Humans and the environment

Question 1

What is central to the issue of sustainability in economic history?

Answer 1

The role and significance of the accumulation over time of various kinds of capital:
durable
human
social

What one generation accumulates does not disappear with that generation, but is passed on to the next.

Question 2

How can human history be divided in economical terms?

Answer 2

1. Hunter-gatherers: from the origin of the species until 12 000 BP
2. Agriculture: until 200 BP
3. Industrial revolution: since 1800 ca

Question 3

What is economics?

Answer 3

Economics is the study of how people interact with each other and with their natural surroundings in producing their livelihoods, and how this changes over time. It is the branch of knowledge concerned with the production, consumption, and transfer of wealth.

Question 4

What is consumption?

Answer 4

Consumption is the use by individuals of goods and services, commodities (C), to
satisfy their needs and wants. It is a component in the calculation of the Gross Domestic Product (GDP). Note that not all consumption is ‘consumptive’ in the material sense: consumption of food is materially consumptive, but the consumption of amenities may be not.

Question 5

What is production?

Answer 5

Production in Economics can be defined as the process of converting the inputs into outputs. Inputs include land, labour and capital, whereas output includes finished goods and services. In other words, Production in Economics is an act of creating value that satisfies the wants of the individuals.

Question 6

What is the role of firms?

Answer 6

Firms are the organizations that undertake the production of the commodities that
individuals consume. Firms produce commodities using various inputs: labour services (L) supplied by individuals, capital flow (K) originated in the capital stock, and other inputs called ‘raw materials’ or ‘natural resources’, directly or indirectly extracted from the environment, which supports human activities by providing a plethora of life support services.

Question 7

What are commodities?

Answer 7

In economics, a commodity is defined as a tangible good that can be bought and sold or exchanged for products of similar value. Natural resources such as oil as well as basic foods like corn are two common types of commodities.

Question 8

What are labor services?

Answer 8

Labor is the amount of physical, mental, and social effort used to produce goods and services in an economy. It supplies the expertise, manpower, and service needed to turn raw materials into finished products and services.

Question 9

What is capital stock?

Answer 9

Capital stock is a broad measure of the existing physical capital in an economy. Capital can be increased by the use of the factors of production, which however excludes certain durable goods like homes and personal automobiles that are not used in the production of saleable goods and services.

The economy’s capital stock, i.e. the reproducible or human-made capital, has four component parts:

1. Durable capital
2. Human capital
3. Intellectual cap
4. Social capital

Question 10

Why isn’t it enough to apply economic concepts to the environment?

Answer 10

1. In general, prices reflect the relative scarcity of goods
   – Yet, environmental and natural resources are characterized by a number of specific
   aspects
2. Most importantly, markets often do not exist
   – no prices
   – no efficient allocation of resources

Question 11

What is Environmental and natural resource economics

Answer 11

It is the application of the principles of economics to the study of how environmental and
natural resources are developed and managed

Question 12

What is ecological economics?

Answer 12

The Greek word ‘oikos’ (household) is the origin of the ‘eco’ in both ecology and economics.

Ecology is the study of nature’s housekeeping, i.e. the study of the relations of animals and plants to their organic and inorganic environments, and…

Economics is the study of housekeeping in human societies i.e. the study of how humans make their living, how they satisfy their needs and desires.

Ecological economics is the study of the relationships between human housekeeping and nature’s housekeeping. Ecological economics is a trans-disciplinary field. It’s an attempt to look at humans embedded in their ecological life-support system, not separate from the environment.

It’s not just analysis of the past but applies that analysis to create something new and better.

Question 13

What is the difference between environmental and ecological economics?

Answer 13

Environmental economics and ecological economics share the common objective of understanding the human–economy–environment interaction in order to redirect the economies towards sustainability.

While the environmental economics has progressed within a narrowly, but sharply, focused neoclassical analytical approach, the ecological economics has expanded by adopting a ‘diversified approach’, which led to widen the gap between the two.

Environmental economics separates environment and economy, while ecological economics puts the economy within the environment.

According to ecological economics:
the human economic system is a subsystem of the system which is the environment.
Regarded as two systems, the economy and the environment are interdependent. –> The whole is defined as socio-ecosystem (SES), characterized by multi-stock processes.

Question 14

What stock does the environment provide?

Answer 14

The environment provides stocks, i.e. the natural capital, that deliver services to the economy:

1. Resource extraction (provisioning service)
2. Waste sink (regulating service)
3. Amenities (cultural service)
4. Life support (supporting service)

Question 15

What is durable capital?

Answer 15

The collection of durable equipment for use in production (tools,
machinery, buildings, etc.) It requires investment using labour, capital, and natural
resources to produce it, and it is subject to wear out, by a depreciation amount.

Question 16

What is human capital?

