tema 1. ecological economics 1.economic activity and environment 2.constituents of human well-being

Tema 1. Ecological Economics

1. Economic activity and Environment

2. Constituents of human well-being

1. Economic activity and Environment

1. The concept of Ecological Economics

2. Interdependent systems

3. Sustainability

o Ecology can be defined as the study of the relations of animals and plants to their organic and inorganic environments and

o Economics as the study of how humans make their living, how they satisfy their needs and desires

o Ecological economics is the study of the relationships between human housekeeping and nature’s housekeeping … or it is about the interactions between economic systems and ecological systems.

1. Economic activity and Environment2. Constituents of human well-being

The concept of Ecological EconomicsInterdependent systemsSustainability

Interpendent systems

Recent history of the environment in economicso 70’s, renewed interest in neoclassical economics about the

natural environmento Environmental economics: focused on the economy’s

insertions into the environment.o Natural resource economics: focused on the economy’s

extractions from the environment

o Neoclassical (Environmental) economics.- Address the environment from a market-law perspective. Environment is a framework which supply inputs and a place to deposit the waste. It is a matter of valuation.

o Ecological economics.- A close interdependence between “how humans make their living” and its “organic and inorganic environment”. It is a matter of values.





http://2012books.lardbucket.org/books/entrepreneurship-and-sustainability/s07-04-practical-frameworks-and-tools.html

o Neoclassical (Environmental) economics.- o Do not ignore equity, but focus on policies to promote

efficiency (pareto). o Confidence in the ability of markets to drive

technological and behavioural changes that will enable the capacity of the economy--environment system to satisfy humans to go on increasing.

o Ecological economics.- o have less confidence in markets and technology.o that solving the problem of poverty cannot be left to

economic growth



Ecological and neoclassical economics: Whose utility counts?


Deontological

Ethical Approach

Duty


Lithosphere -- the solid outer shell of the earth;Hydrosphere -- the water on or near the surface of the earth;Atmosphere -- the gases surrounding the earth’s surface;Biosphere -- living organisms and their immediate environment. - “Ecosphere”



The Environment


The carbon cycle

o The slow cycle. Geological time. 5-10000 Gt in lithosphere in fossil fuel deposit o The fast cycle.- Figure represents annual exchangeso The anthropogenic cycle.- 40% Increase in ppmv since industrial revolution (398

ppmv this is saying that CO2 comprised 0.039 per cent of the global atmosphere


natural human


The carbon cycle


Las estimaciones del IPCC nos informan de que si queremos que en 2050 la temperatura no haya aumentado más de 2ºC con respecto al promedio previo al calentamiento, podemos emitir entre 870 y 1240 gigatoneladas de CO2

(Anxo Sánchez, blog Nada es gratis)


The carbon cycle


http://www.wri.org/resources/data-visualizations/carbon-emissions-past-present-and-future-interactive



Hunting and gathering

Transition to agriculture(12,000 years)

Transition to industry(200 years)

Humans long-history


Humans & purposes

«…they may appear to some to be the most wretched people on earth, but in reality they are far more happier [sic] than we Europeans. They live in a Tranquillity which is not disturb’d by the Inequality of Condition: The Earth and sea of their own accord furnishes them with all things necessary for life, they covet not Magnificent Houses, Household-stuff &c’, they live in a warm and fine climate and enjoy a very wholesome Air, so that they have very little need of clothing… they think themselves provided with all the necessarys of Life and that they have no superfluities.»

Capitan James Cook on Australian aboriginals



Human economy system is a subsytem of the system which is the environment, which provides:o Resources to Firmso Amenities to Individualso Life support serviceso Waste sink

Basic Economic activitieso Consumption.- The use by human

individuals of goods an services to satisfy some of their needs and wants. Not all consumption is ‘consumptive’

o Production.- Commodities to be consumed by individuals or by firms

o Investment.- …in Capital Stock, which provides capital services

Humans & environment



o Reproducible or human-madeo Durable capital.- Tools, machinery, buildings,

infrastructures..o Human Capital.-Stock of learned skillso Intellectual capital.- Accumulated knowledge and skillso Social capital.- Set of institutions and customs

o Natural capital.- Stocks in the environment that deliver services to the economy.

