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Economy
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Human society is an opensubsystem of the biosphere...
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Biosphere
Society
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Society
Biosphere
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The economy is an opensubsystem of human society...
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Economy
Biosphere
Society
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Economy
Biosphere
Society
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GDP
private consumption + gross investment +government spending + (exports í imports)
A few definitions...
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Total real GDP
IGBP synthesis: Global Change and the Earth System, Steffen et al 2004
Nordhaus (1997) The economics of new goods. University of Chicago Press
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Why does the economymatter?
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Prosperityand
Well-being
A few definitions...
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GDP growth
GDP de-growth
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Source: Jackson 2009, 42
Sweden 1800 (off chart)
Sweden 1900
Sweden 2008
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Data from CIA World Factbook, created by Mnmazur for Wikimedia Commons
GDP Growth Rate, 2009
The Great Recession
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Housing Prices, U.S. Unemployment, U.S.
The Great Recession
Data from CIA World Factbook, created by Mnmazur for Wikimedia Commons
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Source: Millenium Development Goals Report 2010, 10
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Source: Millenium Development Goals Report 2010, 9
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It matters to decision makers...
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Source: Stimson 2004
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Source: Stimson 2004
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Source: Hibbs 2007, 6
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Perhaps it¶s more sustainable?
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Fossil Fuel Emissions: Actual vs. IPCC Scenarios
Raupach et al. 2007, PNAS, updated; Le Quéré et al. 2009, Nature Geoscience; International Monetary Fund 2009
Projection 2009
Emissions: -2.8%GDP: -1.1%
C intensity: -1.7%
1990 1995 2000 2005 2010 2015
F o s s i l F u e l E m i s s i o n ( G
t C y - 1
)
5
6
7
8
9
10
Projection
A1B
A1FI
A1T A2
B1
B2
Carbon Dioxide Information Analysis Center
International Energy Agency
Full range of IPCC individual scenarios
Averages
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Source:HSBC 2009, 8
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Source: Steffen et al. 2004, 17
How do we handle this?
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Regulation
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Source: Millenium Development Goals Report 2010, 54
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The Market
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Economy
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Neoclassical Economics
Environmental Economics
Ecological Economics
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Price
Quantity (#)
SUPPLY
DEMAND
EQUILIBRIUM PRICE
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The market allocates efficiently, given afew assumptions...
1. Static conditions for one time period2. Identical product functions3. Property rights
4. Free trade5. Full information6. No transaction costs7. Many buyers and sellers (competition)8. Everyone is a pricetaker (no one sets price unilaterally)
9. No externalities
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Price
Quantity (#)
SUPPLY
DEMAND
The Self-Correcting Market
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³Economics ± and macroeconomicsin particular ± is ecologically illiterate.´
-Tim JacksonProsperity without Growth
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Neoclassical Economics
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Environmental Externalityis outside of the market
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Source: Millenium
Ecosystem Assessment
2005, 9
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Is intervention needed?
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John Maynard Keynes
Keynesian Economics
Spending by Governmentsfor Full Employment
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Source:HSBC 2009, 3
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Source:HSBC 2009, 3
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Environmental Economics
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Price
Quanti
ty (#)
SUPPLY
DEMAND
NEW CURVE
$4000
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Value(per hectare)
0
$2000
$4000
Mangrove Shrimp Farm
Coastal Protection
(~$3,840)
Timber and Non-timber products ($90)
Fishery nursery ($70)
Net: $2,000(Gross $17,900less costs of $15,900)
Pollution Costs (-$230)
Less subsidies (-$1,700)
Restoration (-$8,240)
MangroveConversion
Private Net Present Value per hectare
Mangrove: $91
Shrimp Farm: $2000
19871999Public Net Present Value per hectare
Mangrove: $1,000 to $3,600
Shrimp Farm: $-5,400 to $200
Source: Millennium Ecosystem Assessment; Sathirathai and Barbier 2001
Source: UNEP
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Fiber
Food
Spiritual & religious
Freshwater
Genetic Resources
Climate regulation
Water purification
Disease regulation
Flood/Fire regulation
Recreation & tourism
Aesthetic
Economic Value ($)
EconomicValuation
Difficult or impossible
Easy
Private BenefitCapture
Difficult
Easy
?
?
?
?
?
?
?
?
?
?
?
Many services are public goods
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Ecological Economics
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Price
Quantity (#)
SUPPLY
DEMAND
QUOTA
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Neoclassical Economics
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Environmental Economics
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Thinking about throughput...
Decoupling
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Source: Jackson 2009, 49
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Source: Jackson 2009, 50
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Source: Jackson 2009, 52
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Do rich countries need growth?
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Benef its level off...
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Source: Jackson 2009, 42
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Source: Jackson 2009, 43
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Source: Jackson 2009, 33
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Growth in the developed countries
might be unsustainable...
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...but a lack of growth is unstable...
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...and instability has consequences.
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But why is growth necessary?
Firms
(Businesses)
Households
(Consumers)
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Firms
Revenue Costs =
Prof it!
Capital
Materials
Labor
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Source: Kroszner 2006
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Productivity, Novelty, and Jobs
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The Iron Cage of Consumerism
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The Iron Cage of Consumerism
Source: Jackson 2009, 61
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Source: Jackson 2009, 79
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Source: Jackson 2009, 80
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