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2
Economic growth is no longer improving
people’s lives in the developed world
WHY?
The Economy and the Environment
£
Resources
Resources Waste Waste
Waste
Waste
products
products £
4
Economic theories of development
What development economists agree on:
Development economics: deals with the economic,
social, political, and institutional mechanisms,
both public and private, necessary to bring about
improvements in wellbeing.
150
dollar of GDP) decreased by
Material Use
31%
100
• Population increased by 46%,
Material Intensity
Per capita GDP increased by
50
47%
0
• Total resource use increased
1980 1985 1990 1995 2000 2005 by 49%
Source: SERI (www.materialflows.net)
7
The History of Economic Growth
The Global Economy, 1–2006 AD
7 7000
Population
6 6000
Per Capita GDP
5 5000
3 3000
2 2000
Source: Maddison 2008
1 1000
0 0
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Year 8
The Ecological Footprint
• Measures how much land society needs to:
– Produce the resources it consumes
– Assimilate the wastes it generates
• A country’s ecological footprint is the sum of all the
cropland, grazing land, forest and fishing grounds
required to produce the food, fiber and timber it
consumes, to absorb the wastes emitted when it uses
energy and to provide space for infrastructure
• Earth’s people needed 18 billion hectares of
productive land in order to provide each and every
person with the resources they required to support
their lifestyle and to absorb the wastes they
9
produced.
The bad news is that there were only 12
billion global hectares available.
Global Ecological Overshoot
The World
1.4
• Global ecological footprint
1.2 is greater than available
biocapacity!
1.0
Number of Earths
0.8
• We are in a state of
0.6 overshoot
– Resources are being used
0.4
faster than they can be
0.2 regenerated
– Wastes are being produced
0.0
faster than they can be
1960
1970
1980
1990
2000
assimilated
Ecological Footprint Biocapacity
Source: Global Footprint Network
11
Prevailing Economic System
• Private ownership of material resources
• Public ownership of “sinks”
• Assumptions of
Perfect functioning of the market
Infinite substitutability of resources
Subsidized disposal, energy, water
Main problems with current economic theory
Externalities
- costs not borne by those who
create them
14
Ecological Limits
• Ecological limits makes us understand the
interactions between the economy and the
environment.
• Ecological limits refers to the biological and
physical limits to economic growth beyond which
both ecological and economic collapse would
occur.
• In this view, limits are seen as absolute constraints
on economic activity, not just as a point beyond
which economic growth results in environmental
destruction.
3.1 Biophysical limits to growth
Finitude: fixed size of the ecosystem that hosts an expanding
economic system
Imogen Shaw
Enough is Enough
20
Happiness and GDP
United States
Percentage very happy
Real income
per person
Percentage
very happy
“Americans have been more successful decoupling GDP from happiness than in
decoupling it from material and energy” —Peter Victor
21
Happiness and GDP Across
Countries
Happiness (Index)
32
Ecological concepts applied to
the economy
• Assimilative capacity: the capacity of the natural
environment to absorb wastes
• Regenerative capacity: the ability of the ecosystem to
replace resources that we use in our production systems
• Renewable resources, such as wood or wind energy, are
in continuous supply, although the rate at which they
can be replenished will vary from resource to resource
• Non-renewable resources, such as iron ore or fossil
fuels, are in limited supply within the earth’s crust, and
thus once they are used up they cannot be replaced.
Five Capitals Framework
In a SSE:
• Impose strict resource and emission caps
• Employ a cap–auction–trade system
– Caps set based on ecological criteria
– Permits auctioned by government
– Trade between industries to allow efficient allocation
35
2. Stabilise Population
Currently:
• Natural increase is low in many wealthy countries
• But many rich countries are trying to encourage population
growth
In a SSE:
• Births plus immigration must equal deaths plus emigration
– In wealthy countries:
• Balance immigration with emigration
– In poorer countries:
• Provide education, access to birth control, and equal rights for women
36
3. Reduce Inequality
Currently:
In a SSE:
• No growth, so no excuses!
• Finite resource use = Finite amount of wealth
• Must deal with distribution explicitly
– Need a minimum and maximum income
37
4. Reduce Working Hours
Currently:
In a SSE:
In a SSE:
• What happens to GDP is not important
• Replace GDP with two sets of accounts:
– Well-being
• To be maximised
– Resource use
• To be reduced and kept within ecological limits
40
Alternative Measures of Welfare
(Examples)
• Adds to GDP:
$30,000
$25,000
2000 US$
$20,000
$15,000
$10,000
$5,000
Source: Redefining Progress
$0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000 43
Year
Human Development Index