Capital Stock



Environment provides

Resources to Firms Amenities to Individuals Waste sink Life support services

Source: Millennium Ecosystem AssessmentSource: Common et al (2005): Ecological economics



o Food Derived from plants, animals, and microbes.o Fiber Wood, jute, cotton, hemp, silk, and wool.o Chemical Elementes Gases, metals…o Fuel Wood, dung, oil, gas, solar…serve as sources of

energy.o Genetic resources Genes and genetic information used

for animal and plant breeding and biotechnology.o Biochemicals, natural medicines, and pharmaceuticals.

Many medicines, biocides, food additives such as alginates, and biological materials are derived from ecosystems.

o Ornamental resources Skins, shells, flowers…o Fresh water

Resources to firms / Provisioning



o Flow resources Neither accumulate nor de-cumulate (solar, wave, wind, hydro power).

o Renewable resources Considering sustainable harvestingo Non-Renewable resources Natural growth is zero (fossil

fuels)o Non-Renewable resources , but recyclable (iron, cupper).




Problematic

Open access

Discount rate

Fundamental Uncertainty


Do you think the convention of estimating net present value ignores the rights of

future generations? Why or why not?



o Amenity services from the environment can, that is, be consumed direct without being first transformed by productive activity

o It may be, and often is, a non-consumptive process.

o Environmental amenity service-consumption is different from the use of the resource-input and waste-sink services in that it does not necessarily involve any direct physiochemical impact

Amenities to individuals / Cultural



o Cultural diversity The diversity of ecosystems is one factor influencing the diversity of cultures.

o Spiritual and religious values Sometimes attached values to ecosystems or their components.

o Knowledge systems (traditional and formal) Ecosystems influence the types of knowledge of cultures.

o Educational values Ecosystems and their components and processes provide the basis for both formal and informal education in many societies.

o Inspiration Art, folklore, national symbols, architecture, advertising.




o Aesthetic values Parks, scenic drives, housing locations.o Social relations Ecosystems influence social relations:

fishing differs from nomadic herding or agricultural societies.o Sense of place Many people value the “sense of place”,

associated with recognized features of their environment.o Cultural heritage values Many societies place high value

on the maintenance of either historically important landscapes (“cultural landscapes”) or culturally significant species.

o Recreation and ecotourism People often choose where to spend their leisure time based in part on the characteristics of the natural or cultivated landscapes in a particular area.




o Pollution.- any chemical or physical change in the environment due to waste emission that is harmful to any living organism; By a waste we mean something that is an unwanted by-product of economic activity. The flow of a waste into the receiving environment will be called emissions, or discharges.

o Not all the waste discharges in the environment gives rise to pollution…

o Biomagnification involves the increasing concentration of toxic materials in animals higher up in a foodweb. Ex: DDT

Waste sink / Regulation



o Air quality regulation Contribute chemicals to and extract chemicals from the atmosphere, influencing many aspects of air quality.

o Climate regulation At a local scale can affect both temperature and precipitation. At the global scale, ecosystems play an important role in climate by either sequestering or emitting greenhouse gases.

o Water regulation The timing and magnitude of runoff, flooding, and aquifer recharge can be strongly influenced by changes in land cover, such as the conversion of wetlands or the replacement of forests with croplands or croplands with urban areas.

o Erosion regulation Vegetative cover plays an important role in soil retention and the prevention of landslides.




o Water purification and waste treatment Ecosystems can be a source of impurities (for instance, in fresh water) but also can help filter out and decompose organic wastes introduced into inland waters and coastal and marine ecosystems and can assimilate and detoxify compounds through soil and subsoil processes.

o Disease regulation Changes in ecosystems can directly change the abundance of human pathogens, such as cholera, and can alter the abundance of disease vectors, such as mosquitoes.

o Pest regulationo Pollinationo Natural hazard regulation The presence of coastal

ecosystems such as mangroves and coral reefs can reduce the damage caused by hurricanes or large waves.




o They differ from provisioning, regulating, and cultural services in that their impacts on people are often indirect or occur over a very long time, whereas changes in the other categories have relatively direct and short-term impacts on people.

o Some services, like erosion regulation, can be categorized as both a supporting and a regulating service, depending on the time scale and immediacy of their impact on people.

