Ecological Economics: An Introduction (2005)

Cover......Page 1
Half-title......Page 3
Title......Page 9
Copyright......Page 10
Contents......Page 11
Figures......Page 22
Tables......Page 25
Boxes......Page 27
Preface......Page 29
Contents and organisation......Page 31
Special features......Page 33
Companion website......Page 34
1.1 What is ecological economics?......Page 35
1.2 A brief history of the environment in economics......Page 37
1.3 Science and ethics......Page 40
1.4 Sustainability and sustainable development......Page 42
1.5 The relationship between ecological and neoclassical economics......Page 43
1.6 A guided tour......Page 47
Keywords......Page 49
Further Reading......Page 50
Discussion Questions......Page 51
Part I Interdependent Systems......Page 53
2 The environment......Page 55
2.1.1 Systems......Page 56
2.1.2 The lithosphere......Page 57
2.1.3 The hydrosphere......Page 58
2.1.5 The biosphere......Page 59
2.2.2 First law of thermodynamics......Page 60
2.2.3 Thermodynamic systems classification......Page 63
2.2.4 Second law of thermodynamics......Page 64
2.2.5 Plants as open systems......Page 66
2.2.6 Animals as open systems......Page 68
2.3.1 Energy and nutrient flows......Page 71
2.3.1.1 Origins of the fossil fuels......Page 76
2.3.2 Population dynamics......Page 77
2.3.2.1 Exponential growth......Page 78
2.3.2.2 Density-dependent growth......Page 79
2.3.2.3 Species types......Page 81
2.3.2.4 Equilibrium and stability......Page 82
2.3.3 System dynamics......Page 84
2.3.3.1 Succession......Page 85
2.3.3.3 Resilience......Page 86
2.4.1.1 The slow cycle......Page 90
2.4.1.2 The fast cycle......Page 91
2.4.1.3 Anthropogenic influences......Page 92
2.5.1 Biological evolution......Page 93
2.5.2 Coevolution......Page 95
Keywords......Page 96
Appendix: Doubling Times with Exponential Growth......Page 97
Further Reading......Page 98
Exercises......Page 99
3.1 Human evolution......Page 100
3.1.1 Cultural evolution......Page 101
3.2 The history of human numbers......Page 102
3.3 Hunter-gatherers......Page 103
3.4 The transition to agriculture......Page 106
3.5 The second transition......Page 108
3.5.1 Energy slaves......Page 110
3.5.2 Human numbers in the industrial phase of human history......Page 111
3.6 Energy and agriculture......Page 112
3.7 The extent of the human impact on the biosphere......Page 116
Summary......Page 117
Further Reading......Page 118
Discussion Topics......Page 119
4.1 The big picture......Page 120
4.2 Stocks and flows......Page 122
4.3.2 Production......Page 124
4.3.3 Investment......Page 125
4.3.4 The productivity of capital accumulation......Page 126
4.3.5 Open and closed economies......Page 127
4.4.1 Flow resources......Page 128
4.4.2.1 Renewable resources......Page 129
4.4.2.2 Non-renewable resources......Page 131
4.5.1 Stocks and flows......Page 132
4.5.2 Damage relationships......Page 134
4.6.1 Conservation of mass......Page 136
4.6.2 Entropy......Page 137
4.6.3 Energy flow as an approximate measure of environmental impact......Page 138
4.7 Recycling......Page 139
4.8 Amenity services......Page 141
4.8.1 Sustainable amenity service consumption......Page 142
4.8.2 Ex situ consumption of amenity services......Page 143
4.9 Life support services......Page 144
4.10.1 A river estuary......Page 145
4.10.2 Resource quality, energy use and waste generation......Page 146
4.10.3 The enhanced greenhouse effect......Page 147
4.11.1 Resource depletion......Page 148
4.11.3 Loss of resilience......Page 149
4.11.4 Responses......Page 150
4.11.5 The global perspective......Page 151
Keywords......Page 152
Further Reading......Page 153
Exercises......Page 154
Part II Economic Activity......Page 157
5.1.1 The basic accounts......Page 159
5.1.2 Input–output analysis......Page 162
5.1.3 Accounting for direct and indirect requirements......Page 163
5.1.4 Input–output accounting and the environment......Page 164
