PowerPoint® Slides prepared by Jay Withgott and Heidi Marcum
Ch 2
Environmental Ethics and
Economics: Values and
Choices
Part 1: Foundations of
Environmental Science
PowerPoint® Slides prepared by
Jay Withgott and Heidi Marcum
Copyright © 2006 Pearson Education, Inc., publishing as Benjamin Cummings
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
This lecture will help you understand:
• Culture and worldviews
• Environmental ethics
• Classical and neoclassical
economics
• Economic growth,
economic health, and
sustainability
• Environmental and
ecological economics
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Central Case: The Mirrar Clan Confronts the
Jabiluka Uranium Mine
• Uranium deposits in Australia often occur on sacred Aboriginal
land
- The Mirrar oppose the mine for cultural, religious, ethical,
health, and economic reasons
The mine will not be developed unless the Mirrar agree
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ethics and economics
• Both disciplines deal with
what we value
• Our values affect our
environmental decisions
and actions
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Culture and worldview
• Our relationship with the environment depends on
assessments of costs and benefits
• Culture and worldview also affects this relationship
- Culture = knowledge, beliefs, values, and learned
ways of life shared by a group of people
- Worldview = a person’s or group’s beliefs about the
meaning, purpose, operation, and essence of the world
Culture and worldview affect our perception of the
environment and environmental problems
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Worldviews differ among people
• Different worldviews
result in different
perceptions
• Aborigines saw the
negative environmental
impacts of the Jabiluka
mine
• Others saw jobs, income,
and energy from the mine
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Many factors shape worldviews
• Religions
• Communities
• Political ideology
• Economics
• Individual interests
- Vested interest = an individual with strong
interests in the outcome of a decision that results
in gain or loss for that individual
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ethics
• Ethics = the study of good and bad, right and wrong
- Relativists = ethics varies with social context
- Universalists = right and wrong remains the same
across cultures and situations
• Ethical standards = criteria that help differentiate right
from wrong
- Classical standard = virtue
- The golden rule
- Utility = something right produces the most benefits
for the most people
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental ethics
• Environmental ethics = application of ethical standards
to relationships between human and non-human entities
- Hard to resolve; depends on the person’s ethical
standards
- Depends on the person’s domain of ethical concern
Should we conserve
resources for future
generations?
Is is OK to destroy a
forest to create jobs
for people?
Should humans drive
other species to
extinction?
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is it OK for some
communities to be exposed
to excess pollution?
We have expanded our ethical consideration
• To include animals, communities, nature
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Expanding ethical concern
• Why have we expanded our ethical concerns?
- Economic prosperity: more leisure time, less anxieties
- Science: interconnection of all organisms
• Non-western cultures often have broader ethical domains
• Three perspectives in Western ethics
- Anthropocentrism = only humans have rights
- Biocentrism = certain living things also have value
- Ecocentrism = whole ecological systems have value
- Holistic perspective, stresses preserving
connections
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Western ethical expansion
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
History of environmental ethics
•
People have questioned our relationship with the environment for
centuries
•
Christianity’s attitude towards the environment
•
•
Anthropocentric hostility, or
•
Stewardship?
The Industrial Revolution increased consumption and pollution
•
People no longer appreciated nature
•
Transcendentalism = nature is a manifestation of the divine
•
Ralph Waldo Emerson, Henry David Thoreau
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The preservation ethic
• Unspoiled nature should be protected for its own inherent value
• John Muir (right, with President Roosevelt at Yosemite National
Park) had an ecocentric viewpoint
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The conservation ethic
• Use natural resources wisely for the greatest good for the most
people
• Gifford Pinchot had an anthropocentric viewpoint
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The land ethic
• Healthy ecological systems depend on protecting all parts
• Aldo Leopold believed the land ethic changes the role of people
from conquerors of the land to citizens of it
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Deep ecology, ecofeminism, and justice
• Deep ecology = humans are inseparable from nature
• Since all living things have equal value, they should be
protected
• Ecofeminism = male-dominated societies have degraded
women and the environment through fear and hate
• Female worldview = cooperation
• Environmental justice = the fair and equitable treatment
of all people regarding environmental issues
• Wealthy nations dump hazardous waste in poorer
nations with uninformed residents
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental justice (EJ)
• The poor and minorities are exposed to more pollution,
hazards, and environmental degradation
75% of toxic waste landfills in the southeastern U.S. are in
communities with higher racial minorities
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental justice and Native Americans
From 1948 to the 1960s, Navajo miners were not warned
of radiation risks, nor provided protection by the industry
or the U.S. government
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Economics
•
Friction occurs between people’s ethical and economic
impulses
•
Is there a trade-off between economics and the
environment?
