|
|
25
Sustainable Economics:
Understanding the Economy
and Challenges Facing the
Industrial Nations
Chapter Outline
Economics, Environment, and Sustainability
Economic Systems
The Law of Supply and Demand
Environmental Implications of Supply and Demand
Measuring Economic Success: The GNP
The Economics of Pollution Control
Cost-Benefit Analysis and Pollution Control
Who Should Pay for Pollution Control
Does Pollution Control Always Cost Money?
The Economics of Resource Management
Time Preference
Opportunity Cost
Discount Rates
Ethics
What’s Wrong with Economics: An Ecological Perspective
Economic Shortsightedness
Obsession with Growth
Exploitation of People and Nature
Creating a Sustainable Economic System: Challenges in the Industrial World
Harnessing Market Forces to Protect the Environment
Corporate Reform: Greening the Corporation
Green Products and Green Seals of Approval
Appropriate Technology and Sustainable Economic Development
A Hopeful Future
Environmental Protection vs. Jobs: Problem or Opportunity?
Key Terms
economics inputs outputs
descriptive economics normative economics ecological economics
sustainable economics command economies market economies
supply demand market price equilibrium
free market gross national product economic externality
cost-benefit analysis law of diminishing returns consumer-pays option
taxpayer-pays option direct costs indirect costs
repercussion costs time preference opportunity cost
discount rates ethics green taxes
full-cost pricing net economic welfare sustainable economic welfare index
marketable permit green products environmental auditing
appropriate technology
Objectives
1. Define the following terms: “economics,” “descriptive economics,” “normative economics,” “ecological economics,” and “sustainable economics.”
2. List the two types of economic systems and their characteristics.
3. Discuss the law of supply and demand and the environmental implications of this law.
4. Discuss how the following concepts fit into understanding the economics of pollution control:
“economic externality,” “cost-benefit analysis,” “law of diminishing returns,” “direct costs,” “indirect costs,” and “repercussion costs.”
5. Define the following terms and explain how each term relates resource management: “time preference,” “opportunity cost,” “discount rates,” and “ethics.”
6. Discuss some reasons current market economics lead to unsustainable activities.
7. Discuss some alternative measure of economic progress other than the gross national product (GNP).
8. Summarize the changes in our economic system that would foster environmental sustainability.
9. List some characteristics of a sustainable economy.
10. Define the term “appropriate technologies” and list the characteristics of an appropriate technology.
11. Discuss how environmental protection could be a stimulant to economic progress.
Lecture Outline
Economics, Environment, and Sustainability - Economics is the study of the production, distribution, and consumption of goods and services. Both descriptive and normative economics must be employed in any study of the relationship between economics and the environment. Sustainable economics is that branch of economics that integrates normative and descriptive approaches in the service of both people and the environment.
Economic Systems
Economics seeks to answer three questions: what, how, and for whom commodities should be produced.
These questions are answered differently in command and market economies; most nations' economies are mixed, with elements of both types integrated in them.
The Law of Supply and Demand
Price is the main governor of behavior in a market economy; it is largely determined by supply and demand.
The market price equilibrium is the point at which supply and demand curves graphically intersect, and represents a price compromise between producers and consumers.
The law of supply and demand can have serious implications for the environment and may work against conservation efforts, as it fails to take into account the finite nature of many resources.
Environmental Implications of Supply and Demand
Supply and demand can spawn a variety of wasteful and unsustainable practices.
Measuring Economic Success: The GNP
Gross national product (GNP) is the most widely used measure of a nation's economic activity.
The Economics of Pollution Control - Traditionally, most economies have regarded pollution as an economic externality. In response to citizen complaint, some governments established pollution control standards that internalized the costs of industrial pollution.
Cost-Benefit Analysis and Pollution Control
The goal of cost-benefit analysis is to maximize pollution control at minimum cost.
Problems with cost-benefit analysis include the impossibility of quantifying certain costs and benefits, such as human life, pain and suffering, and aesthetic/intrinsic values; if not quantified, they cannot easily enter into the analysis.
Who Should Pay for Pollution Control?
The consumer, the taxpayer, or both must bear the cost of pollution abatement programs; determining who should pay in a given situation is difficult and often controversial.
Note that pollution control does not always cost but often pays the polluter, when all direct, indirect, and repercussive costs of pollution are figured in.
The Economics of Resource Management - Economic considerations often influence our behavior and decisions regarding natural resources and pollution.
