Library Communiveristy Open Learning Course

The Economy and Us: week 2Overview

What is ‘capital’?

The ‘conventional’ viewAn extended view

What are the ‘flows’ in an economy?

The ‘conventional’ viewAn extended view – the basis of an ecological economyThe implications of the ecological model

What is ‘capital’?

In broad terms:

A ‘stock’ of something which has the ability to produce a flow of economically desirable outputs.It depreciates over time, but can be renewed

For example:A house: produces over time a ‘flow’ of ‘shelter services’.

A car: produces a ‘flow’ of transport services

Conventional economics …

Recognises two kinds of capital:

Fixed, ‘human made’ or physical capital – machinery, roads, buildings, various kinds of equipment, …

Financial capital: The financial (monetary) counterpart of ‘physical’ capital; the title to ownership

This latter usage is rather misleading – ‘finance’ is a further remove from practical use!

An extended definition recognises more

• Natural capital• Human capital• Social capital • (plus – the ‘conventional’ physical capital)

Natural Capital …

• … the services of the environment around us – for example:– Trees and plants take in carbon dioxide and

produce oxygen– Earthworms regenerate the soil– Microbes break down our waste– … [Your own examples?]

• Natural capital is a gift – and is easily damaged!

Human capital …

• … ourselves! People:– having skills– ethical positions– the ability to plan– think ahead– design and invent– the ability to learn and adapt

Social capital

• The ability to work together, identify and meet needs, settle disagreements/disputes

Physical/manufactured capital …

• As noted earlier – buildings, machines, roads, …

Economic production processes

Goods and services

Economic policy

Individual welfare

Manufactured capitalLabourLand

Consumption

Investment

‘Fixed’ investment, training, land improvement

 

Flows in the ‘conventional’ economy

QUB P&SD 2011/2012 10

Comments on the ‘conventional’

• Output is of two types: ‘consumption’ and investment. Split between the two determined by ‘economic policy’

• No mention of ’waste’• No mention of resource limits• ‘Welfare’ solely a function of consumption

Words again: ‘ecological’ or ‘environmental’ ?

‘Ecological’ preferred; it suggests a powerful concern to recognise and integrate

Flows in an ecological economy

Solar Energy

Natural Capital

Human CapitalSocial Capital

Manufactured capital

Economic Productio

n processes

Ecological services

Well-being: individual and community

Goods and Services

Wastes

Policy and

Culture

Waste heat

Restoration/Conservation of natural capital; Education and training of human capital; developing mutuality and trust; investment in manufactured capital

Positive impact on human capital

Investment

Consumption

Negative impact on all forms of capital

QUB P&SD 2011/2012 13

Much more to say …

• Four distinct kinds of capitals now explicit

• Investment – to maintain stocks of each – is a requirement (including ourselves!)

• Waste – and waste energy (heat) is recognised

• “Well-being” is a function of several ‘outputs’, not just consumption

• Solar energy drives the whole system

Waste … what can we say about it?

• What is it? How does it arise?• What waste streams can we identify?• Why is it a bad thing?• Can we do anything about it?

Synergy/symbiosis – spent grains in a brewery

http://www.zeri.org/ZERI/Beer.html