•
Generally, environmental protection is good for the
economy
•
Economics studies how people use resources to provide
goods and services in the face of demand
•
Most environmental and economic problems are linked
•
Root “oikos” gave rise to both ecology and economics
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Types of modern economies
• Economy = a social system that converts resources into
• Goods: manufactured materials that are bought, and
• Services: work done for others as a form of business
• Subsistence economy = people get their daily needs
directly from nature; they do not purchase or trade
• Capitalist market economy = buyers and sellers interact
to determine prices and production of goods and services
• Centrally planned economy = the government
determines how to allocate resources
• Mixed economy = governments intervene to some extent
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Government intervenes in a market
economy
• Even in capitalist market economies, governments
intervene to:
• Eliminate unfair advantages
• Provide social services
• Provide safety nets
• Manage the commons
• Mitigate pollution
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Conventional view of economics
• Conventional
economics focuses on
production and
consumption
• Ignores the
environment
• The environment is
an external “factor
of production”
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental view of economics
• Human economies
exist within, and
depend on, the
environment
• Without natural
resources, there
would be no
economies
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental systems support economies
• Ecosystem services = essential services support the life
that makes economic activities possible
*Soil formation
*Pollination
*Water purification
*Nutrient cycling
*Climate regulation
*Waste treatment
• Economic activities affect the environment
• Deplete natural resources
• Produce too much pollution
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Classical economics
•
Competition between people free to pursue their
own economic self-interest will benefit society as a
whole (Adam Smith, 1723-1790)
•
The market is guided by an “invisible hand”
•
This idea is a pillar of free-market thought today
•
It is also blamed for economic inequality
•
•
Rich vs. poor
Critics think that market capitalism should be
restricted by government
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Neoclassical economics
• Examines the
psychological factors
underlying consumer
choices
• Market prices are explained
in terms of consumer
preferences
• Buyers vs. sellers
• The “right” quantities of a
product are produced
The market favors equilibrium between supply and demand
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Marginal benefit and cost curves
• Cost-benefit analysis =
the costs of a proposed
action are compared to
the benefits that result
from the action
• If benefits > costs:
pursue the action
• Not all costs and benefits
can be identified
Marginal benefit and cost curves determine an “optimal” level
of resource use or pollution mitigation
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Neoclassical economics
• Enormous wealth and jobs are generated
- Environmental problems are also created
• Assumptions of neoclassical economics:
- Resources are infinite or substitutable
- Costs and benefits are internal
- Long-term effects are discounted
- Growth is good
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumption: Resources are infinite
• Economic models treat resources as substitutable
and interchangeable
- A replacement resource will be found
• But, Earth’s resources are limited
- Nonrenewable resources can be depleted
- Renewable resources can also be depleted
- For example, Easter Islanders destroyed
their forests
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumption: Costs and benefits are internal
• Costs and benefits are experienced by the buyer and seller alone
- Do not affect other members of the society
- Pricing ignores social, environmental or economic costs
• Externalities = costs or benefits involving people other than the
buyer or seller
• External costs = borne by someone not involved in a transaction
- Human health problems
- Resource depletion
- Hard to account for and eliminate
- How do you assign monetary value to illness?
