What is the environment (2)

What is the environment

WHAT IS THE ENVIRONMENT?

What role does it play in economics?

What is environmental economics about?

Environmental vs Ecological economics.

THE ‘NATURAL’ WORLD. (vs. the unnatural world??!!)

{ Man and the Natural World, Keith Thomas ,Penguin}

Different environmental functions.

1) Space time domain.

2) The source of input materials ie life support (resource) base.

3) The sink for wastes.

4) The provider of ‘environmental services’

many other aspects. Amenity etc. Perhaps the question should be what environment?!

Environmental economics cf. Ecological economics.

Traditionally Env.Econ. tended to focus on the correction of externalities and a general view that the economy was the dominant system, with the ecological system relegated to the status of a subsystem. Is this a coherent viewpoint?

Ecological Econ. reverses this perspective and the

economic system is perceived as being embedded as a subsystem of the broader ecological system and subject to ecological constraints. Only one earth perspective.

Neoclassical growth models eg Solow were formulated on the implicit assumption that labour and capital were the limiting factors. Does this make ecological sense? Under what circumstances might it hold true as a reasonable approximation? Does economics have credible scientific

What is the environment

underpinning as assumed under the general EMH (Efficient Market Hypothesis)?

WHOSE ENVIRONMENT IS IT? : BIO-ETHICS. ALTERNATIVE PERSPECTIVES.

Is there any coherent meaning to the notion of

unnatural? Man made vs. non man made ok. Jumbo jet no less ‘natural’ than an anthill?!

Mankind as a natural phenomenon!? Potential clashes with some belief systems eg creationism vs Darwinism. Different perspectives.

ANTHROPOCENTRIC.(Only mankind matters, other species to be exploited ; best that could be assumed is enlightened self interest).

BIOCENTRIC. ( Possibility of other species having rights; mankind may have to

GAIA

ECONOMIC CONCEPTS

EFFICIENCY,OPTIMALITY,SUSTAINABILITY.

VALUE, /UTILITY TO WHOM FOR WHAT OVER WHAT TIME SCALE?

TOTAL ECONOMIC VALUE (TEV) comprises

use value + option value + existence value.

What is the environment

resources/attributes.

Conventional economic theory lays emphasis on markets and the normal underlying assumptions.

MC=MB only ok in the absence of externalities.

MSC=MSB the ‘correct’ criterion …or is it?

Does the ‘Efficient Market Hypothesis’ actually hold true?

Numerous problems re. the environment eg.

The ‘missing market’ issue, ie placing values on non marketed attributes. Valuation of externalities.

Intergenerational equity issues and the notion of

‘stewardship’. Constituency issues ie. whose opinions /valuations should be considered and on what basis.

Pareto criterion very unlikely to be of any practical importance.

Kaldor-Hicks criterion requires identification of gainers and losers AND the magnitudes of gains and losses . Vexed question re. ‘hypothetical compensation’ and distributional consequences.

Big projects raise very complex issues eg the current public enquiry re. the harnessing of renewable electricity from remote areas of Scotland and transmission to load centres. Political, economic, ecological and technical dimensions are all involved.

Environmental economics thus not simple, arguably ecological economics even more complex.

What is the environment

Economists optimistic ; scientists worried. Not much

communication!! (not much has changed then!? See also

C P Snow’s ‘The two Cultures)

Jevons : The Coal Question (1865) Depletion of UK stocks as potential constraint on economic growth.

Soddy; Energy theory of Value. 1926 Wealth, Virtual Wealth and Debt. Critical importance of energy as the economic depression thus an institutional failure’.

1930’s Middle East Oil as petroleum source (Aramco) begins

Post second world war. The nuclear era with civil nuclear power and ‘techno- optimism’.

Rachel Carson ‘Silent Spring’ 1962. A classic warning of the ecological impacts of widespread use of pesticides etc and effects on the food chain of persistent chemicals etc.

Kenneth Boulding ‘Space ship earth’ 1965

thermodynamics for economists environmental limits to growth. Open vs closed systems. Evolutionary economics

Nicolas Georgescu-Roegen : ‘The Entropy Law and Economic Progress’ 1971. The thermodynamics of economic activity.

OPEC oil price rises and the “ Energy Crisis” !? (1970s) Energy policy now a central issue. Vulnerability of

economies to disruption via energy issues exposed. EEC was >60% reliant in primary energy demand on oil!

Diversity of fuel supplies now seen an important aspect of policy : geo-politics .