market.
      • Two related economic concepts are marginal costs , the cost of producing one more unit of a product, and seller’s marginal benefits , the profit made by producing and selling one more unit.
      • In real world economics, marginal costs and benefits are what actually determine prices and benefits to consumers and costs and profits to producers.
      • In practice, truly free markets do not exist .
      • Businesses try to exert as much control as possible over prices of goods and services and lobby for government subsidies, tax breaks, or regulations that give their product a market advantage.
      • Some consumers will buy a product regardless of its price; economists call this price inelasticity .
    • Why Governments Intervene?
      • Governments intervene to provide economic stability , national security, public services, and environmental protection.
      • Markets often work well in the production of private goods.
      • Providing public services may require that governments intervene to correct market failures and to regulate national security and environmental protection.
      • Government regulation can also prevent development of monopolies or oligolipies where one or a few sellers or buyers dominate the market.
      • Government interventions also help:
      • provide a safety net for people who can’t meet their basic needs,
      • protect people from fraud, trespass, theft, and bodily harm,
      • establish and enforce civil rights and property rights,
      • protect the health and safety of workers and consumers,
      • prevent or reduce pollution and depletion of natural resources, and
      • manage public land resources .
      Why Governments Intervene?
    • Economists’ Views of Pollution Control and Resource Management
      • Neoclassical economists see natural resources as a component of an economic system , and
      • Ecological economists see economic systems as a component of nature’s economy.
      • Neoclassical economists feel that economic growth is necessary, desirable, and unlimited .
      • - Natural resources are important, but not vital
      • - because we can find substitutes for scarce resources.
      • Ecological and environmental economists view economic systems as subsystems of the environment that depend very much on irreplaceable natural resources .
      • Ecological and environmental economists distinguish between unsustainable economic growth and environmentally sustainable development.
    • Strategies to shift to an eco-economy
      • Use resources more efficiently .
      • Use indicators that monitor economic and environmental health.
      • Have market prices of goods and services include their harmful effects on the environment and human health (full-cost pricing).
      • Phase out environmentally harmful government subsidies and tax breaks.
      • Shift taxes by lowering taxes on income and wealth and increasing taxes on pollution and resource waste.
      • Pass laws and regulations to prevent pollution and resource depletion in certain areas.
      • Use tradable permits or rights to pollute or use resources within programs that limit overall pollution and resource use in given areas.
      • Use eco-labeling to identify products produced by environmentally sound methods.
    • Monitoring Environmental Progress
      • We need new indicators to distinguish between goods and services that are environmentally or socially beneficial/harmful.
      • A new approach is to develop indicators that add to the GDP
      • The genuine progress indicator (GPI) was introduced in 1995 to help evaluate and promote sustainability.
      • GPI = benefits not included in market transactions—harmful environmental and social costs.
      • The Index of Sustainable Economic Welfare (ISEP) combines estimates of income, natural resource depletion, environmental degradation, economic benefits from volunteer work, and distribution of income for different countries.
      • Economists have developed several ways to estimate the non-market values of the earth’s ecological services.
      • Economists use discount rates to estimate the future value of a resource.
      • Most businesses, the U.S. Office of Management and Budget, and the World Bank typically use a 10% annual discount rate.
      • High discount rates encourage rapid use of resources for immediate payoffs.
      • A moderate discount rate of 1–3% would mean that nonrenewable resources would be used more slowly or sustainably.
    • Harmful External Costs and Full-Cost Pricing
      • The price you pay for an item does not include indirect environmental, health, and other harmful costs involved in its production and use.
      • 1. Direct costs of a good include cost of the raw materials, labor, shipping, and sales markup.
      • 2. Indirect or external costs or benefits are not included in the market price of an item. These costs and benefits are called externalities .
      • 3. Negative externalities involve such things as extraction of raw materials, use of nonrenewable energy resources, hazardous wastes, land disturbance, and air and water pollution.
      • These costs may be paid for in poorer health, higher costs for health care, insurance and taxes for pollution control, road congestion and land used for highways and parking.
      • If Americans were to have indirect costs included in the price of gasoline, it would cost between $3–8.60 per gallon . This does not include the cost of future harmful effects on climate change.
