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8/10/2019 Chapter 7 Ecological Limits and Economic Devlopment
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Chapter 7Ecological limits and Economical
development
GaneshThapa
The earth provides enough resources for everyonesneed, but not for some peoples greed
Ghandi
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What is Economic Growth? Increase in the production and consumption of
goods and services Occurs when either population or per capita
consumption increases
Typically measured using GDP Total expenditure on all goods and services
produced within a country
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WHY?
Economic growth is no longer improving peoples lives in the developed world
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The Economy and the Environment
Waste products
Waste
products
Resources Waste
Resources Waste
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Closed Economic System
Capital Technology Stock Stock
Production Labor
OutputConsum tion Households
Capital Investment
Technology Investment
Source: Pezzey
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Economic theories of development
What development economists agree on:Development economics: deals with the economic,
social, political, and institutional mechanisms, both public and private, necessary to bring aboutimprovements in wellbeing .
Structural change is an essential part of this process
BUT: does this mean a shift away from agriculturein the economy?
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Most neoclassical economists assume thattechnological advance will outpace resourcescarcity over the long run and that ecologicalservices can also be replaced by newtechnologies.
Ecological economists, on the other hand,assume that resource and ecological limits arecritically important and are much less
confident that technological advances willarise in response to higher prices generated byscarcities.
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8
0
50
100
150
200
250
1980 1985 1990 1995 2000 2005
I n d e x
( 1 9 8 0 =
1 0 0
)
Can Technology Save Us?
Source: SERI (www.materialflows.net)
Between 1980 and 2005: Material intensity (i.e. kg of
biomass, minerals, and fossil
fuels required to produce adollar of GDP) decreased by31%
Population increased by 46%,Per capita GDP increased by
47% Total GDP increased by 116% Total resource use increased
by 49%
The WorldGDP
Material Use
Material Intensity
Can we decouple economic growth from resource use?
Technological progressSwitch from goods to services
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9
0
1
2
3
4
5
6
7
0
2 0 0
4 0 0
6 0 0
8 0 0
1 0 0 0
1 2 0 0
1 4 0 0
1 6 0 0
1 8 0 0
2 0 0 0
Year
P o p u
l a t i o n
( B i l l i o n s
)
0
1000
2000
3000
4000
5000
6000
7000
PerCapita GDP (1990$)
Population
Per Capita GDP
The History of Economic GrowthThe Global Economy, 1 2006 AD
Can this really continue???
Source: Maddison 2008
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The Ecological Footprint Measures how much land society needs to:
Produce the resources it consumes Assimilate the wastes it generates
A countrys ecological footprint is the sum of all thecropland, grazing land, forest and fishing groundsrequired to produce the food, fiber and timber itconsumes, to absorb the wastes emitted when it usesenergy and to provide space for infrastructure
Earths people needed 18 billion hectares of productive land in order to provide each and every person with the resources they required to supporttheir lifestyle and to absorb the wastes they
produced.
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The bad news is that there were only 12billion global hectares available.
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12
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1 9 6 0
1 9 7 0
1 9 8 0
1 9 9 0
2 0 0 0
N u m
b e r o
f E a r t
h s
Ecological Footprint Biocapacity
Global Ecological Overshoot
Global ecological footprintis greater than available
biocapacity!
We are in a state ofovershoot Resources are being used
faster than they can be
regenerated Wastes are being produced
faster than they can beassimilated
Source: Global Footprint Network
The World
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Prevailing Economic System
Private ownership of material resources Public ownership of sinks Perfect functioning of the market Infinite substitutability of resources Subsidized disposal, energy, water
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Main problems with current economic theory
Externalities- costs not borne by those who
create them
Badly defined property rights
- environmental goods perceived as commons
The environment is not subject of rights
- the environments interests are not legally represented inthe economic system
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Problems with Current Economic Theory
Assumes market prices reflect consumer willingness to pay. Assumes that consumers are the best judge of value and that
community considerations are irrelevant.
Assumes consumers understand the value of ecologicalresources provided by many biological resources.
Assumes consumer, aided by the market place, knowswhich species are unnecessary for ecosystem maintenance.
Assessment of economic value ignores many equity andmoral considerations.
General failure to recognize that market prices are highlydistorted.
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The Limits to Growth
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To understand the interactions between theeconomy and the environment concept ofecological limits is most.
