[[Economy & The Environment

Question 1

Notes

Answer 1

Wtf is going on
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Want to specialise in this so do read essential readings

Question 2

What is the role of the environment and ecosystem services in economic growth and development?

Question 3

What is the Natural Capital theory?

Answer 3

A concept

Contributes to economic activity sustainability by

Question 4

How did different economic theories perceive the environment over the past decades?

Question 5

What are the best approaches to protect the environment without reducing living standards?

Question 6

//Classical & neoclassical econnomics vs Environmental economics

Question 7

//What are the effects of climate change on the economy?

Question 8

1. Economic theory and the environment (20.3)

Answer 8

Economic theory sees environment as land - area that encompasses the physical universe of humans, covering oceans, atmosphere, solar energy, etc.
Interest in land fell as societies shifted from agriculture to industrial economies
Recenty environmental crises renewed environmental interest
Aspects of land discussed economically: biodiversity support or sources of non-renewable resources
Perception of land (environment) historically in economic theory:
1. Pre-classical economics
2. Classical economics
3. Neoclassical economics
4. Environmental and resource economics, sustainable development and ecological economics

Take away points of economic theory’s differing perception of land:
-environment is considered under umbrella term ‘land’
-neoclassical economics appreciated capital and labour more as a source of economic growth and wealth compared to land, tho Adam Smith and David Ricardo did place importance on natural resources
-environment was considered back into economic theory bc of environmental crises
-environmental and ecological economics: major focus on valuing ecosystem services in status quo

Question 9

1.1 Pre-classical economics

Answer 9

Ancient and medieval economies
Prevalent role in production: agriculture -> perceived as wealth source & necessary for subsistence
Changed with rise of mercantilism (economic theory/policy that trade generates wealth by accumulation of profitable balances) in 17th & 18th centuries -> change: land still perceived as wealth source to feed the population + acknowledgement as potential source of precious metals
Economic surplus attributable to land, population growth seen as unfavourable -> economy’s stationary view: max economic output level is consistent with arable land at a given technology level

Question 10

1.2 Classical economics

Answer 10

Industrial revolution + industrial class uprising
Affected how economics perceived vitality of land & environment
Appreciation of land shifted to capital and technological progress as source of wealth and driver of economic growth and productivity
Early classical economists still enabled land special treatment:
-Adam Smith: agriculture is more productive than manufacturing & is still a source of revenue and wealth (Smith, 1776)
-David Ricardo: natural resource scarcity may halt economic growth (Ricardo, 1817)

Question 11

1.3 Neoclassical economics

Answer 11

Food & fibre-based economy shifted to mineral and fuel-based economies (20th century) -> appreciation of land as source of wealth further fell
Neoclassical economic theory: 2nd half of 20th century (1950s): land w/ its environmental resources was no longer used in production function (Solow Growth Model Chapter 5) bc capital and labour concentration
International trade theory: didn’t take natural resource-intensive products into consideration (Heckscher-Ohlin Model Chapter 6)
Economic agents used land for utility-maximising or profitmaximising behaviour -> land usage, allocation and development are with the intent to maximise utility or profit
e.g. landowner rents out land for agriculture usage if it generates highest profit relative to residential/commercial development.
government designates certain areas of land as protected natural reserves to maximise ecological utility or public enjoyment from land
Criticisms of neoclassical economics:
SR: theories achieve land efficiency allocation but incentivises environmental degradation bc of irreversibility, production factors’ non-substitutability and widespread of external effects
LR: theories can lead to environmental resources to run out
Reaction of neoclassical economics: emergence of a new field - ecological economics

Question 12

1.4 Environmental and resource economics, sustainable development and ecological economics

Answer 12

Environmental & Resource Economics
Focus: spatial aspects of environmental issues, policies and interactions with the economy
Nature/environment conservation: =/ not using natural resources but = sustained maximum yield concept by using renewable resources without reaching the point where resource is destroyed
Key for non-renewable resources: find substitutes and recover

Environment economics key concept: Sustainable Development
definition: development that aligns economic and social needs w/ environment protection
aim: meet needs of current society without affecting future generation’s ability to meet their needs
more effect on mainstream economics after oil price shocks (financial crises) in 1970s
2 different concepts:
1) weak sustainability: natural resources can be replaced by man-made capital whilst aggregate stock of artificial and Natural Capital shouldn’t decline
2) strong sustainability: maintenance of Natural Capital stock

Ecological Economics
focus: economic and social systems’ dependency on nature
created: conservation movement in USA bc of first local environmental crises from water industrial poisoning and pesticides & insecticides usage -> movement placed importance on efficient usage of resources and sustainable growth
development of ecological footprint (concept)
uses: biophysical approaches (not monetary terms) to emphasise coevolution of economic & environmental systems alongside nonsubstitution concept

Question 13

2. Economic value and nature (20.4)

Question 14

3. Climate change and adaptation strategies (20.5)