Life support services / Supporting



o Soil Formation Because many provisioning services depend on soil fertility, the rate of soil formation influences human well-being in many ways.

o Photosynthesis Photosynthesis produces oxygen necessary for most living organisms.

o Primary production The assimilation or accumulation of energy and nutrients by organisms.

o Nutrient cycling Approximately 20 nutrients essential for life, including nitrogen and phosphorus, cycle through ecosystems and are maintained at different concentrations in different parts of ecosystems.

o Water cycling Water cycles through ecosystems and is essential for living organisms.

Life support services / Supporting



Recycling

Involves the diversion of some activity away from production for consumption or investment to the interception of some of the waste stream before it crosses the economy-environment boundary


o Sustainability.- Maintaining the capacity of the joint economy-environment system to continue to satisfy the needs and desires of humans for a long time into the future

o Major problem.-o the current scale of global economy activity threatens

sustainabilityo It is necessary to increase the scale of economic activity to

alleviate povertyo Sustainable development.- a form of economic growth

that would meet the needs and desires of the present without compromising the economy--environment system’s capacity to meet them in the future.



Concepts



Major threats

o Depletion of non-renewable resourceso Waste accumulationo Loss of resilienceo Global warming

o Balancing economic targets (poverty alleviation, human well-being…) with environmental sustainability



Sustainability from a wider perspective

Sustainable development is about dealing with economic and social development (poverty, freedom…) without undermining sustainability

Healthy environment

Prosperous Economy

Just Society

1. Economic growth and its limits

2. Human well-being

3. Governance

2. Constituents of human well-being

Economic growth and its limitsHuman well-beingGovernance


The rich and the poor

http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components



Historical data

o Many economic historians take the view that until around 1500 the differences were so small that all of the world’s economies should be regarded as having had the same level of per capita income.

o Given the nature of exponential, or compound, growth… growth rates do not need to differ greatly to produce large differences in levels over periods of the order of a century.

·



What drives economic growth

·

𝐾 𝑡=𝐾 𝑡−1+𝐼 𝑡=𝐾 𝑡−1+𝑆𝑡

𝑆=𝑠 ·𝑌

o Consensus on the basic model of economic growth while it is useful in drawing attention to the role of capital accumulation, it is not a satisfactory model of economic growth.o Mainly this is because it generates a declining rate of growth.o Why is the savings rate higher in one economy than another? Given two

economies with the same savings rate, why does one have more technical progress than another, why is it more innovative?...

o People will save and innovate more when the incentives to do so are greater. Again, this answer leads to more questions – what are the incentives to save and innovate, and why do they differ across economies?

Development and under-development





Why “NOT” nations fails

o The Geography hypothesis: “environmental determinism”; “Equatorial Paradox” (70% of economic development explained)

o The Culture hypothesis(*).- o Social norms matters and shapes institutions but…o … are not sufficient to explain how we got here and why the

inequalities in the world persist.o Cultural aspects are mostly an outcome of institutions, not an

independent cause.

o The ignorance hypothesis (*).-o Poor countries have a lot of market failureso Economist and policy makers do not know how to get rid of

them.

o Economic growth and prosperity are associated with inclusive economic and political institutions while extractive institutions typically lead to stagnation and poverty

o Inclusive economic institutions.- allow and encourage participation in economic activities and that enable individuals to make the choice they wish: Secure private property, unbiased system of law, provision of public services that provides a level playing filed where people can exchange and contract.

o Extractive institutions.- An small group (elite) which fight to keep their privilegis trough restrictive laws and barriers to entry. Extractive institutions cannot generate sustained technological change for two reasons: the lack of economic incentives and resistance by the elites.