The idea is that there are biological and physicallimits to economic growth beyond which bothecological and economic collapse would occur.
In this view, limits are seen as absolute constraintson economic activity, not just as a point beyondwhich economic growth results in environmentaldestruction.
Ecological Limits
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3.1 Biophysical limits to growthFinitude: fixed size of the ecosystem that hosts an expanding
economic system
Entropy: the ordered structures of the economic subsystem
are maintained at the expense of creating a more thanoffsetting amount of disorder in the rest of the system.Ecosystem as source of low-entropy inputs and sink forhigh entropy waste. Entropic costs = depletion of resourcesand pollution
Ecological interdependence: ecological connections between economic sub-system and its hosting ecosystemare disrupted with growth of economy
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3.2 Ethical and social limits to growthCost to unpaid workers:anything that does not enter the calculations of GDP
does not matter, therefore it can be used upwithout need for reinvestment
Costs to future generations: how do discount rateswork? Welfare of future people?
Cost to other life forms: extinction and the welfareof other animals and planet
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Is It All Worth It?
Imogen Shaw
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Enough is Enough
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Happiness and GDP
Americans have been more successful decoupling GDP from happiness than indecoupling it from material and energy Peter Victor
Real income
per person
Percentagevery happy
Source: Layard (2005)
United States
P e r c e n
t a g e v e r y
h a p p y
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Happiness and GDP Across
Countries
Source: Inglehart and Klingemann (2000)
Income per Person ($)
H a p p
i n e s s
( I n
d e x )
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Socialism collapsed because it did not allow
prices to tell the economic truth.
Capitalism may collapse because it does not
allow prices to tell the ecological truth.
Source: Dahle, 2001.
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What then?United Nations Definition of Development :
The basic purpose of development is to enlarge people's choices.
People often value achievements that do notshow up at all, or not immediately, in incomeor growth figures:
o greater access to knowledge,o better nutrition and health services,o more secure livelihoods,o security against crime and physical violence,
satisfying leisure hours,o political and cultural freedoms and sense of
participation in community activities.
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What then? The objective of development is to create an enabling
environment for people to enjoy long, healthy and creative
lives
UN definition of sustainable development: development which meets the needs of the present withoutsacrificing the ability of the future to meet its needs.
Growth: quantitative increase by assimilation or accretionof materials
Development: qualitative improvement, realization ofpotential
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3. Sustainable development
"Anyone who believes exponentialgrowth can go on forever in a finite
world is either a madman or aneconomist."
Kenneth Boulding (1910-1993)
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Concept of ecologically sustainabledevelopment
Ecologically sustainable development is theenvironmental component of sustainabledevelopment.
It can be achieved partially through the use ofthe precautionary principle ; if there are threatsof serious or irreversible environmental damage,lack of full scientific certainty should not be usedas a reason for postponing measures to preventenvironmental degradation.
f
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Also important is the principle of
intergenerational equity; the present generationshould ensure that the health, diversity and
productivity of the environment is maintained or
enhanced for the benefit of future generations. In order for this movement to flourish,
environmental factors should be more heavily
weighed in the valuation of assets and services to provide more incentive for the conservation of biological diversity and ecological integrity.
Concept of ecologically sustainabledevelopment
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Economy with Environmental ConsiderationsEnvironmentalProductivity
Natural Resource StocksRenewable Non- PollutionCapital Technology Resources Renewable Stock Stock Stock Resources
Production
Labor
Output Waste FlowsHouseholds
Capital Investment Consumption
Utility Environmental Amenity Technology Investment
Clean Up Expenditure
Environmental Quality
Source: Pezzey
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Sustainable Economic System
Understands primary role of natural systems in theeconomy
Integrates functions of industrial and natural
ecologies Accounts for true costs of waste and disposal
Cradle-to-Grave responsibility for products
Penalizes waste, rewards efficiency Provides for fair, just, meaningful, and fulfilling
employment of human resources
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What is a Steady State Economy
(SSE) ? Stable population
Stable per capita consumption
Energy and material flows are reduced andkept within ecological limits
Constant stocks of natural and human-built
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How Do we overcome the
Ecological limits? Adopt the right macro-economic goal : the
Steady State Economy
Gradually change existing policies from
growth towards a steady state
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Ecological concepts applied to
the economy Assimilative capacity : the capacity of the natural
environment to absorb wastes Regenerative capacity: the ability of the ecosystem to
replace resources that we use in our production systems Renewable resources , such as wood or wind energy, are
in continuous supply, although the rate at which theycan be replenished will vary from resource to resource
Non-renewable resources , such as iron ore or fossilfuels, are in limited supply within the earths crust, andthus once they are used up they cannot be replaced.
