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What is environmental economics?
• It is a social science, focussing on the relationship and interactions of society and environment
• It employs many concepts from „regular” economics:– the theoretic principles (like in externalities)– and methodology (such as marginal analysis)
• It complements „regular” economics with interdisciplinary approach (ecology, environment and chemistry)
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
How it all began…• In the 1920s, Arthur
Cecil Pigou explored the relationship between pollution and economic externalities
• The school of welfare economics enabled him to investigate environmental problems regularly• As the questions about the environment grew in numbers, the area outgrew the „capacities of microeconomics”
Arthur Cecil Pigou(1877-1959)
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The rivals ofenvironmental economics
• Libertarian school of economics: there is no need for an extraordinary analysis of environmental relationships; all we need is to define ownership rights accurately, and the markets will do everything– Really? How?
• Ecological economics: we need to unify the principles of ecology and economics, and we need to stress the ecological constraints– Are these compatible, though?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
What are we trying to investigate?
• We are trying to understand and describe the occurrences and processes of pollution and the use of environmental resources, using the concepts of economics– What’s going on?
• We’re trying to discover where the „rules of play of the economy” are imperfect in treating environmental resources– What’s causing it?
• We’re trying to devise alternatives to optimalise the relationship between the economy and the environment– What needs to be changed?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Things we need to pay attention to
• We need to use the precise terminology– so that we mean what we say
• We need to separate facts from opinions
• We need to distinguish between consecutive events and cause-and-effect events– the fallacy of „post hoc ergo propter hoc”
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Is everything going like we think it is?
• Our economies were booming before the crisis; the economies expanded by several percentage points per year
• When the economic crisis broke out, our economies started contracting, causing havoc
• Is economic growth good for us?• Does economic growth make us
richer/happier/better?• Why are our economies growth-
orientated, then?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
… in short: no!
• Growth may bring more economic wealth, but the richer we get, the less our sense of welfare increases
• When our economies started contracting, signs of rationalisation showed up.
• Economic growth in itself is not good for us– In fact, some scientists have come up with the
idea that zero growth is ideal• Our economies are growth oriented,
because… uhm… well…– Does anybody know?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
More about this later.
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The most important milestones ofenvironmental economics – part one• Rachel Carson (1962) – Silent Spring
• Foundation of the Club of Rome (1968)• Appeal from UN Sec.-Gen. U Thant (1969)• USA: Earth Day, establishment of EPA,
Clean Air Act (1970)• UN conference on the human
environment (1972)• „The Limits to Growth” (MIT, 1972)• Leontief’s World Model (1973)
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Rachel Carson – Silent Spring (1962)
• An American marine biologist, writing about the adverse effects of DDT
• Her work is fiction, but it is based on scientific facts
• Points the limelight at the severity of environmental problems
Rachel Carson(1907-1964)
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The Limits to Growth (1972)• Aim: to draw the attention of governments
and international organisations by focussing on and investigating a global problem, ie. a particular threat to humanity.
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Research (1900-1970)• Population• Industrial• Food production• Pollution• Depletion of natural
resources
OutcomeIf the current trends in economic growth persist, we will reach the limits to growth by the end of the 21st Century.
Recommendation: Zero growth
Leontief’s World Model (1973)• The UN was seeking the relationships
between its development strategy and the problems with the environment
• Research into– how ecological factors influence economic
growth– how good the international development
strategies are
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
• Hypothesis:– Pollution and environmental protection can be
dealt with technically, but it’s rather costly
The most important milestones ofenvironmental economics – part two• UN establishes the „Brundtland Commission”
(1984-1987)• Montréal Protocol on the protection of the
ozone layer (1987) • Brundtland Commission publishes its report:
Our Common Future (1987)• UN’s Rio Conference (1992) on the
environment and development• Kyoto Summit (1997)• Johannesburg Summit (2002)• Copenhagen Summit (2009)
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The Brundtland Commission (1984-1987)
Aim:• To investigate the critical aspects of
environmental protection and development, and a realistic proposition to solve the issues
• Recommendation on forms of international cooperation
• Initiation of programmes improving environmental sensitivity and readiness to take action
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Results:• Mapping of environment and development until
2000, while developing a global strategy for the period after that
And now for somethingcompletely different
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The principles of environmental and ecological economics
• But before we begin:– what IS the „environment”?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
What do we call „environment”?
• When we say „environment”, we usually mean the natural environment– Vernacular approach– This also includes living and non-living
things
• Built-up environment– Created by human beings
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
How can we define „environment”?
• It’s the part of the world surrounding human beings where humans live and act.
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
What does our environment consist of?
… or perhaps not.
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The „spheres” of our environment
• Biosphere:– „the place on Earth's surface where life
dwells” (Eduard Suess, 1875)
• Lithosphere – the Earth’s crust• Hydrosphere – the waters of Earth• Atmosphere – the air on Earth
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The macroeconomic problems of environmental economics
• Economic growth• Scarcity• Indicators
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Economic growth• Growth-oriented economies increase the
demand of natural resources• Growth produces additional resources
needed for social welfare…BUT
• It increases the demand for natural resources, whilst causing pollution
• These adverse effects may over-compensate the direct economic benefits– ie.: we may end up worse off than before!
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The debate about economic growth
• Malthus (1798) claimed that famine is inevitable, because we cannot feed an exponentially growing population from a limited amount of land
• Meadows et al: The Limits to Growth• Ecological economists:
– Growth is undesirable, the aim is development– See also: Herman Daly’s „Steady State
Economics”
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The perspectives of economic growth• Growth is unacceptable, and is morally wrong
– immaterialists, eg. Schumacher and Daly• Growth is impossible on the long run
– pessimists, eg. Meadows et al• Growth and technological advancement go
hand in hand, thus the quality of the environment improves over time– technocrats
• Growth and environmental deterioration is unavoidable, unstoppable– opportunists
• Growth is necessary for the funding of environmental protection– optimists
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Economic growth and the environment
Fundamental explanatory principles:• Population growth and the increase in
per-capita consumption increase the demand for natural resources, whilst increasing the level of pollution
• The technological advancements required for economic growth decrease the relative use of natural resources, and therefore, pollution (see: Solow’s growth theorem)
• What is the resultant outcome of these two, opposing thoughts?
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
The outcome:• If we take the ecological footprint
into consideration, a larger GDP will mean more pollution
• If we take the environmental performance index into consideration, a larger GDP will mean less pollution
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
Is there a solution, then?• Economic prosperity and the use of raw
materials must be de-coupled– Greater welfare with constant or decreasing
material use
• Possible solutions– Produce less (towards „Zero growth”)– Produce less waste (cleaner technologies)– Recycle more (…and also, re-use more)– Growth in services and in low raw-material
intensive sectors only
•About the course
•Introduction•Historical
background•The principles
of environmental and ecological economics
That’s it for today!
See you next week!•About the
course•Introduction•Historical
background•The principles
of environmental and ecological economics
