Environment & Economy• Econ Systems• Economists:

– Conventional– Ecological

• Indicators– GDP vs. GPI

Resources

• Human• Manufactured• Financial• Natural• Cultivated

Basic Economic Questions

• What to produce?• How?• How many?• Who gets

– To Purchase Products?

– The Revenues?

Pure Economic Systems?

Pure Command • No Markets• All Decisions Top-

Bottom• Planning• Centralization• Legislation

Pure Economic Systems?Free Market• Supply and Demand• Perfect Competition• Perfect Information• No Regulations

– Taxes– Subsidies– Barriers to Trade

• No Barriers to Investing

Actually Existing Capitalism

• Drive out competition

• Subsidies• Tax Breaks• Withhold

Information• Externalize Costs• No Social

Obligations• Maximize Profits

No Pure Economies

• Market Oriented– United States– Japan– Europe– Asian “Tigers”– Latin America– South Africa

• Command Oriented– China – North Korea– Viet Nam– Cuba– Other African

Countries

There are No Pure Economies

• All Exhibit Environmental Problems• Brought to You By….

– Technologies– Inequality– Consumerism– Poverty– Others?

Conventional vs. Ecological Economics

Conventional Economics

Conventional Economics• Economy is the Total System• Nature is a subsystem• Growth as Ultimate Goal• Poverty (who gets to purchase, who

profits) is an individual choice• Technological Optimism provided

that• We let markets work freely• Nature is Substitutable

Ecological Economics

• Economy is a Subsystem of Society• Society is a Subsystem of Nature• Growth has environmental limits

– Goal is “Steady State”

• Technological Skepticism• Markets ok but not always (Govt.

needed)• Nature is not Substitutable

Isolated system?: Universe

Natural resources NATURAL ENVIRONMENT Natural sinks and material cycles

Earth’s energy

Closed system: Earth

Institutional context (political & organisational

system, etc.) SOCIETY Property rights distribution

Non-market caring servicesCulture (traditions, ethical values, etc.)

Technologies and know-how

Open system: human societies

ECONOMIC SYSTEM

Open system: human production processes

Goods and Services (human-made)

Money

Labour force and other production factors

Money

Information and Knowledge

Information and Knowledge

Natural Resources

Material Wastes and Emissions

Direct Solar Energy

Earth’s Energy

Dissipated Heat

Enterprises

Homes

The economy from the point of view of The economy from the point of view of ECOLOGICAL ECOLOGICAL ECONOMICSECONOMICS

pp 1st May 2002

Growth

Steady State

Indicators

• GDP vs. GPI• Gross Domestic Product

– Value of all goods & services produced in the economy in one year

– Business leaders, Experts, Governments use it as indicator of well being or progress

– The higher the GDP the “better off we are”

Problems with GDP• Not Good as Indicator of Well Being• Fails to Distinguish Between Goods & Bads• “Defensive” Expenditures add to GDP

– Pollution control devices– Crime control devices (alarms, locks,

surveillance)– Divorce Lawyer Services, Cholesterol

Medicines• Resource Depletion and Degradation Adds

Problems with GDP

• Does not count – Food we grow ourselves– Unpaid Services we provide to our families– Volunteer & domestic work– Unpaid labor (family health/child care)

• Says nothing about Income Distribution

GPI

• Genuine Progress Index• Developed by Redefining Progress• www.rprogress.comwww.rprogress.com• Other IndicatorsOther Indicators

– Human Development IndexHuman Development Index (UNDP) (UNDP)– Ecological FootprintEcological Footprint– HANPP: Human Appropriation of Net

Primary Production

GPI Adjusts GDP

• negative adjustments for – growing ECONOMIC inequality – Underemployment – loss of leisure time – Pollution– Resource depletion– Crime– family breakdown– longer commuting times (and traffic jams)– auto accidents

GPI Adjusts GDP

• Positive Adjustments for– Unpaid work at home

• Child care, parenting• health care, maintenance, cleaning

– “Do it ourselves” Work• Construction, lawn mowing, etc.

– Services of consumer durables, highways etc.

Ecological Indicators

• Ecological Footprint (page 11, textbook)– Amount of land needed to produce

resources consumed average person, in Hectares

– India 1 ha (1 billion)– The Netherlands 5.9 (94 million)– US 10.9 (3 billion)

Ecological Indicators

• HANPP– Human Appropriation of Net Primary

Production– Primary Producers support all other

living things– Mainly Plants and Phytoplankton– (pages 85-87 textbook )

– World uses an estimated 40% of land base NPP

– About 25 % of land and aquatic combined

Ecological Indicators

• Material and energy flow accounting (MEFA) – Tons of minerals extracted and

wasted– Energy Produced, used and

wasted– ALL relative to GDP

Uncertainty: Which Indicator?

• Many Ecological Indicators

• Different Trends

• Opposite Trends

• How do we (should we) make decisions?

• Averages do not consider inequality

– Rich and Poor are affected Differently

Ecological Indicators: transport issues

Ecological Indicators: energy issues

Ecological Indicators

• Ambiguous Trends

• Unclear Messages, Plus

• Translating Indicators into $ not easy

• Unexpected Things Happens– CFCs, Asbestos, Agrochemicals, GMOs? – Take Precautions: Technological Skepticism

• How do we (should we) make decisions?

How should we make decisions?

• Ecological Economic Indicators Help but..

• Who decides among indicators?

• We need Democracy

• Citizen Participation

• Integrate Multiple Opinions

• Experts don’t Always Know Better

• Indicators can’t do the job for us!!

Inequality and Environment

• Poverty– Environmental-poverty trap– Lack resources to restore / conserve nature

• Too much Wealth– Nature as just One among many Resources – Cash Cows, Deplete and Invest Elsewhere– Consumerism– Power to Impose Costs on Others

Ecological Debt

• Rich owe the Poor ?• High Income Countries owe Low

Income Countries?• Poor people bear the burden?• Environmental Justice• If you use more your logical, fair

share of natural resources you run-up an ecological debt..

Ecological Debt

• Carbon Debt• Biopiracy

– Medicinal– Agricultural (farmer’s rights)

• Environmental Dumping– Prices do not internalize environmental costs– Not Paying for local externalities (e.g. Texaco)

• Toxic Trade

Ecological Debt

• Bridge Poverty Gap – Between countries– Within Countries