Why “do” nations fails

o Aislamiento de Madrid de los flujos económicos e innovadores (Altiplano, sin río navegable), que llegó a ser Corte, pero nunca Villa

o Única manera de prosperar, era la de “medrar” para conseguir “regalías”

o Buques de la nueva “Armada Española” son hijas del BOE:o Ex-Monopolios (privatizaciones ad hoc)

o Constructoras (contratas obra civil).

En Versión Española… “Capitalismo Castizo”

o Fuertes interrelaciones entre la clase política y la aristocracia empresarial, con trasvase de miembros entre ellas… generadora de instituciones extractivas que tratan de capturar al regulador



o Neoclassical economist only relies in growth (“the rising tide lifts all the boats”) because:



Poverty alleviation: Economic growth vs redistribution

o The better-off tend not to like ito the amount by which the better-off collectively

are better-off than the poor collectively is not sufficiently large for it to be possible to solve the poor’s problems this

o Redistribution could act as a disincentive to behavior

o Ecological economics, does not share neoclassical enthusiasm for economic growtho the world as a whole, economic growth is not, on account of economy--

environment interdependence, a feasible long-run objective

o Economic growth is only highly desirable in the economies where there are many poor people

“The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late”

The price of inequality



Un cierto grado de desigualdad económica es fundamental para estimular el progreso y el crecimiento (recompensar talento y el esfuerzo de quienes tienen la ambición necesaria para innovar y asumir riesgos empresariales) pero la riqueza extrema (al igual que la pobreza extrema) es una amenaza.

The Easterlin paradox



the reasonable conclusion is that economic growth is very important for improving human well-being at income levels typical of the developing world today, but not very important in that respect at income levels typical of the developed world today.

What makes people happy?


Why does growth not increase happiness in rich countries?

“The explanation is that an individual’s happiness depends on the match between what he aspires to and what he experiences, and that his aspirations depend on his own experience and what he observes about others’ experience. Aspirations are formed by adaptation, or habituation, and rivalry”. (Common)

"The first problem arises because people overestimate the long-term happiness they will derive from consumption goods and underestimate the satisfactions of leisure, education, friendship and other intangibles. The second problem arises because, even if people are rational in wanting to be top of the pile, the logic of positional competition dictates that not all of them can be“ (Skidelsky)


Less is more




The capabilities approach


o Functionings.- A set of things that person may value or doingo Examples: being happy, allow to choose, being healthy,

nourished and sheltered, having self-respect, “he-freedom-to-appear-in-public-without-shame”, being involved in the community

o Capabilities.- Alternative combinations of functioning that are feasible to achieve (opportunity freedom); or the effective possibility of enjoying your full human rights. o Examples: right to vote for the illiterates; fasting or hunger

strike vs starving

o Development can be seen, it is argued here, as a process of expanding the real freedoms that people enjoy... Development requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as intolerance or overactivity of repressive states.


Development as freedom


o A new approach to development which focuseso Not in the mere economic growth (accumulation of

commoditeies)…o But in the expansion of the real freedoms which allows

persons to lead the kind of lives they value -and have reason to value (moral and intercultural).

o Juzgar el nivel de vida (desarrollo) en países pobres:o ¿Están bien alimentados? ¿Sufren de mortalidad “evitable”?

¿Esperanza de vida? ¿Saben leer y escribir? ¿Saben contar?

o Juzgar el nivel de vida (desarrollo) en países ricos:o ¿pueden participar en la comunidad? ¿pueden aparecer sin

vergüenza en público y sin sentirse desgraciados? ¿pueden encontrar trabajos que merezcan la pena? ¿pueden calentarse? ¿pueden hacer uso de su educación? ¿pueden mantener relaciones con familiares y amigos?

o No es una cuestión de “ganancias” si no de lo que las personas “pueden” o no “pueden” hacer. Lo relevante es la “libertad”, no las “mercancías”.

La acción sociocaritativaDesarrollo y subdesarrolloDesarrollo y libertadConociendo la realidad



Assesing the “real” level of development

3. Bodily integrity.- Being able to move freely and safely from place to place.

4. Senses, Imagination, and Thought.- Being able to use the senses, to imagine, think, and reason—and to do these things in a "truly human" way, a way informed and cultivated by an adequate education.

