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Slides for a talk I will be giving on rethinking neo-classical economics education
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Rethinking ECONOMICS 101
Maggie Winslow, Ph.D.
• We the undersigned, senior members of the world’s scientific community, hereby warn all humanity of what lies ahead. A great change in our stewardship of the Earth and the life on it is required if vast human misery is to be avoided and our global home on this planet to be irretrievably mutilated. – UCS 1992
• Human activity is putting such a strain on the natural functions of the Earth that the ability of the planet’s ecosystems to sustain future generations can no longer be taken for granted. – MEA 2005
What is the Point of SUSTAINABILITY?Human survival/quality of life
What is the problem with Econ 101?
• Approximately 1 million U.S. college students per year take economics.
• They are being taught a model that is incorrect and that leads to misperceptions about the world and the market.
• This has repercussions for understanding of and attitudes towards environmental sustainability.
Socially Constructed Vision
• Unlimited economic expansion is possible through free markets and free trade.
Classic Diagram From MicroeconomicsAllocate resources based on market price
Facilitate free trading to achieve optimal outcome
S
D
Q
P
P*
Q*
PROBLEMS:• Consumers are irrational – cognitive science
• Individual consumption decisions ≠ society flourishing
• Requires perfect information
• Prices based on current generation’s valuation • No upward sloping supply curves – original concept based on
agricultural land quality
• Most goods priced based on mark-up on cost or with a pricing strategy
Externalities andPublic Goods
Firms Households
$
Goods and Services
Labor
$Environment
Classic Diagram From Macroeconomics
Savings/Investment
Taxes/ Government Spending
Imports/Exports
Firms Households
$
Goods and Services
Labor
$
Ecosystem
Classic Diagram From Macroeconomics
SolarEnergy
Ecosystem
Degraded matter
Wasteheat
Matter
Renewable,Fossil,Atomic energy
recycling
EconomicSystem
Low grade thermal energy
Limits to Economic Growth
Ecosystem’s capacity to 1. Regenerate renewable resources2. Restore ecosystem services
Technological capacity to3. Recycle and/or substitute non-renewable resources
1. Within the regenerative and 2. Re-absorptive capacity of the
environment and 3. Within our capacity to recycle or
replace non-renewables.
If we are using resources faster then this, we are drawing down capital. It isn’t income, it is capital spending.
Economic growth rate has to be:
The Great Acceleration
From William Rees
EROI of Global Energy Resources: Preliminary Status and Trends, Charles Hall et al. 2012
Image from Energy and the Wealth of Nations, Hall and Klitgaard, 2012
Image from Energy and the Wealth of Nations, Hall and Klitgaard, 2012
Econ
101
?
Human Capital EconomicProduction Process
GoodsandServices
EvolvingCulturalNorms andPolicy
Well Being(Individual andCommunity)
Consumption(based on changing,adapting preferences)
Education, training,research.
Building
Investment(decisions about, taxescommunity spending,education, science andtechnology policy, etc., basedon complex propertyrights regimes)
Individual Public
GDP
Wastes
Common
Ecologicalservices/amenities
having, being
- having,- being
negative impacts on all forms of capital
being, doing, relating
Restoration,
Conservation
Natural Capital
ManufacturedCapital
having
positive impacts on human capital capacity
doing, relatingComplex propertyrights regimes
SolarEnergy
Social Capital
Lim
ited
Su
bst
ituta
bili
tyB
etw
ee
n C
ap
ital F
orm
s
Simple Model of the Economic System
Waste heat
Institutionalrules, norms, etc.
From: Costanza, R., J. C. Cumberland, H. E. Daly, R. Goodland, and R. Norgaard. 1997. An Introduction to Ecological Economics. St. Lucie Press, Boca Raton, 275 pp.
recycling
LimitedEnergy
GDP
What Should Be Taught in Econ 101?• Inexpensive fossil fuels have allowed unprecedented
expansion in the past 100 years• There are ecosystem-based limits to growth• Ecosystem services are vital for human well-being and
the production process• As we use up resources, we decrease what is available
for future generations.• If continued growth is not possible, consumption by
wealthy is decreasing ability of poor to exist.• Before we talk about efficient allocation of resources,
we need to talk about scale of the economy and distribution of wealth/resources