Time Preference
Time preference refers to one's willingness to postpone a certain reward today for a greater reward in the future; it is influenced by current needs, uncertainty outcome, inflation rates, and the rate of return on the postponed reward.
With regard to natural resources, differing time preferences may lead to either depletion or conservation strategies.
Opportunity Cost
This is the cost of lost opportunities; when high, it may discourage the adoption of conservation strategies, though the reverse is increasingly the case.
Discount Rates
The discount rate is a decision-making tool reflecting time preference and opportunity costs; its application is often used to justify the rapid depletion of natural resources.
Ethics
Ethical considerations are noneconomic factors that often affect our economic decisions.
What’s Wrong with Economics: An Ecological Perspective
Economic Shortsightedness
Vision is needed to adjust supply and demand economics to reflect ecological realities.
Obsession with Growth
The major bias of descriptive and normative economics is the tenet that economic growth is always desirable; this tenet rests upon the frontier belief that there is always more of everything needed to fuel such growth.
The doctrine of growth requires an ever-expanding population and ever-increasing per capita consumption, both environmentally disastrous.
Growth and the GNP: Some Fundamental Flaws
The GNP is value-neutral and counts wasteful or remedial expenditures as well as those genuinely contributory to standard of living improvement.
Subtracting these disamenities from the GNP yields net economic welfare (NEW), a more accurate measure of an economy's service to society. As pollution and congestion increase, the disparity between GNP and NEW increase.
Since GNP inherently favors growth and ignores accumulated wealth, it cannot guide or reflect the transition to a sustainable economy; similarly, by quantifying health statistics but ignoring total well-being, we fail to accurately measure a country's overall condition.
Ending Our Obsession with Growth
New, more holistic and realistic measures of economic success are needed to supercede our current obsession with growth as the measure of prosperity.
Making the Economic System Work for Us
Rather than fatalistically accepting the divergence between GNP and NEW, a sustainable society must have as its goal the elimination of this discrepancy.
Rethinking Growth: Focusing on Development
Limited economic growth that focuses on sustainable forms of development is an environmentally preferable alternative to the current pattern of unsustainable growth.
The Economic System and Dependency
Economic interdependency has fostered unsustainability in many regions of the world. Regionalism and localism are more inherently stable and ecologically appropriate.
Exploitation of People and Nature
The traditional economy inherently exploits both people and nature
Creating a Sustainable Economic System: Challenges in the Industrial World
Harnessing Market Forces to Protect the Environment - Some have proposed that the government harness existing marketplace forces in service of environmental protection.
Economic Disincentives
Through user fees and pollution taxes, economic disincentives can make environmental protection more attractive to individuals and companies than continued environmental abuse.
Economic Incentives
Incentives such as tax credits and economic grants can insure compliance with legislation aimed at protecting the environment.
The Permit System
While not without critics, due to its ethical implications, marketable permits may be used to regulate total pollution emissions in a given region while minimizing costs of compliance.
Removing Market Barriers
Legislative and regulatory reforms are needed to make environmentally friendly practices more feasible.
Corporate Reform: Greening the Corporation
Many corporations are beginning to reform their operating principles to incorporate guidelines for responsibility such as the Coalition for Environmentally Responsible Economies (CERES) principles.
Green Products and Green Seals of Approval
Corporate environmentalism is increasingly reaching the consumer in the form of environmentally friendly products; these can often be identified by the Green Seal or Green Cross mark of approval.
Appropriate Technology and Sustainable Economic Development
An integral element of sustainability is the development and use of appropriate technology; that is, technology that is efficient and proportionately scaled to the task at hand.
A Hopeful Future
While progress towards sustainability is unsatisfactorily slow, we should remain optimistic that the trends of unsuitability will be changed as awareness and concern increase worldwide.
Environmental Protection vs. Jobs: Problem or Opportunity?
Nearly all objective studies and analyses show that this is a false dichotomy; environmental protection, in the long run, is always more compatible with a healthy economy and full employment than is business as usual.
Suggestions for Presenting the Chapter
Ÿ Instructors should stress the problems with current economic theory and how they can be improved.
Ÿ Economic activity and environmental health are not mutually exclusive. Instructors should explain how local and regional economies can become more sustainable.
Ÿ Students should be encouraged to identify sustainable economic activity in your area/region. Discussion of local economies is a good way to illustrate the important points of the chapter.
Ÿ A trip to a sustainable business is a good way to promote sustainable activity in the community.
|
|
|