1. Introduction to Ecological Economics VT Law School June 10, 2005 Gary Flomenhoft-Gund Institute

2. Intro to Ecological Economics DEFINE TERMS 1)SCALE-Size of the economy in relation to the biosphere (macro-economics) 2)DISTRIBUTION-Apportionment of income and wealth among different individuals 3)ALLOCATION-Apportionment of resources to production of different goods and services 4)CONSILIENCE, (EO WILSON)-Theories must be consistent with other sciences

3. Course website SCALE

4. CIRCULAR FLOW MODEL OF ECONOMY ECONOMY “EXTERNALITIES” SOCIETY ENVIRONMENT ? ?

5. = NEO-CLASSICAL ECONOMICS 1890- No Ingredients, only labor and capital P = f(L,K)= AL a. BK b (Cobb-Douglas multiplication) Labor (Chef ) Capital (Mixing bowl) x Bread? Capital (oven) X

6. = NEO-CLASSICAL ECONOMICS INFINITE SUBSTITUTABILITY: 2P = f(L,K)= 2AL a. 2BK b More Chefs or Bigger Mixing bowl x More Bread?

7. Quotable Quotes “There is no reason we can’t have a perfectly healthy economy with virtually no resources whatsoever” Robert Solow “We can do without agriculture because it’s only 2% of the economy.” Norgaard? “neo-classical economics is a form of brain damage” -- Hazel Henderson

8. ECOLOGICAL ECONOMY NO “EXTERNALITIES”

9. Intro to Ecological Economics Throughput-open system 1st Law: Conservation of mass ECONOMY (waste) (some)

10. Intro to Ecological Economics Throughput-closed system ECONOMY earth

11. Intro to Ecological Economics Throughput-isolated system Universe

12. Intro to Ecological Economics-human dev Growth Development Growth=increase in throughput-quantitative Development=qualitative improvement

13. Intro to Ecological Economics-population Growth Development Demographic transition Theory

14. Intro to Ecological Economics-population

15. Intro to Ecological Economics-forest succession Growth Development Reorganization Aggredation Transition Steady-state (mature)

16. We hear: “There is no conflict between economic growth and environmental protection!”

18. GDP 1825: ~$200 BILLION 2000: $41,000 B ILLION OR $41 TRILLION =205X 1825 level.

20. 60 Million yrs of CO2

21. CLIMATE DAMAGE

23. Europe in August 2003 COUNTRYDEATHSDETAILS France14,802 Temperatures soared to 104 degrees Fahrenheit in parts of the country; temperatures in Paris were the highest since record-keeping began in 1873. Germany7000 High temperatures of up to 105.4 degrees Fahrenheit, the hottest since records began in 1901, raised mortality some 10 percent above average. Spain4230 High temperatures coupled with elevated ground-level ozone concentrations exceeding the European Union's health-risk threshold. Italy4175 Temperatures in parts of the country averaged 16 degrees Fahrenheit higher than previous year. UK2045 The first triple digit (Fahrenheit) temperatures were recorded in London. Neth1400 Temperatures ranged some 14 degrees warmer than normal. Portugal1316 Temperatures were above 104 degrees Fahrenheit throughout much of the country. Belgium150 Temperatures exceeded any in the Royal Meteorological Society's records dating back to 1833. TOTAL35,118

24. ESA Listings and GDP 1973 1980 1990 2001 $10 $9 $8 $7 $6 $5 $4 $3 R 2 = 98.4 Source: The Wildlife Society Technical Review 2003-1.

25. Endangerment Causes Urbanization Agriculture Water diversions (e.g., reservoirs) Recreation, tourism development Pollution Domestic livestock, ranching 247 205 160 148 143 136 Czech et al. 2000. Bioscience 50(7):593-601.

26. Causes (cont.) Mineral, gas, oil extraction Non-native species Harvest Modified fire regimes Road construction/maintenance Industrial development 134 115 101 83 81 Czech et al. 2000. Bioscience 50(7):593-601.

27. K Carrying Capacity Scenarios Individuals Time r-selection K-selection

28. K and r-selected Species

29. Time GNP K Natural capital allocated to human economy Natural capital allocated to wildlife Czech, B. 2000. Economic growth as the limiting factor for wildlife conservation. Wildlife Society Bulletin 28(1):4-14.

30. Natural Capital “We treat the earth like a business in liquidation.” Herman Daly Opportunity cost. Loss is not counted.

31. K Economic Carrying Capacity (“Plimsoll line”) GNP Time r-selection K-selection (OVERSHOOT)

32. K and r-selected Economies

33. SCALE-Full World or Empty World? Source: Ecological Economics Principles & Applications, Farley and Daly

34. GGP K Human economy Economy of nature We Might Ask

35. American GNP, 1929-1997 K or r-selected?

36. KTKT GNP Natural capital allocated to human economy Natural capital allocated to non-human economy X natural capital allocable Time KUKU Natural Capital Allocation Revisited

37. Governance

39. Intro to Ecological Economics Entropy=disorder, randomness 2nd Law: entropy always increases ECONOMY (waste) LOW ENTROPYHIGH ENTROPY (dissipated)

40. Intro to Ecological Economics WHAT IS ANTI-ENTROPIC? ECONOMY (waste) LOW ENTROPYHIGH ENTROPY

41. Distribution-Grow out of poverty?

42. ALLOCATION Adam Smith

43. ALLOCATION PARETO EFFICIENCY: “No other allocation of resources would make someone better off without making someone else worse off.”

44. Rivalness and Excludability rival –My use leaves less for you to use Excludable (property rights) –One person can keep another from using the good –Consumer must pay, market will supply Must have a price to work in the free market!

45. Rivalness and Excludability Non-rival –My use does not leave less for you to use –Market sells for a price, discouraging use, but social cost of use = 0, therefore market should not supply Non-excludable –One person can’t keep another from using the good –Consumer will not pay, market will not supply Must have a price to work in the free market!

46. Rival} Non-rival} Excludable Non-Excludable Market Good: Food, clothes, cars, land, timber, fish once captured, farmed fish, regulated pollution Potential market good (Tragedy of the “non- commons”)but inefficient: patented information, Pond, roads (congestible), streetlights Pure Public Good: climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, etc. Open Access Regime: (misnamed: Tragedy of the commons) Oceanic fisheries, timber etc. from unprotected forests, air pollution, waste absorption capacity Non-rival, congestible Private beaches, private gardens, toll roads, zoos, movies Public beaches, gardens, roads, etc.

47. “Maximization of Shareholder Value” “Golden Rule of Publicly held companies: Rational behavior: Externalize costs Influence politics to Seek subsidies and favors “Invisible boot”

48. “Altruism is evil and selfishness is a virtue.”-Ayn Rand Quotable Quotes “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.” -Milton Friedman 1962 Enron, World Com, Tyco????

49. Marginal disutility

50. Cost of regulations-OMB reportOMB report Annual Cost: $37-43 billion EPA conservative approach, Consistently overestimates costs, not considering least cost approach and technical innovation Annual Benefits: $121-193 EPA consistently underestimates benefits USING ACTUAL NOT THEORETICAL CASES BENEFITS OUTWEIGH COSTS 5:1

51. CONSILIENCE “~Resources are infinite and the economy can grow forever”-Julian Simon “Anyone who thinks you can have infinite growth on a finite planet is either a madman or an economist”Kenneth Boulding

53. Differences