Environmental Economics
"Industrial development has produced lifestyles that separate most of us from direct contact with the natural systems upon which we depend for sustenance. We buy our food in supermarkets and get our water from a kitchen faucet. We tend to take the availability of these essentials for granted until something threatens the supply."
Theodore D. Goldfarb—views toward the Environmental Movement
Environmental problems are primarily economic problems. While this may be an overstatement, it often is difficult to separate economics from environmental issues or concerns.
Do the Benefits Exceed the Cost?
Economics
-the study of how people use their limited resources to try to satisfy their unlimited wants~When the actions involve economic development, their predictions may contribute to policy decisions that have significant environment consequences.
Goods and services (products) and money (to pay for the products) flow between businesses (production) and consumers. Economics depend s on the natural environment to provide resources (energy and raw materials) and ecosystem services.
When consumption or production of a product has a harmful side effect that is borne by people not directly involved in the market exchange for the product, the side effect is called an external cost.
THE COST OF THE POLLUTION PRODUCED BY THE PROCESS OF MAKING A PRODUCT HAS NO IMPACT ON THE CONSUMER’S DECISION TO BUY THE PRODUCT.
A move toward a better environment entails a cost in terms of goods
Supply/Demand Curve
-the relationship between available supply of a commodity or service and its priceBasically, economics deals with resource allocation and is the description of how we value goods and services. We are willing to pay for things or services we value highly and are unwilling to pay for things we think there is plenty of. For example, we will readily pay for a warm, safe place to live but would be offended if someone suggested that we pay for the air we breathe.
Our goal as a society is to seek long-term economic growth that creates jobs while improving and sustaining the environment. Achieving this goal requires an environmental strategy that repairs past environmental damages; helps us shift from waste management to pollution prevention; and uses valuable resources more efficiently.
In the three decades since the first Earth Day, many nations have made considerable progress in responding to threats to public health and the environment. Yet major challenges remain. We can put in place a set of policies and programs that will establish a new course for the development and use of environmental technologies into the next century but we must design them to meet the challenges of today and the needs of tomorrow constantly change.
How much will it cost?
What are the benefits?
HOW MUCH IS ENOUGH?
How much luxury, convenience, or simple acquisition of "stuff" do we need?
Would we—and the world—be better off if we were satisfied with less?
If resources were unlimited, there would be no need to choose between alternatives and no need for a system of economics.
Tragedy of the Commons
Coined after a now classic essay "The Tragedy of the Commons" written by Garrett Hardin, the original commons were areas of pastureland in England that were provided free by the king to anyone who wished to graze cattle.
There are no problems on the commons as long as the number of animals is small in relation to the size of the pasture. Every herder, though, wants to enlarge his or her herd. The focus then becomes "If my animals don’t eat the grass, someone else’s will." Each herd grows and the density increases until the commons become overgrazed. The result is that everyone loses as the animals die of starvation.
The tragedy is that, even though the eventual result should be perfectly clear, no one acts to avert disaster. In a democratic society, there are few remedies to keep the size of herds in line.
The ecosphere is one big commons stocked with air, water, and irreplaceable mineral resources—a "people’s pasture," but a pasture with very real limits.
Each nation attempts to extract as much from the commons as possible while enough remains to sustain the herd.
The limit to these resources is not based so much on the amount available as it is the energy cost required to extract the resources and the environmental consequences of doing so.
Economists say that the use of resources for pollution abatement should be increased only until the cost of abatement equals the cost of the damage done by the pollution.
Government controls pollution by imposing legal limits on amounts of permissible pollution by command and control.
Check out Erin's page again to brush up on these acts.
Discussion:
The most prominent corner in the environmental debate today is called "market based" environmentalism. The basic idea is to establish financial sticks instead of ordinary regulation. Instead of mandating a smokestack scrubber, charge the company heavily for what it emits and let it find the most efficient way to clean up its discharges.
In the midst of the Depression, Congress established the Securities and Exchange Commission to require rigorous financial reporting by corporations. The idea was that informed investors would help avert a financial crash. In the 1980s, a so-called Toxics Release Inventory was enacted that required plants to disclose to their neighbors the toxic substances they use and emit.
Do you think environmentalists should stretch traditional cost-benefit analysis to include how development impacts the environment or shouldn’t they?
What are the benefits to this? The risks?
Do we need more environmental-impact reporting so that informed buyers can avert an environmental crash?
Will this even make a difference?
"For the love of money is the root of all evil."
1 Timothy 6:10
I am sure that I have not given the idea of environmental economics the depth that it should have but I hope that I have touched on at least a few of the important aspects. The main goal is to get you thinking about how the environment affects our economy and vice versa in order to spark some interesting discussions Monday evening. I am looking forward to your feedback and knowledge, as economics is something that I am generally unfamiliar with. Please feel free to clarify any terms or concepts that I may not explain adequately enough.
Any questions…email me: Sarah Beaumont
dancing4god@yahoo.com
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