5.1.5 Input–output structures in history......Page 166
5.2.1 The basic ideas......Page 170
5.2.2 Gross and net national product......Page 172
5.2.3 Investment is necessarily equal to saving......Page 173
5.2.4 Accounting for government......Page 174
5.2.5 Foreign trade: national and domestic national income......Page 176
5.2.6 National income accounting in practice......Page 177
5.3 National income as the measure of economic performance......Page 178
5.3.2 Gross or net income?......Page 179
5.3.4 What national income does not include......Page 181
5.3.6.1 Comparisons over time......Page 182
5.3.6.2 International comparisons......Page 186
5.4 National income accounting and the environment......Page 188
5.4.1 Natural resource balance sheets......Page 189
5.4.2 Satellite accounting......Page 190
Summary......Page 192
Keywords......Page 193
Calculating industry gross outputs......Page 194
Allocating resource use and emissions......Page 196
Further Reading......Page 197
Websites......Page 198
Exercises......Page 199
6.1.1 International comparisons of per capita national income......Page 201
6.1.3 Poverty in the world economy......Page 203
6.2 Why are some countries rich and some poor?......Page 205
6.3.1 The basic growth model......Page 207
6.3.1.1 The production function......Page 208
6.3.1.2 Saving and capital accumulation......Page 210
6.3.1.3 Model simulation......Page 212
6.3.1.4 Varying the parameter values......Page 215
6.3.2 The basic model and the data......Page 216
6.3.3 Efficiency......Page 218
6.3.4 Technological change......Page 219
6.3.5 Endogenous technological progress......Page 220
6.3.6 Explaining economic growth......Page 222
6.4 The desirability of economic growth......Page 223
6.4.1 Economists and dentists......Page 224
6.4.2 Poverty alleviation......Page 225
6.4.3 Growth and inequality......Page 227
6.5 Non-economic indicators of well-being......Page 228
6.5.2 Are things getting better?......Page 229
6.5.3 Relationships between GDP per capita and well-being indicators......Page 230
6.5.4 GDP per capita and happiness......Page 232
6.6.1.1 Measuring happiness......Page 234
6.6.1.2 What determines happiness?......Page 235
6.6.2.3 Over time......Page 237
6.6.2.4 Why does growth not increase happiness in rich countries?......Page 238
Summary......Page 239
Further Reading......Page 240
Exercises......Page 242
7.1 The IPAT identity......Page 244
7.1.1.1 Population......Page 246
7.1.1.2 Affluence......Page 247
7.1.1.3 Technology......Page 249
7.1.2 The commodity composition of GDP –‘consumption technology’......Page 250
7.2 Modelling growth and the environment......Page 252
7.2.1 On substitution possibilities......Page 253
7.2.2 Renewable resources......Page 255
7.2.2.1 Stock size and harvesting......Page 256
7.2.2.2 Growth and sustainable yield harvesting......Page 257
7.2.2.3 Technical progress......Page 259
7.2.2.4 Constant population......Page 260
7.2.2.5 Renewable resources in classical economics......Page 261
7.2.3 Non-renewable resources......Page 262
7.2.3.1 Depletion profile......Page 263
7.2.3.2 The Leontief production function case......Page 265
7.2.3.3 The Cobb--Douglas production function case......Page 267
7.2.4 Summary and overview......Page 268
7.3.1 Growth and the environment in history......Page 270
7.3.2 The limits to growth......Page 271
7.3.3 Reactions to The limits to growth......Page 278
7.3.4 Beyond the limits......Page 280
7.4.1 The EKC hypothesis......Page 281
7.4.2 The empirical status of the hypothesis......Page 282
7.4.3.1 Thresholds and population growth......Page 284
7.4.3.2 A lower limit to per capita emissions......Page 286
7.5 Sustainable development?......Page 288
Further Reading......Page 291
Exercises......Page 293
8.1.1 Exchange......Page 295
8.1.2 Specialisation in production......Page 296
8.1.3 Money and prices......Page 300
