PowerPoint ® Lecture prepared by Gary A. Beluzo Ecological View of the Economy 10

PowerPoint® Lecture prepared by Gary A. Beluzo

Ecological View of the Economy

10

Copyright © 2007 McGraw-Hill Publishing Company

STUDENT LEARNING OUTCOMES

• Identify the key differences between the circular flow and ecological views of the economy.

• Define the four steps of the economic process.

• Describe the connection among economic growth, energy, and materials use.

• Understand the reasons behind international differences in affluence.

• Identify the reasons why green accounting is important for sustainability.

After reading this chapter, students will be able to


The 2004 U.S. Economy (Costs and Benefits)

• Gross National Product (GNP) most widely used index of a society’s economic well-being.

• What is the environmental cost?• To produce 11.7 trillion dollars of

GNP in 2004• 100 x 1015 BTUs of fossil fuels• 140 million metric tons of copper,

lead and other metals• 170 million metric tons of wood

products• Consumed 630 million metric tons

of food.• Eroded 20 million metric tons of soil

• 5,900 million metric tons of CO2

• 214 million metric tons of MSA• 1.5 million metric tons of hazardous

chemical waste.• Quality versus Quantity of Life?


Two Views of the U.S. Economy

• The linear view

• The circular view


The Economic SystemProduction and Consumption of Goods and Services

• Goods

• Services

• Production

• Firms

• Labor and Capital = Factors of Production

• Technology

• Utility

• Consumption


Linking Production and ConsumptionThe Circular Flow Model


What’s Missing? The Role of Government


Steps of the Economic ProcessLinks to the Environment

• Creating Natural Resources

• Providing a Habitable Environment

• The Production of Goods, Services, and Wastes

• Waste Assimilation


Step 1. Creating Natural Resources

• Biogeochemical cycles produce natural resources

• Highly concentrated energy and/or materials

• High degree of organization


Environmental Energy Cost


Step 2. Providing a Habitable Environment

Ecosystem Services• Values that people derive, directly and indirectly, from ecosystem

functions.

• Chemical composition of the atmosphere

• Climate control

• Nutrient recycling

• Soil formation

• Pollination

• Habitat for biodiversity

• Regulation of hydrologic cycle


Step 3. Production of Goods, Services, and Wastes

• Law of Conservation of Matter and the Laws of Thermodynamics determine-

• The energy, materials, and waste that will result from the production of goods and services


Step 4. Waste Assimilation

• Ability of the environment to absorb, detoxify, and disperse wastes in a way that makes them less harmful.

• Biodegradable

• Persistent

• Nondegradable


Economic Growth


Comparing Levels of Affluence


Changing Technology


Affluence and Materials use

19001900• U.S. used 20 elements U.S.

• Renewable resources such as forestry and agriculture

• Cotton, wool, rayon

NowNow• U.S. uses all 92 elements

• Nonrenewable Petrochemicals

• Polyesters, acrylics, nylon


Economic Growth, Energy, and Materials

• Why are many environmental goods and services not included in the GDP?

• Market Failures• Private property

• Public property

• Common property

• “Tragedy of the Commons”


Valuing Environmental Goods and Services

• So, how do we measure the economic value of these environmental goods and services?

• Direct Market Valuation


The Global Distribution of Ecosystem Services

Figure 10.19


Impacts of Environmental Degradation

• Resource Quality• Depletion and exhaustion

• Opportunity Costs


Degradation of Oil Resources


Accounting for Environmental Degradation• Environmental

Accounting

• Income and wealth

• Green National Accounts

Documents

PowerPoint ® Lecture prepared by Gary A. Beluzo Ecological View of the Economy 10