Answer 16

The stocks of learned skills, embodied in particular individuals, which
enhances their productivity as suppliers of labour services. Investment – in culture –involves acquiring and disseminating skills, education and training to other individuals.

Question 17

What is intellectual capital?

Answer 17

The accumulated knowledge and skills available to the economy that is not embodied in particular individuals, but resides in books and other cultural artifacts such as computer memories. As with durable capital, so investment in intellectual capital involves using inputs to produce knowledge and disseminate it. Contrary to equipment knowledge is subject to wear out with non-use: forgetting.

Question 18

What is social capital?

Answer 18

The set of institutions and customs which organize economic activity.
Institutions and customs do not ‘wear out’, but may become obsolete as circumstances change.

Question 19

How can provisioning services be classified?

Answer 19

1. Stock resources: exemplify the standard stock-flow relationship where stocks and flows are of the same stuff, and inflow is ‘growth’ and outflow is the ‘extraction’ –> water.
2. Flow resources: no corresponding stocks of the same stuff. They neither accumulate nor decumulate. The amount used today has no implications for the amount available in the future
   - -> solar radiation
3. Renewable resources are typically biotic populations which can reproduce.
4. Non-renewable resources: minerals and fossil fuels.

Question 20

What is waste?

Answer 20

Waste is 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.

Pollution: any chemical or physical change in the environment due to waste emission that is harmful to any living organism.

In many cases concentrations are more important than the absolute mass of wastes/pollutants.

Markets as such have a limited role in regulating the amount of wastes dumped into environmental sinks, a job that must be done largely by government, recycling apart.

Question 21

What are environmental sinks?

Answer 21

Ecosystem service - regulating service

Ecological processes capable of converting waste flows (e.g., sewage, runoff) into benign or usable resources; such processes typically have limited capacity, beyond which their ability to convert waste can be degraded or overwhelmed.

Question 22

What are amenities?

Answer 22

Ecosystem services - cultural service

Nature-based recreational activities. This means that the value of things is measured by the utility or satisfaction they bestow upon people, whatever the source of that utility may be.

In modern industrial societies much of the consumption of such services does involve the joint consumption of commodities produced in the economy: non-consumptive and consumptive processes together.

The quality of the environment (and of the amenity service), may be negatively affected by
recreational exploitation: crowding and damage related to the number of visitors.

Question 23

What are life support services?

Answer 23

Ecosystem services - supporting service

the services that make human life, and hence economic activity, possible: biogeochemical cycles, of water, oxygen, nitrogen…

All of the other plants and animals that we use as natural resources, which participate in waste assimilation, and which contribute to the provision of amenity services, also depend on these life support services.

Technological innovation may surrogate some of life support services, independently of the functioning of the biosphere. However, this has only been done, thus far, on a very small scale, whereas the scale of the provision by the biosphere is huge, and the costs of surrogated services may be huge too.

Question 24

Laws of thermodynamics applied to economics.

Answer 24

1st Law: conservation of mass - What economic activity does is to transform things.
1. production transforms inputs of resources, capital services and labour services
into commodities, and wastes
2. consumption transforms commodities into satisfactions of needs and desires

2nd Law: entropy. Entropy is a measure of disorder, and the reduction of entropy requires
energy.
1. production uses energy, raw materials, etc. to deliver commodities having lower entropy, and wastes having higher entropy than the natural resources used
2. the materials that humans utilize as natural resources are so recognized precisely because of relatively low entropy.

Question 25

What is recycling in economical terms?

Answer 25

Recycling involves the interception of some of the waste streams before they cross the economy-environment boundary.

• The intercepted wastes are processed and then reused as inputs to production.
• Recycling has two consequences:

1. reduction of the amount of waste inserted into the environment, and
2. reduction of corresponding resource extraction from the environment

Question 26

What are the major threats and responses to sustainability?

Answer 26

Threats:
• Resource depletion
• Waste accumulation
• Loss of resilience
The major threats to sustainability, and hence to sustainable development, are global in nature

Responses:
• Recycling
• Substitution
• Sustainability governance

Question 27

What is green economy?

Answer 27

“green economy” is defined as an economy that results in improved human wellbeing and social equity, while significantly reducing environmental risks and
ecological scarcities.

Question 28

What is green economic growth?

Answer 28

Green economic growth is defined as a growth which is: efficient in its use of natural resources; clean in that it minimizes pollution and environmental impacts; resilient in that it accounts for natural hazards and for the role of environmental management and natural capital in preventing physical disasters; inclusive, aiming at a reconciliation of the developing countries’ need for
economic growth and poverty alleviation with the need of avoiding irreversible and costly environmental damage (WB, 2012).

Green growth may be seen as a way of making more operational the wider objective of sustainable development, abandoning the perspective of maximizing economic growth and imposing a set of qualifications on the structure of the economic growth model.