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumptions: Long-term effects are
discounted and growth is good
• A future event counts less than a present one
- Discounting = short-term costs and benefits are more important
than long-term costs and benefits
- Policymakers ignore long term consequences of our actions
- Discourages attention to resource depletion and pollution
• Economic growth is necessary to maintain employment and social
order
- Promoting economic growth creates opportunities for poor to
become wealthier
- Progress is measured by economic growth
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is the growth paradigm good for us?
• “More and bigger is better”
• The dramatic rise in per-person consumption has severe
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is economic growth sustainable?
• Affluenza = material goods do not always bring
contentment
• Uncontrolled economic growth is unsustainable
- Technology can push back limits, but not forever
- More efficient resource extraction and food
production perpetuates the illusion that resources
are unlimited
• Many economists believe technology can solve
everything
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Other types of economists
• Ecological economists = civilizations cannot overcome
environmental limitations
- Steady state economies should mirror natural
ecological systems
- Calls for revolution
• Environmental economists = unsustainable economies
have high population growth and inefficient resource use
- Modify neoclassical economics to increase efficiency
- Calls for reform
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
A steady state economy
• As resources became harder to find, economic growth
slows and stabilizes (John Stuart Mill, 1806-1873)
• We must rethink our assumptions and change our
way of economic transactions
• This does not mean a lower quality of life
• Economies are measured in various ways
• Gross Domestic Product (GDP) = total monetary
value of final goods and services produced
• Does not account for nonmarket values
• Pollution increases GDP
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
GPI: An alternative to the GDP
• Genuine Progress Indicator (GPI) = differentiates between
desirable and undesirable economic activity
- Positive contributions (i.e. volunteer work) not paid for with
money are added to economic activity
- Negative impacts (crime, pollution) are subtracted
In the U.S., GDP has risen greatly, but not GPI
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
More “green accounting” indicators
• Net Economic Welfare (NEW) = adjusts GDP by
adding the value of leisure time, while deducting
environmental degradation
• Sustainable Economic Welfare (ISEW) = based on
income, wealth distribution, resource depletion
• These indicators give a more accurate indication of a
nation’s welfare
- Very controversial, hard to practice
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Valuing ecosystems goods and services
• Our society mistreats the very systems that sustain it
- The market ignores/undervalues ecosystem values
• Nonmarket values = values not included in the price of a
good or service
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assigning value to ecosystem services
• Contingent valuation = uses surveys to determine how
much people are willing to pay to protect or restore a
resource
- Measures expressed preferences
- But, since people don’t really pay, they may
overinflate values
• Revealed preferences = revealed by actual behavior
- Time, money, effort people spend
- Measuring the actual cost of restoring natural systems
The global value of all ecosystem services = $42 trillion!
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Markets can fail
• Market failure = markets do not account for the
environment’s positive impacts
- Markets do not reflect the negative effects of activities
on the environment or people (external costs)
• Government intervention counters market failure
- Laws and regulations
- Green taxes = penalize harmful activities
- Economic incentives to promote conservation and
sustainability
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ecolabeling addresses market failures
• The market can be used to counter
market failure
- Create markets in permits
- Ecolabeling = tells consumers
which brands use sustainable
processes
- A powerful incentive for
businesses to switch to better
processes
- “Dolphin safe” tuna
- Socially responsible investing in
sustainable companies
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Corporations are responding to concerns
• Industries, businesses, and corporations can make money
by “greening” their operations
- Local sustainably oriented businesses are being started
- Large corporations are riding the “green wave” of
consumer preference for sustainable products
- Nike, Gap
• Be careful of greenwashing, where consumers are misled
into thinking companies are acting sustainably
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Conclusion
• Recent developments have brought economic approaches
to bear on environmental protection and conservation
• Environmental ethics has expanded people’s ethical
considerations
• Economic welfare can be enhanced without growth,
resulting in economic health and environmental quality
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
An ecocentric worldview would consider the impact of
an action on… ?
