3. Markets and Commodities Flashcards
was the most prominent spokesperson for the population crisis and was
typically identified as the paramount and persuasive neo-Malthusian of the time
Paul Ehrlich
Julian Simon had long maintained
that humanpopulation growth improved living conditions and environmental quality, because
a) morepeople means more good ideas, and
b) more demand for things (including clean air and water) produces an incentive to find, make, and creatively maintain the world
Paul Ehrlich vs. Julian Simon
Economist Julian Simon bet biologist Paul Ehrlich in 1980 that human ingenuity would prevent resource scarcity despite population growth. Simon won, as the prices of five metals fell, supporting his view that innovation can overcome environmental limits, though critics questioned its broader relevance.
Explain the Market Response Model
A model that predicts economic responses to scarcity of a resource ; the model explains that scarcity will lead to increases in prices that will result either in decreased demand for that resource or increased supply, or both
The market response model explains that when a resource becomes scarce, its price goes up. Higher prices then lead people to use less of it (lower demand) or find more of it (higher supply), balancing the market.
Coase theorem who
Ronald H. Coase
What is Coase Theorem
A thesis based in neoclassical economics, holding that externalities (e.g., pollution) can be most efficiently controlled through contracts and bargaining between parties, assuming the transaction costs of reaching a bargain are not excessive
- The Coase Theorem states that problems like pollution can be solved efficiently if people or companies negotiate, bargain and make contracts or agreements, as long as the cost of making a deal is low.
an effect, where one person’s economic activity comes at the
expense of another, is called an
externality
What is cap and trade system?
- Real world application of Coase theorem
- The cap-and-trade system sets a limit on total pollution and allows companies to buy, sell, or trade emission permits,
- this creates financial incentives to reduce pollution efficiently.
- The goal (of this market-based system) is to manage environmental pollutants where a total limit is placed on all emissions in a jurisdiction (state, country, worldwide, etc.),
- and individual people or firms will possess transferable shares of that total, theoretically leading to the most efficient overall system to maintain and reduce pollution levels overall
What is Externality
The spillover of a cost or benefit, as where industrial activity at a plant leads to pollution off-site that must be paid for by someone else
An externality is a side effect of an activity that affects others, like a factory polluting the air while the community bears the cost of the damage.
- an effect, where one person’s economic activity comes at the
expense of another, is called an
What is Market Failure
A situation or condition where the production or exchange of a good or service is not efficient; this
refers to a range of perverse economic outcomes stemming from market problems like monopoly or uncontrolled externalities
What is Transaction Costs
- In economics, this refers to the cost associated with making an exchange,
- including, for example, drawing a contract, traveling to market, or negotiating a price; while most economic models assume low transaction costs, in reality these costs can be quite high, especially for systems with high externalities.
- Transaction costs are the cost or extra expenses involved in making a trade, such as negotiating, enforcing contracts, or traveling to a market, which can be high in complex systems with many external effects.
What is Monopoly
- one service provider/ owner, many buyers
- A market condition where there is one seller for many buyers, leading to perverted and artificially inflated pricing of goods or services
What is Monopsony
- One buyer, many sellers
- A market condition where there is one buyer for many sellers, leading to perverted and artificially deflated pricing of goods or services
What is Green Taxes: concept, market component, role of the state
- Green taxes are taxes placed on goods or activities that harm the environment, this makes polluting activities more expensive which encourages individuals and firms to adopt environmentally friendly practices, pushing them to choose cleaner alternatives; while also generating government revenue for environmental solutions.
- Incentivized behavior
- Sets and collects taxes
Cap and Trade: concept, market component, role of the state
- Cap and trade is a market-based policy that limits total pollutant emissions while allowing companies to buy and sell emission allowances.
// This means that a maximum allowable level of pollution is set, and companies receive or purchase permits that allow them to emit a specific amount, which they can trade with others. - Rewarding efficiency
- Sets limits and enforces contracts
What is Green Consumption: concept, market component, role of the state
- Green consumption refers to the practice of consumers selecting products or services based on their environmental impact, often opting for eco-friendly or sustainably produced goods, even at a higher cost.
- Willingness to pay
- Oversees and authenticates
claims of producers and sellers
What is Greenwashing?
The exaggerated or false marketing of a product, good, or service as environmentally friendly
What is Green Certification?
Programs to certify commodities for the purposes of assuring their ecological credentials, such as organically grown vegetables or
sustainably harvested wood products.
- is a process or One way of confirming the truth in Green Advertising
Through the market response model…
The concept that holds that as long as environmental goods and services can be sold or traded, scarcity will be diminished by economic forces through the
market response model.
The market response model alleviates scarcity by
creating incentives that either increase the supply of environmental goods and services or reduce demand for them.
Environmental externalities can be mediated, in this theory, through
private contracts more efficiently than through regulation.
Many market-based mechanisms therefore may exist for solving environmental problems, including
green taxes, markets for pollution, and green consumer choices.
Other problems face ____, including the fact that some environmental goods are difficult to value, that markets can be volatile and fickle, and that economic solutions are not necessarily democratic ones.
market-based environmentalism
Compare/contrast Julian Simon’s and Paul Ehrlich’s views on the general effects of
human population growth on environmental conditions (include the term “scarcity” in your answer)
Paul Ehrlich, a neo-Malthusian, argued that human population growth leads to increased resource consumption and environmental degradation, resulting in greater scarcity.
Julian Simon, on the other hand, believed that population growth fosters innovation, leading to technological advancements that alleviate scarcity by increasing resource availability. His perspective was supported by the outcome of their 1980 bet on commodity prices, which declined due to human ingenuity and economic adaptation