8.2.1 Demand and supply functions......Page 302
8.2.2.2 Supply......Page 308
8.2.3.1 Own-price elasticity of demand......Page 309
8.2.3.3 Income elasticity of demand......Page 311
8.2.3.4 Elasticity of supply......Page 312
8.2.3.5 Short- and long-run elasticities......Page 313
8.3.1 Price ceilings......Page 316
8.3.2 Price floors......Page 317
8.3.3 Commodity taxation......Page 320
8.4.1 Compounding and discounting......Page 323
8.4.2 Saving and lending......Page 324
8.4.3 Investing and borrowing......Page 326
8.4.3.1 The Net Present Value test......Page 327
8.4.3.2 Net worth maximisation......Page 329
8.4.3.3 The supply function for bonds......Page 331
8.4.3.4 The Internal Rate of Return to investment......Page 332
8.4.4.1 The bond market......Page 333
8.4.4.2 Money and bonds......Page 335
Keywords......Page 338
Exercises......Page 340
9.1 Markets and efficiency......Page 342
9.1.1 The invisible hand – allocative efficiency......Page 343
9.1.2 What is allocative efficiency?......Page 344
9.1.3 How markets could achieve allocative efficiency......Page 345
9.1.3.1 Net benefit maximisation......Page 349
9.1.4.1 The rate of return......Page 350
9.1.4.2 The allocation of investment......Page 351
9.1.4.3 Financial markets and intertemporal efficiency......Page 353
9.2.1.1 Well-behaved technologies and preferences......Page 354
9.2.1.3 The price taker condition......Page 355
9.2.2 Market failure is the norm......Page 356
9.2.3 Consumer sovereignty......Page 358
9.2.4.1 Public goods......Page 359
9.2.4.2 Externalities......Page 361
9.2.4.3 Monopoly......Page 364
9.2.5 Multiple sources of market failure......Page 365
9.3 Markets and equity......Page 366
9.3.1 Intratemporal equity......Page 367
9.3.2 Intertemporal efficiency and distribution......Page 370
9.4.1 Property rights......Page 371
9.4.2 Natural resources......Page 373
9.4.2.1 Non-renewable resources......Page 374
9.4.2.2.1 private property rights outcomes......Page 377
9.4.2.2.2 open access outcomes......Page 380
9.4.2.3 Flow resources......Page 382
9.4.4 Amenity and life support services......Page 383
9.5.1 Non-renewable resource depletion and sustainability......Page 384
9.5.2 The efficient level of waste emissions......Page 386
Keywords......Page 388
Further reading......Page 390
Exercises......Page 391
Part III Governance......Page 393
10 Determining policy objectives......Page 395
10.1.2 The ‘Brundtland Report ’–our common future......Page 396
10.1.3 The United Nations Conference on Environment and Development (UNCED)......Page 398
10.1.4 The World Summit on Sustainable Development (WSSD)......Page 403
10.2.1 What is the principle meant to deliver?......Page 406
10.2.2 Sustainability in neoclassical economics......Page 408
10.2.3 Sustainability in ecology......Page 410
10.2.4 Sustainability in ecological economics......Page 411
10.3 Decision making under imperfect knowledge......Page 413
10.3.1.1 Risk......Page 414
10.3.1.2 Ambiguity......Page 415
10.3.1.3 Uncertainty......Page 416
10.3.1.4 Ignorance......Page 418
10.3.2 Imperfect information and the environment......Page 419
10.3.2.1 Environmental decision making under conditions of risk......Page 420
10.3.2.3 Environmental decision making under conditions of ambiguity......Page 421
10.3.2.4 Environmental decision making under conditions of ignorance......Page 422
10.4.1 The Precautionary Principle......Page 423
10.4.2 Safe minimum standards......Page 426
10.4.4 The Precautionary Principle in the US......Page 428
10.5 Science and precaution......Page 429
10.6 From policy principles to policy objectives......Page 430
Keywords......Page 431
Further Reading......Page 432
Websites......Page 433
Exercises......Page 434
11 Environmental policy instruments......Page 436
11.1 Choice of environmental policy instruments......Page 437
11.2 Moral suasion......Page 440
11.2.2 Varieties of preferences......Page 441
