M4 Flashcards
What is ‘the economy’?
The system of trade and industry by which the wealth of a country is made
and used.
A set of processes that involves its
culture, values, education, technological
evolution, history, social organization, political
structure, legal systems, and natural resources as main factors.
What kind of decoupling has the EU seen?
carbon footprint fell by 22%, even as the economy grew by 58% (issues with territorial carbon counting as well; EU as a whole has higher carbon footprint). This is relative decoupling.
How much chance do we have of staying below 1.5 degrees according to IPCC?
A 66% chance
How much carbon budget do we have according to IPCC?
420Gt co2
What is the average rate of co2 decline atm?
Less than 1%
What happens to decoupling when the economy grows?
The larger the economy becomes, the more dificult to decouple it.
Why do unregulated markets overproduce CO2?
Because the CO2 costs are not calculated into the transactions
What is a market failure?
when markets do not maximise society’s welfare; outcome is not pareto efficient (optimised)
OR mismatch between private + social costs/benefits
is climate change a market failure?
yes
What contributes to the climate change market failure?
No solution for the GHG externality; only ethical incentive for businesses right now
What are common solutions to the climate change market failure?
higher prices on carbon emissions, low carbon tech
What are other climate-related externalities?
Lack of information on how to reduce emissions, network effects, lack of innovation incentives, animal abuse
What do households give to businesses?
labour and knowledge
What do companies give to households?
goods and services
what do companies and households give to government?
taxes
what does government give to companies and households?
wages or consumption, infrastructure, institutions, other services
Imperfect markets are…
- monopolies
- info-asymmetry
- externalities
- assumption of homo economicus
- tragedy of the commons
Ultimate ends (daly triangle)
Wellbeing
Intermediate ends (daly triangle)
human capital and social capital
intermediate means (daly triangle)
built and human capital
ultimate means (daly triangle)
natural capital
tech progress can overcome poverty, can grow within planetary boundaries
smithian/tech optimism
ideology that says that we need to scale down and adhere to the planetary boundaries; in the long run the econmy will be at a steady state, poor people need to invest in having children
malthusian pessimism
How to calculate the market equilibrium
MPB = MSB = MPC