Lecture 12 Topic: Economic aspects of environmental sustainability

The main idea: Follow the simple golden rule for an sustainable economy: “Leave the world better than you found it, take no more than you need, try not to harm life or the environment, and male amends if you do.” (Paul Hawken)

Lecture outline:

1. Economic systems and environmental problems

2. Measures of life and environmental quality

3. Concept of externalities

4. Economic strategies for pollution control

5. Solutions of reducing poverty

6. Sustainable strategies on economy

1. Economic systems and environmental problems

Economic resources:

1) Natural capital (natural resources) – earth’s resources and processes that sustain living organisms, including humans (goods and services produced by the earth’s natural processes).

These include: the planet’s air, water, and land; nutrients and minerals in the soil and deeper in the earth’s crust; wild and domesticated plants and animals (biodiversity); and nature’s dilution, waste disposal, pest control, and recycling services.

2) Manufactured capital – items made from earth capital with the help of human capital.

This includes: tools, machinery, equipment, factory buildings, and transportation and distribution facilities.

3) Human capital – people’s physical and mental talents.

Workers sell their time and talents for wages. Managers take responsibility for combining earth capital, manufactured capital, and human capital to produce economic goods.

Major types of economic systems:

1) Command economic system or centrally planned economy – all economic decisions are made by the government.

2) Market economic system – all economic decisions are made in markets, in which buyers (demanders) and sellers (suppliers) of economic goods freely interact without government or other interference. All buying and selling is based on pure competition.

3) Mixed economic system – fall somewhere between the pure market and pure command systems.

Economic growth and sustainability

Economic growth – an increase in countries’ capacity to provide goods and services for people’s final use (accomplished by means of population growth – more consumers and producers, or more consumption per person, or both).

Sustainability – meeting the needs of today without degrading the environment for future generations.

Ecologically sustainable development, or Sustainable development – the development that meets the needs of the present generations without compromising the ability of future generations to meet their own needs” (Brundtland Commission 1987).

Table: Sustainable living in economic system (compare and contrast)

Industrial age	Sustainability or ecological age
Multinational corporations	Community-based economics
Competition	Cooperation
Limitless progress	Limits to grow
Economic growth	Steady state, development
No accounting of nature	Economics based on ecology