a) Humans only
b) Animals only
c) Plants only
d) All living things
e) All nonliving things
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which ethic holds that healthy ecosystems depend on the
protection of all their parts?
a)
Preservation ethic
b) Land ethic
c)
Conservation ethic
d) Deep ecology
e)
Biocentrism
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which of the following is an ecosystem service?
a) Water purification in wetlands
b)
Climate regulation in the atmosphere
c)
Nutrient cycling in ecosystems
d)
Waste treatment by bacteria
e)
All of the above
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which is NOT an assumption of neoclassical economics
that can lead to environmental degradation?
a) Resources are limited
b) Long-term effects are downplayed
c) All costs and benefits are experienced by the buyer
and seller alone
d) Growth is good
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which of the following statements would be spoken by an
ecological economist?
a) The current economic system is working fine
b) The current economic system simply needs to be
fine-tuned
c) The current economic system is broken and a new
one needs to be developed
d) Economic systems never work
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Interpreting Graphs and Data
Market equilibrium, which sets the price of a product, is
reached …
a) When supply exceeds
demand
b) When demand exceeds
supply
c) By demand when
quantity is low, and
supply when quantity is
high
d) When supply equals
demand
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Interpreting Graphs and Data
Which conclusion can you draw from this graph?
a) GDP has not really
increased since 1950
b) Although we are
spending more money,
our lives are not much
better
c) We are spending less
money, and our lives
are much better
d) The GPI is not as
accurate as GDP
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Viewpoints
Think of an issue in your community that could pit
environmentalists against economic development. What
do you think should prevail: environmental protection
or economic development?
a) Economic growth; we need the jobs
b) Environmental protection; we need the
environment
c) Both; a compromise must be reached
d) Whatever costs the taxpayers the least
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Viewpoints
What entities do you include in your domain of ethical
concern?
a)
b)
c)
d)
Humans only
Humans and pets
Humans, pets, and other animals
Humans, pets, other animals, and nature
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental Ethics and
Economics: Values and
Choices
Part 1: Foundations of
Environmental Science
PowerPoint® Slides prepared by
Jay Withgott and Heidi Marcum
Copyright © 2006 Pearson Education, Inc., publishing as Benjamin Cummings
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
This lecture will help you understand:
• Culture and worldviews
• Environmental ethics
• Classical and neoclassical
economics
• Economic growth,
economic health, and
sustainability
• Environmental and
ecological economics
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Central Case: The Mirrar Clan Confronts the
Jabiluka Uranium Mine
• Uranium deposits in Australia often occur on sacred Aboriginal
land
- The Mirrar oppose the mine for cultural, religious, ethical,
health, and economic reasons
The mine will not be developed unless the Mirrar agree
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ethics and economics
• Both disciplines deal with
what we value
• Our values affect our
environmental decisions
and actions
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Culture and worldview
• Our relationship with the environment depends on
assessments of costs and benefits
• Culture and worldview also affects this relationship
- Culture = knowledge, beliefs, values, and learned
ways of life shared by a group of people
- Worldview = a person’s or group’s beliefs about the
meaning, purpose, operation, and essence of the world
Culture and worldview affect our perception of the
environment and environmental problems
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Worldviews differ among people
• Different worldviews
result in different
perceptions
• Aborigines saw the
negative environmental
impacts of the Jabiluka
mine
• Others saw jobs, income,
and energy from the mine
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Many factors shape worldviews
• Religions
• Communities
• Political ideology
• Economics
• Individual interests
- Vested interest = an individual with strong
interests in the outcome of a decision that results
in gain or loss for that individual
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ethics
• Ethics = the study of good and bad, right and wrong
- Relativists = ethics varies with social context
- Universalists = right and wrong remains the same
across cultures and situations
• Ethical standards = criteria that help differentiate right
from wrong
- Classical standard = virtue
- The golden rule
- Utility = something right produces the most benefits
for the most people
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental ethics
• Environmental ethics = application of ethical standards
to relationships between human and non-human entities
- Hard to resolve; depends on the person’s ethical
standards
- Depends on the person’s domain of ethical concern
Should we conserve
resources for future
generations?