11.2.3 Innovations in measuring and reporting economic and environmental performance......Page 443
11.3 Command-and-control instruments......Page 444
11.3.1 Non-transferable emissions licences......Page 445
11.3.3 Regulation of location of polluting activities......Page 446
11.4 Creation of property rights......Page 447
11.5.1 Taxation for allocative efficiency......Page 449
11.5.2 Taxation for an arbitrary standard......Page 451
11.5.3 Taxation and the goods market......Page 452
11.5.4 Environmental taxes raise revenue......Page 456
11.6 Tradable permits......Page 459
11.7 The least cost theorem......Page 461
11.8 Environmental performance bonds......Page 465
Summary......Page 468
Keywords......Page 469
Further Reading......Page 470
Discussion Topics......Page 471
Appendix input - output analysis of carbon taxation......Page 472
Part IV The International Dimension......Page 477
12.1.1 The principle of comparative advantage......Page 479
12.1.2 Domestic winners and losers......Page 481
12.1.3 Some qualifications to the principle of comparative adavantage......Page 483
12.1.4 Trade and the environment – a first look......Page 485
12.2 Patterns of international trade......Page 486
12.3 International trade and sustainable development......Page 488
12.3.1.1 Increase of income......Page 489
12.3.1.2 Economic growth and the environment......Page 490
12.3.1.3 International trade and the transfer of cleaner technology......Page 491
12.3.1.4 Environmental policy learning and benchmarking......Page 492
12.3.2.1 Environmental spillovers......Page 494
12.3.2.2 Internationalisation of market failure......Page 495
12.3.2.3 Unequal exchange......Page 497
12.4.1 Trade measures – WTO rules......Page 498
12.4.2 Multilateral Environmental Agreements......Page 501
12.5 Towards trade rules for sustainability......Page 502
12.6 Globalisation......Page 505
12.6.1 Role of transnational and multinational corporations......Page 506
Keywords......Page 510
Further Reading......Page 512
Websites......Page 513
Exercises......Page 514
13.1 The nature and extent of the problem......Page 516
13.1.1 The greenhouse effect......Page 517
13.1.2 The enhanced greenhouse effect......Page 518
13.1.3 The Intergovernmental Panel on Climate Change......Page 519
13.1.4 The greenhouse gases......Page 520
13.1.4.1 Modelling......Page 522
13.1.4.2 Has there been an enhanced greenhouse effect at work?......Page 523
13.1.4.3 Future prospects......Page 524
13.1.5 The enhanced greenhouse effect – impacts of climate change......Page 527
13.1.6 Responding to the enhanced greenhouse effect......Page 529
13.2.1 A global public bad......Page 532
13.2.2 Equity issues......Page 533
13.2.2.1 Past and future differences between countries......Page 534
13.2.2.2 A long-term problem......Page 536
13.2.3 Complexity and ignorance......Page 538
13.3.1 Setting a global target......Page 540
13.3.2.2 Command and Control......Page 542
13.3.3 National sovereignty and mitigation......Page 543
13.4.1 The United Nations Framework Convention on Climate Change......Page 544
13.4.2 The Kyoto Protocol......Page 545
13.4.3 What would Kyotos impact be?......Page 548
13.4.4 Assessment......Page 550
Keywords......Page 551
Further Reading......Page 552
Exercises......Page 553
14.1.1 What is biodiversity?......Page 555
14.1.2 How fast is biodiversity being lost?......Page 557
14.1.3 Why is it being lost so fast?......Page 559
14.1.4 Why does biodiversity loss matter?......Page 560
14.2.1 Publicness......Page 561
14.2.2 Equity......Page 562
14.3.1 Ex situ versus in situ conservation......Page 563
14.3.2 Which species to preserve?......Page 564
14.3.3 Habitat preservation and protected areas......Page 566
14.4.1 Objectives and principles......Page 568
14.4.2 Instruments......Page 569
Keywords......Page 571
Further Reading......Page 572
Discussion Questions......Page 573
References......Page 574
Index......Page 586