Ch. 1: Visions of the Future

1
Ch. 1 Visions of the Future

• The Self-Extinction premise
• Edward Gibbon (1776-1788). The Decline and Fall
  of the Roman Empire
• Thomas Malthus (1798) Essay on the Principle of
  Population
• Ravi Batra (1988) The Great Depression of 1990
• Robert Shiller (2000) Irrational Exuberance
• Bill McKibben (1989) The End of Nature

2
Models

• defn simplified characterizations of reality
• Assume
• initial conditions
• key and irrelevant variables
• relationships between variables
• functional form of relationship

3
Pessimistic Models Example

• Jay Forrester et al. (MIT, 1972, 1992)
• Uses system dynamics model of exponential growth
  to predict pollution cresting in mid 21st
  century, and falling after
• exhaustion of natural resource supplies
• collapse of industrial and food production
• collapse of population levels

4
Positive vs. Negative Feedback Loops

• Positive feedback loops self-reinforce
• capital accumulation
• learning
• Negative feedback loops mitigate
• Gaia hypothesis
• heat regulation in body
• basketball defense to hot/cold hands

5
Optimistic Models Example

• Julian Simon (UMd., 1981)
• Since population has risen along with living
  standards throughout recorded history, and raw
  materials prices keep dropping, why should it
  stop now?
• Diagrams relationships between income and
• population with safe drinking water
• population with adequate sanitation
• concentration of PM10
• concentration of SO2
• Environmental Kuznets curve

6
Hegels dialectic

• thesis antithesis synthesis
• environmental optimism environmental pessimism
  ???

7
Purpose of course

• To apply the tools you knew from economics
  principles
• equimarginal analysis
• Pareto optimality
• with some new additions
• cost-benefit analysis
• Welfare theorems
• Coase Theorem
• and a background of case studies (see
  coursepack) so that you can solve the dialectic.