Is is OK to destroy a
forest to create jobs
for people?
Should humans drive
other species to
extinction?
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is it OK for some
communities to be exposed
to excess pollution?
We have expanded our ethical consideration
• To include animals, communities, nature
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Expanding ethical concern
• Why have we expanded our ethical concerns?
- Economic prosperity: more leisure time, less anxieties
- Science: interconnection of all organisms
• Non-western cultures often have broader ethical domains
• Three perspectives in Western ethics
- Anthropocentrism = only humans have rights
- Biocentrism = certain living things also have value
- Ecocentrism = whole ecological systems have value
- Holistic perspective, stresses preserving
connections
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Western ethical expansion
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
History of environmental ethics
•
People have questioned our relationship with the environment for
centuries
•
Christianity’s attitude towards the environment
•
•
Anthropocentric hostility, or
•
Stewardship?
The Industrial Revolution increased consumption and pollution
•
People no longer appreciated nature
•
Transcendentalism = nature is a manifestation of the divine
•
Ralph Waldo Emerson, Henry David Thoreau
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The preservation ethic
• Unspoiled nature should be protected for its own inherent value
• John Muir (right, with President Roosevelt at Yosemite National
Park) had an ecocentric viewpoint
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The conservation ethic
• Use natural resources wisely for the greatest good for the most
people
• Gifford Pinchot had an anthropocentric viewpoint
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
The land ethic
• Healthy ecological systems depend on protecting all parts
• Aldo Leopold believed the land ethic changes the role of people
from conquerors of the land to citizens of it
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Deep ecology, ecofeminism, and justice
• Deep ecology = humans are inseparable from nature
• Since all living things have equal value, they should be
protected
• Ecofeminism = male-dominated societies have degraded
women and the environment through fear and hate
• Female worldview = cooperation
• Environmental justice = the fair and equitable treatment
of all people regarding environmental issues
• Wealthy nations dump hazardous waste in poorer
nations with uninformed residents
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental justice (EJ)
• The poor and minorities are exposed to more pollution,
hazards, and environmental degradation
75% of toxic waste landfills in the southeastern U.S. are in
communities with higher racial minorities
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental justice and Native Americans
From 1948 to the 1960s, Navajo miners were not warned
of radiation risks, nor provided protection by the industry
or the U.S. government
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Economics
•
Friction occurs between people’s ethical and economic
impulses
•
Is there a trade-off between economics and the
environment?
•
Generally, environmental protection is good for the
economy
•
Economics studies how people use resources to provide
goods and services in the face of demand
•
Most environmental and economic problems are linked
•
Root “oikos” gave rise to both ecology and economics
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Types of modern economies
• Economy = a social system that converts resources into
• Goods: manufactured materials that are bought, and
• Services: work done for others as a form of business
• Subsistence economy = people get their daily needs
directly from nature; they do not purchase or trade
• Capitalist market economy = buyers and sellers interact
to determine prices and production of goods and services
• Centrally planned economy = the government
determines how to allocate resources
• Mixed economy = governments intervene to some extent
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Government intervenes in a market
economy
• Even in capitalist market economies, governments
intervene to:
• Eliminate unfair advantages
• Provide social services
• Provide safety nets
• Manage the commons
• Mitigate pollution
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Conventional view of economics
• Conventional
economics focuses on
production and
consumption
• Ignores the
environment
• The environment is
an external “factor
of production”
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental view of economics
• Human economies
exist within, and
depend on, the
environment
• Without natural
resources, there
would be no
economies
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Environmental systems support economies
• Ecosystem services = essential services support the life
that makes economic activities possible
*Soil formation
*Pollination
*Water purification
*Nutrient cycling
*Climate regulation
*Waste treatment
• Economic activities affect the environment
• Deplete natural resources
• Produce too much pollution
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Classical economics
•
Competition between people free to pursue their
own economic self-interest will benefit society as a
whole (Adam Smith, 1723-1790)
•
The market is guided by an “invisible hand”
•
This idea is a pillar of free-market thought today
•
It is also blamed for economic inequality
•
•
Rich vs. poor
Critics think that market capitalism should be
