Lecture 6: Natural Science of Economy-Resource-Environment System Flashcards
(38 cards)
Key Ecological Economic Issues
-The economy is part of and contained within the biosphere
- Flows may be measured in ecological or physical terms
- Economy may expand physically in terms of resources
Characteristics of Nature
-Air, ocean, freshwater, land, habitat
Functions of Nature
- Life support, resource source, waste sink (Critinc)
- Regulation, habitat, production (deGroot)
Values of Nature
- Ecological (conservation, existence)
- Social (human health, personal, community, option)
- Economic (production, consumption, employment)
Natural Capital/Environmental Functions
- A way of looking at the flow between economy and environment; Natural capital produces flows and benefits similar to other forms of capital
- To prof this makes more sense than economy THEN externalities for environment.
Millenium Life Ecosystem Assessment
2005 publication tracking the flows between ecosystem services and constituents of well-being
- Ecosystem Services: Supporting, Provisioning, Regulating, Cultural
- Consistuents of Well-Being: Security, basic material for good life, Health, Good social relations, Freedom of choice
Competition between Functions
- Not all desired uses of environmental functions is possible; the enviornment and its functions are scarce
- Economics = science which studies human behavior as relationship b/w given ends and scarce means with competing uses
Types of Competition b/w Functions
Quantitative Competition:
- Source - one use precludes another;
- depletion
Qualtitative Competition:
- Sink - one use degrades quality, reduces other functions,
- pollution
Spatial competition:
- Occupation (of land) - one use limits or precludes another;
- congestion; loss of life support functions
These competitions also lead to loss of Human Health and Welfare functions
Example of Competition: Lake
Source for fish
Sink for human or industrial waste
Place for swimming (Human Health + Welfare)
Support biodiversity (Life Support)
But not at same time
Biocentrism
Living things have intrinsic value
Anthropocentricism
Living things only have value in so far as they benefit humans (use, non-use values) and humans decide that value
How to Choose b/w Environmental Functions - What Types of Values
- Biocentrism
- Anthropocentrism
Utility function
U = f (income, employment, leisure, working conditions, etc.)
[individuals get utility from different sources]
Environment-Income Trade-off
Curves on a graph with x-axis = income and y-axis = environmental quality
- Rich value environment more
Pareto Criterion
A change that leaves at least one person better off and no one worse off
- Not necessarily just, but economists would argue they are
Possible Utility Functions
- Curve that has ‘Anna’s utility’ on x-axis and ‘Brewster’s utility’ on y. Any point that falls on the curve = Pareto efficient. Any point that falls within the curve is not.
Compensation Principle
If one party full compensates another and is still better off, it is socialy preferable.
Kaldor-Hicks
If one party compensates another and is still better off, the compensation doesn’t actually have to be made and it’s still socially preferred
E.g. large dams discplacing people in the city and around the river and they don’t get compensation even though it might be better off big picture.
Social Welfare Function
Defines a criterion whereby different utilities can be compared and trade-off against each other.
- Enables production of social indifference curves.
Some social welfare functions
- Benthamite (utilitarian): sum all individual utilities
- Egalitarian (utility is dependent on utility of all MINUS poorest person’s utility)
- Rawlsian (most extreme): only way to make society as a whole better off is making poorest people better off. [Maximin]
Arrow’s Impossibility Theorem
There is no rule by which the six criteria for individual preferences can be converted into a social ordering i.e. life is a messy compromise. Not realistic for them all to behave and can’t get away from social power in choice.
Choice Mechanisms: Arrow’s Basic Requirements for Ordering Social Outcomes
- Completeness
- Unanimity
- Non-dictatorship
- Transitivity
- Independence of irrelevant alternatives
- Universality
Evolutionary Economics v. Equilibrium Economics
Equilibrium economics says shocks happen but it comes back to equilibrium.
Evolutionary economics says equilibrium is nonsense; there’s always complex stuff going on pushing different ways; no equilibrium
Evolution
Process of selective retention of renewable variation
- Societyies, economies, and ecological systems are in perpetual change and inherently dynamic; they co-evolve
- Innovation is purposeful change
- No equilbirum