5. Emotions.- Being able to have attachments to things and people: to love, to grieve, to experience longing, gratitude, and justified anger.

La acción sociocaritativaDesarrollo y subdesarolloDesarrollo y libertadConociendo la realidad

1. Life.- Being able to live to the end of a human life of normal length.

2. Bodily health.- To have good health, to be adequately nourished; to have adequate shelter.


Nussbaum and the Decalogue of development


6. Practical reason.- Being able to form a conception of the good and to engage in critical reflection about the planning of one's life.

7. Affiliation.- Being able to live with and toward others; Having the social bases of self-respect and non-humiliation; non discrimination (race, sex, sexual orientation, ethnicity, caste, religion, national origin and species

8. Other species.- Being able to live with concern for and in relation to animals, plants, and the world of nature.

9. Play.- Being able to laugh, to play, to enjoy recreational activities.

10.Control over one’s Environement.- Being able to participate effectively in political choices that govern one's life; Being able to hold property; being able to work as a human.


Nussbaum and the Decalogue of development




o Basic materials for a Good Life To have a secure and adequate livelihood: income and assets, enough food and water at all times, shelter, ability to have energy to keep warm and cool, and access to goods.

o Health Ability of an individual to feel well and be strong, or in other words to be adequately nourished and free from disease, to have access to adequate and clean drinking water and clean air, and to have the ability to have energy to keep warm and cool.

o Good social relations Refer to the presence of social cohesion, mutual respect, and the ability to help others and provide for children.

o Security We refer to safety of person and possessions, secure access to necessary resources, and security from natural and human-made disasters.

o Freedom of Choice and Action ability of individuals to control what happens to them and to be able to achieve what they value doing or being.

Constituents of human well-being

Determining policy objectives



o Two reasons to “not” left to markets alone the sustainable development:o First, market failures of various kinds mean that the actual

market outcomes are not allocatively efficient.o Second, achieving efficiency does not guarantee either

inter- or intragenerational equity, both of which are essential features of sustainable development.

o Hence, aiming for sustainable development requires more than correcting market failure

Major sustainable development events



Year Event Outcomes

1972 The limits to growth: a report for the Club of Rome’s project on the predicament of mankind

concerns about the over-use of natural resources

1983 The ‘Brundtland Report’ – our common future

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs

1988 IPCC (Intergovernmental Panel on Climate Change)

IPCC Reports, which supports the United Nations Framework Convention on Climate Change (UNFCCC): (Kyoto Protocol);

1992 The United Nations Conference on Environment and Development -- Río de Janeiro

Rio Declaration; Agenda 21;Legally binding agreements: Convention on Biological Diversity; UNFCCC United Nations Convention to Combat Desertification

2000 Millenium Summit 8 Millenium Development Goals (MDGs) by 2015

2002 World Summit on Sustainable Development (Río+10) -- Johannesburg.

The Johannesburg Declaration.- multilateralism as the path forward.

2012 United Nations Conference on Sustainable Development – Río+20 -- Río de Janeiro

“The Future We Want”.- non-binding political commitment to sustainable developmentSustainable Development Goals (SDGs) by 2030;

Commitments



The sustainable development principle



o A truly sustainable way of life:o Economic Growth and Equityo Conserving Natural Resources and the Environmento Social Development

o A three interconnected component dimensions of sustainable development vs short-term economic success.

o Adapted to specific circumstances: emphasiso in economic growth in poor countrieso In social and environmental objectives in rich world

o Common, M. S. and S. Stagl. (2005): Ecological economics : an introduction. Cambridge: Cambridge University Press. (Chapters 1-9)

o World Resources Institute. (2005). Ecosystems and human well-being : biodiversity synthesis. Washington, DC: World Resources Institute.

tema 1. ecological economics 1.economic activity and environment 2.constituents of human well-being

Documents

neoclassical economics

conventional economics

desiresecological economics

ecological sectors

ecological systems

natural resource economics

economy resource economics

economic sectors