restricted by government
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Neoclassical economics
• Examines the
psychological factors
underlying consumer
choices
• Market prices are explained
in terms of consumer
preferences
• Buyers vs. sellers
• The “right” quantities of a
product are produced
The market favors equilibrium between supply and demand
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Marginal benefit and cost curves
• Cost-benefit analysis =
the costs of a proposed
action are compared to
the benefits that result
from the action
• If benefits > costs:
pursue the action
• Not all costs and benefits
can be identified
Marginal benefit and cost curves determine an “optimal” level
of resource use or pollution mitigation
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Neoclassical economics
• Enormous wealth and jobs are generated
- Environmental problems are also created
• Assumptions of neoclassical economics:
- Resources are infinite or substitutable
- Costs and benefits are internal
- Long-term effects are discounted
- Growth is good
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumption: Resources are infinite
• Economic models treat resources as substitutable
and interchangeable
- A replacement resource will be found
• But, Earth’s resources are limited
- Nonrenewable resources can be depleted
- Renewable resources can also be depleted
- For example, Easter Islanders destroyed
their forests
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumption: Costs and benefits are internal
• Costs and benefits are experienced by the buyer and seller alone
- Do not affect other members of the society
- Pricing ignores social, environmental or economic costs
• Externalities = costs or benefits involving people other than the
buyer or seller
• External costs = borne by someone not involved in a transaction
- Human health problems
- Resource depletion
- Hard to account for and eliminate
- How do you assign monetary value to illness?
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assumptions: Long-term effects are
discounted and growth is good
• A future event counts less than a present one
- Discounting = short-term costs and benefits are more important
than long-term costs and benefits
- Policymakers ignore long term consequences of our actions
- Discourages attention to resource depletion and pollution
• Economic growth is necessary to maintain employment and social
order
- Promoting economic growth creates opportunities for poor to
become wealthier
- Progress is measured by economic growth
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is the growth paradigm good for us?
• “More and bigger is better”
• The dramatic rise in per-person consumption has severe
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Is economic growth sustainable?
• Affluenza = material goods do not always bring
contentment
• Uncontrolled economic growth is unsustainable
- Technology can push back limits, but not forever
- More efficient resource extraction and food
production perpetuates the illusion that resources
are unlimited
• Many economists believe technology can solve
everything
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Other types of economists
• Ecological economists = civilizations cannot overcome
environmental limitations
- Steady state economies should mirror natural
ecological systems
- Calls for revolution
• Environmental economists = unsustainable economies
have high population growth and inefficient resource use
- Modify neoclassical economics to increase efficiency
- Calls for reform
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
A steady state economy
• As resources became harder to find, economic growth
slows and stabilizes (John Stuart Mill, 1806-1873)
• We must rethink our assumptions and change our
way of economic transactions
• This does not mean a lower quality of life
• Economies are measured in various ways
• Gross Domestic Product (GDP) = total monetary
value of final goods and services produced
• Does not account for nonmarket values
• Pollution increases GDP
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
GPI: An alternative to the GDP
• Genuine Progress Indicator (GPI) = differentiates between
desirable and undesirable economic activity
- Positive contributions (i.e. volunteer work) not paid for with
money are added to economic activity
- Negative impacts (crime, pollution) are subtracted
In the U.S., GDP has risen greatly, but not GPI
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
More “green accounting” indicators
• Net Economic Welfare (NEW) = adjusts GDP by
adding the value of leisure time, while deducting
environmental degradation
• Sustainable Economic Welfare (ISEW) = based on
income, wealth distribution, resource depletion
• These indicators give a more accurate indication of a
nation’s welfare
- Very controversial, hard to practice
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Valuing ecosystems goods and services
• Our society mistreats the very systems that sustain it
- The market ignores/undervalues ecosystem values
• Nonmarket values = values not included in the price of a
good or service
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Assigning value to ecosystem services
• Contingent valuation = uses surveys to determine how
much people are willing to pay to protect or restore a
resource
- Measures expressed preferences
- But, since people don’t really pay, they may
overinflate values
• Revealed preferences = revealed by actual behavior
- Time, money, effort people spend
- Measuring the actual cost of restoring natural systems
The global value of all ecosystem services = $42 trillion!
