First Midterm Flashcards
What is neoclassical economics?
Aims to be descriptive
Not normative (doesn’t give guidance on what should be done)
Supply, demand, eqb
What is welfare economics?
Normative (prescriptive)
Concerned with well being and distribution (equity)
What is ecological economics?
Strong sustainability Limits to growth Human behaviour Equity Interdisciplinary
Define Strong sustainability
Natural and human capital are complimentary to eachother but not substitute able
Threats to environmental sustainability
1) resource depletion
2) waste impact accumulation
3) loss of ecosystem resilience
4 classifications of pollutants
1) absorptive capacity
- cumulative (stock) vs non cumulative (flow)
2) spacial scale
- local vs global
3) origin
- point source vs non point source
4) occurence
- continual or episodic
What is environmental Kuznets curve?
Inverted U shape curve that shows as GDP rises localized environmental quality improves
2 laws of thermodynamics
1) Conservation
Energy is converted from one form. To another
2) Entropy
Never 100% efficiency, there are always losses
Through economics energy degrades from available to unavailable state
Example- fossil fuels are high quality/availability (low entropy) but combusting them for heat makes them low quality (high entropy)
Growth paradigm
Idea that growth of GDP is good, and infinite despite having a limited biosphere with limited resources
Limited by biological capacity, waste absorption, stock of high availability resources
Steady state principles (Daly)
1) renewable resources
Harvest at maximum a sustainable yeild
2) non renewable resources
invest in equal renewable replacements
3) emissions/wastes don’t exceed assimilative capacity
4) limit scale of human activity **controversial
GDP alternatives
Genuine progress indicator
Measures resource depletion, damages of GHGs loss of habitat, crime, education, household inequality
Measuring happiness
Surveys, qualitative, issues
Assumptions of neoclassical economics (supply)
Firms act to maximise profits
Perfect competition among sellers
No transaction costs
Assumptions of neoclassical economics (demand)
Individuals maximise utility/welfare
People are rational
Perfect information
All costs/benefits are represented (no externalities)
WTP - uses and critique
Uses-
Measure of consumer bennefit/utility
Easily quantified
Critiques-
Income based
Issues of monotizing
Preferences can change
Why do demand curves shift?
of buyers
Preferences/tastes
Incomes
Price of goods
What is coas theorum?
Voluntary bargaining will lead to efficient outcomes
Key assumptions- Clear enforced property rights Low to zero transaction costs No income effects Transparent information
Policy for common property
Pigouvian tax
Coaslike property rights
Coersive laws
Self governance
Total economic value (tev)
1) Direct use value
- extractive or non extractive
2) indirect use value
- like water sources and soil retention
3) non use values
Existence value, option value and bequest
Revealed preferences
They are real world and dependable
Production function, market price, avoided cost