      • Inclusion of external costs in market prices informs consumers
      • 1. The full cost = actual internal costs + its actual external costs.
      • 2. Full-cost pricing might encourage consumers to conserve water, use fuel-efficient cars, and produce less trash.
      • 3. A gradual transformation to this type of system would allow transition to become more environmentally beneficial .
      • Reasons for not wide use : some businesses would be forced out of business and
      • - the difficulty in putting a price tag on environmental costs.
      • 5. Consumers generally are looking for the best price, so phasing in full-cost pricing requires government action .
      • Governments could begin to move producers and consumers in this direction by:- phasing out environmentally harmful subsidies,
      • - taxing harmful goods and services, and
      • - regulating pollution and resource depletion.
    • Reducing Poverty to Improve Environmental Quality and Human Well-Being
      • A. Most financial benefits of global economic growth have gone to the rich rather than the poor.
      • A 2000 World Bank study indicates that
      • - half of the world’s population live on less than $3/day - and one-fifth has about $1/day .
      • 2. Poverty is one of the six major causes of environmental problems.
      • 3. Since 1960, the trickle-down effect has not functioned to help the poor, rather there has been a growing wealth gap.
      • 4. This wealth gap is unsustainable.
      • 5. Poverty is sustained by corruption, absence of property rights, insufficient legal protection, and inability of many people to borrow money to start a small business or grow crops.
      • The World Bank makes loans to developing countries, but a number of these loans have had harmful effects .
      • 1. The World Bank was formed in 1945 to help with the rebuilding of Europe and Japan after WWII.
      • 2. A number of loans for large-scale dams, roads, and mining operations have been environmentally destructive and controversial .
      • 3. Many developing countries sell their mineral, timber, and other resources in order to pay the interest on their loans.
      • 4. Environmentalists and representatives of the poor have protested the Bank’s policies , and the bank has begun to carry out more detailed reviews of the environmental and social impacts of its loans.
    • Strategies to alleviate poverty
      • Forgiving the international debts of the poorest countries will sharply cut poverty. G8.
      • Developed countries should forgive at least 60% of the $2.4 trillion debt owed on the condition that the money is spent on meeting basic human needs.
      • Combat malnutrition and infectious diseases.
      • 4. Lending agencies can make small loans to poor people who want to increase their income.
      • 5. Small-scale infrastructure improvements such as solar cell power facilities, small-scale irrigation projects, and farm-to-market roads will help reduce poverty in developing countries.
      • 6. Stabilizing populations.
      • 7. Integrate human rights with sustainable development.
      • 8. UNDP estimates it will cost about $50 billion a year to provide universal access to basic services such as education, health, nutrition, family planning, safe water, and sanitation.
    • Transition to More Environmentally Sustainable Economies
      • An eco-economy of sustainability.
      • Paul Hawken’s golden rule of eco-economy is:
      • “ Leave the world better than you found it, take no more than you need, try not to harm life or the environment, and make amends if you do.”
      • 2. Some businesses will decline as we make the transition to more environmentally sustainable economies, and other businesses will grow in importance.
      • Germany and the Netherlands are working to make their economies more environmentally sustainable.
      • 1. Germany has developed the most efficient gas turbines.
      • 2. In 1977, they started eco-labeling products.
      • 3. All domestic German cars must be recycled. ,
      • 4. They are becoming the world leader in solar-cell and wind turbine technology and hydrogen fuel.
      • 5. They also provide green foreign aid to developing countries.
      • In 1989, the Netherlands began a National Environmental Policy Plan (Green Plan)
      • - Eight major areas for improvement were identified.
      • - Task forces were formed .
      • - Four general themes were the focus of each task force:
          • a. life-cycle management,
          • b. energy efficiency,
          • c. environmentally sustainable technologies, and
          • improving public awareness.
      Industrial leaders like the Green Plan - There has been an increase in organic agriculture , greater use of bicycles in some cities, and eco-friendly new housing. - Some goals have had to be revised or abandoned. -The environmental revolution is also an economic revolution.
    • Next Class
      • G. Tyler Miller’s
      • Living in the Environment
      • 15th Edition
      • Chapter 8