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Five Capitals Framework
We are facing a sustainability crisis because we're consuming our stocks ofnatural, human and social capital faster than they are being produced. Unlesswe control the rate of this consumption, we can't sustain these vital stocks inthe long-term.
Forum for the Future
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1. Limit Resource UseCurrently:
Few controls on use of resources and emission of pollutants Montreal Protocol: limits ozone-depleting substances EU Emissions Trading Scheme: limits CO 2 emissions
In a SSE:
Impose strict resource and emission caps
Employ a cap auction trade system Caps set based on ecological criteria Permits auctioned by government Trade between industries to allow efficient allocation
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2. Stabilise PopulationCurrently:
Natural increase is low in many wealthy countries But many rich countries are trying to encourage population
growth
In a SSE:
Births plus immigration must equal deaths plus emigration
In wealthy countries: Balance immigration with emigration In poorer countries:
Provide education, access to birth control, and equal rights for women
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3. Reduce InequalityCurrently:
Economic growth is used as an excuse to avoid dealing with poverty
A rising tide lifts all boats
In a SSE:
No growth, so no excuses! Finite resource use = Finite amount of wealth Must deal with distribution explicitly
Need a minimum and maximum income
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4. Reduce Working Hours
Currently:
Technological progress is used to increase production of
goods and services A better widget machine = more widgets!
In a SSE:
We cannot increase production if it results in higherresource use
Instead, shorten the working day, week, & year Same salaries but more leisure time!
5 Changing the Signals to the
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5. Changing the Signals to theEconomy
Currently taxes are applied to positive aspects of behavior: wages, productivity, profit It would be better to tax aspects that are negative:
waste, inefficiency, pollution Tax pollution, not production -Pollution excise,
Tradable pollution permits, Deposit fees, tax credits
Shifting impacts of production to producers iscalled internalization
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6. Change How We Measure
ProgressCurrently: Rely on GDP, which doesnt distinguish between:
Benefits and costs Quality and quantity
In a SSE:
What happens to GDP is not important
Replace GDP with two sets of accounts: Well-being To be maximised
Resource use To be reduced and kept within ecological limits
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Alternative Measures of Welfare
(Examples) Index of Sustainable Economic Welfare
(ISEW) Genuine Progress Indicator (GPI)
Human Development Index (HDI)
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What Are We Actually
Measuring? GDP
Total expenditure on all goods and services
produced within a country
Adds to GDP:
Also adds to GDP:
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Same accounting framework as GDP, but
Adds value of household and volunteer workSubtracts cost of crime, pollution, and family breakdown
Genuine Progress Indicator (GPI)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1 9 5 0
1 9 5 5
1 9 6 0
1 9 6 5
1 9 7 0
1 9 7 5
1 9 8 0
1 9 8 5
1 9 9 0
1 9 9 5
2 0 0 0
2 0 0 0 U S $
GPI per capitaGDP per capita
Source: Redefining Progress
United States
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Human Development Index
Created by the United Nations DevelopmentProgram (UNDP)
A composite of three indicators Longevity: life expectancy
Knowledge: literacy, years of schooling
Standard of Living: purchasing power based onGDP/capita
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The Degrowth Transition to a
SSE
Time
CarryingCapacity
Growth Degrowth SSE
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Conclusion There is a conflict between economic growth and
environmental protection
Economic growth is no longer improving peoples lives in the
developed world
We need to make the transition to a SSE and sustainabledevelopment
Adopt the right macroeconomic goal
Restrict resource use, stabilise population, limit inequality, reduceworking hours, eliminate fractional reserve banking, and change theway we measure progress
Summary and Conclusions
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Summary and Conclusions The current economic system is not sustainable
Depends on the scale of material/energy throughput Subsidizes resource extraction and pollution Taxes productive activities Does not measure welfare
A system based on Ecological Economics would: Shift taxes to waste, inefficiency, and pollution, away
from wages, profits, productivity, and investment Focus on dematerialization, deenergization,
decarbonization, and detoxification Measure welfare instead of absolute monetarytransactions
Support an EcoIndustrial revolution
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