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Markets can fail
• Market failure = markets do not account for the
environment’s positive impacts
- Markets do not reflect the negative effects of activities
on the environment or people (external costs)
• Government intervention counters market failure
- Laws and regulations
- Green taxes = penalize harmful activities
- Economic incentives to promote conservation and
sustainability
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Ecolabeling addresses market failures
• The market can be used to counter
market failure
- Create markets in permits
- Ecolabeling = tells consumers
which brands use sustainable
processes
- A powerful incentive for
businesses to switch to better
processes
- “Dolphin safe” tuna
- Socially responsible investing in
sustainable companies
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Corporations are responding to concerns
• Industries, businesses, and corporations can make money
by “greening” their operations
- Local sustainably oriented businesses are being started
- Large corporations are riding the “green wave” of
consumer preference for sustainable products
- Nike, Gap
• Be careful of greenwashing, where consumers are misled
into thinking companies are acting sustainably
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
Conclusion
• Recent developments have brought economic approaches
to bear on environmental protection and conservation
• Environmental ethics has expanded people’s ethical
considerations
• Economic welfare can be enhanced without growth,
resulting in economic health and environmental quality
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
An ecocentric worldview would consider the impact of
an action on… ?
a) Humans only
b) Animals only
c) Plants only
d) All living things
e) All nonliving things
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which ethic holds that healthy ecosystems depend on the
protection of all their parts?
a)
Preservation ethic
b) Land ethic
c)
Conservation ethic
d) Deep ecology
e)
Biocentrism
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which of the following is an ecosystem service?
a) Water purification in wetlands
b)
Climate regulation in the atmosphere
c)
Nutrient cycling in ecosystems
d)
Waste treatment by bacteria
e)
All of the above
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which is NOT an assumption of neoclassical economics
that can lead to environmental degradation?
a) Resources are limited
b) Long-term effects are downplayed
c) All costs and benefits are experienced by the buyer
and seller alone
d) Growth is good
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Review
Which of the following statements would be spoken by an
ecological economist?
a) The current economic system is working fine
b) The current economic system simply needs to be
fine-tuned
c) The current economic system is broken and a new
one needs to be developed
d) Economic systems never work
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Interpreting Graphs and Data
Market equilibrium, which sets the price of a product, is
reached …
a) When supply exceeds
demand
b) When demand exceeds
supply
c) By demand when
quantity is low, and
supply when quantity is
high
d) When supply equals
demand
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Interpreting Graphs and Data
Which conclusion can you draw from this graph?
a) GDP has not really
increased since 1950
b) Although we are
spending more money,
our lives are not much
better
c) We are spending less
money, and our lives
are much better
d) The GPI is not as
accurate as GDP
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Viewpoints
Think of an issue in your community that could pit
environmentalists against economic development. What
do you think should prevail: environmental protection
or economic development?
a) Economic growth; we need the jobs
b) Environmental protection; we need the
environment
c) Both; a compromise must be reached
d) Whatever costs the taxpayers the least
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings
QUESTION: Viewpoints
What entities do you include in your domain of ethical
concern?
a)
b)
c)
d)
Humans only
Humans and pets
Humans, pets, and other animals
Humans, pets, other animals, and nature
Copyright © 2008 Pearson Education, Inc., publishing as Benjamin Cummings