economics “Why environmental economics?” • Discuss the problems with markets and classical economics • Realize the importance of valuing our natural resources “Natural Capitalism” Table Coral at the Apo Island Marine Reserve 2008 Apo Island Marine Reserve 2008 Chapel Point Apo Island 2008 Conventional view of economic activity Neoclassical economics • Focuses on the psychology of consumer choice •
The market favors equilibrium between
supply and demand. Marginal benefit and cost
Marginal benefit and cost curves determine
an “optimal” level of resource use or pollution mitigation. The World economy is 7 times the size it was 50 years ago!
• More & more goods produced
• More material wealth although big gaps between rich and poor. • Resources are limited so nonstop growth is not sustainable. Criticism of neoclassical economics:
• Runaway growth can be compared to...
CANCER We are spending more and more money, but are our lives really that much better? GDP vs. GPI(Genuine Progress Indicator Environmental view of economic activity Donut Model by Kate Raworth Strategies for Sustainability
• Identify external costs
• Assign value to nonmonetary items
• Attempt to make market prices reflect real
costs and benefits Assign Values to Nonmonetary Items • Nonmarket values- values not included in the price of a good or service, the worth we ascribe to things Market failure
• Occurs when markets do not take into
account the environment’s positive effect on economy or negative effects on environment or people (external costs).
• Traditionally has been countered by
government intervention: laws & regulation, green taxes on environmentally harmful activities, market incentives Natural Capitalism
• Natural capital refers to the natural resources and
ecosystem services that make possible all economic activity, indeed all life – Natural capitalism's four interlinked principles are: • Radically increased resource productivity. • Redesigning industry on biological models with closed loops and zero waste • Shifting from the sale of goods to the provision of services • Reinvesting in the natural capital that is the basis of future prosperity.
– Natural Capitalism: Creating the Next Industrial Revolution, by Paul
Hawken, Amory Lovins, and L. Hunter Lovins What can we do individually?
• Be aware and educated about community issues
(economic principles, sound financial decision making etc.) • Do not patronize certain products or promote certain lifestyles • Waste segregation and management • Support sustainable economic policy • Individual micro saving in an environmental fund? Conclusion
“ Environmental values are economic values; it is in principle just as
important, in the interests of economic efficiency and therefore economic welfare, to conserve our limited natural resources, to make wise and sparing use of our limited clean air, water and living space, as it is to economize in the use of labor and capital.” Alfred Kahn Summary
• Classical Economic theory needs to be
revised/updated • to accurately plan for sustainable development we need to quantify what was previously unquantified • We have to decide what we mean by development and growth You have to decide whether development means affluence or whether development means peace, prosperity and happiness. Sunderlal Bahuguna
