Lec 12 Flashcards
Neoclassical economics
A theory of economics that explains market prices in terms of consumer preferences for units of particular commodities
Buyers want lower prices
Sellers want higher
This conflict results in a compromise-price and the “right” quantity being bought and sold
4 assumption of the neoclassical theory
Resources are infinite or substitutable
Long-term effects should be discounted
Costs and benefits are internal
Growth is good
Issues with Neoclassical theory assumptions
These assumptions have massive environmental implications
Resources are infinite and substitutable issues
The Earth is a closed system
Even renewable resources can be exploited and used up
Tragedy of the Commons (Hardin 1968)
Analogy that shows how individuals driven by self-interest can end up destroying the resource upon which they depend
Natural Resources is another word for
Commons
Collapsing tragedy
Tragedy in which selfishness causes the loss of a resource
Component tragedy
Selfishness reduces the resource
Long-term effects should be discounted issues
The market value resources is discounted for future use
Economically, best to gain value now instead of waiting for later
Neoclassical economics
All costs and benefits of goods or services are between the individuals involved in the transaction
Real life economics
We are all connected
Costs and benefits are not internal
Externalities
Costs or benefits of a transaction that involve people other than the buyer or seller. Can either be positive or negative
Problem with externalities
Too many negative ones
Growth is good issue
More and bigger is not always better
Commonly used metric for the health of an economy is
Its growth rate: how many goods and services are provided
What to do about neoclassical economics problems
Think beyond a single economic bottom line
Single bottom line
Generating profit is the only focus
Triple bottom line
Economic social and environment are factors
3 bottom line idea
concept of the 3 P’s
People
Planit
Profit
How do we approach the triple bottom line system
Assign a value to the goods and services we receive from the environment
Ecosystem goods and services
The benefits humans derive from ecosystem functions. Often referred as ecosystem services
Ecosystem function
The capacity of nature to provide goods and services that satisfy human needs
4 types of ecosystem services
Provisioning
Regulating
Cultural
Supporting
Provisioning
The delivery of products that we directly use
Regulating
Services provided that regulate our environment
Cultural
Non material benefits that enrich the human experience
Supporting
The provision of ecosystem processes needed to support life and all other ecosystem services