EEP 255 ECOLOGICAL ECONOMICS

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EEP 255ECOLOGICAL ECONOMICS

• Satish Joshi
• Class 1 Introduction
• August 26, 2003

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All about me

• Under-graduation in Mechanical Engineering
• Masters in Rural Management
• Ph.D. in Public Policy Analysis
• I have an accent and I speak fast (BOGO)
• My research interests are in Corporate
  Environmental Management and Alternative
  transportation fuels.

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About You

• Name
• Major
• What made you take this course?
• Do you have any special interests/expertise in
  environmental/economic issues?
• Have you taken any economics courses before?
  Please list them.
• Have you taken any ecology courses before? Please
  list them.

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Ecological Economics

• Ecology Study of relationships between
  organisms and their environment
• Economics Study of economies i.e. the
  institutional structure through which individuals
  in a society co-ordinate activities to meet their
  diverse wants and desires.
• Ecological Economics Study of the relationship
  between the economy and the environment

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Course Organization

• Three parts
• Bio-physical and interdependent nature of the
  production processes, and basic market mechanisms
• Environmental impacts of economic activity,
  market failure, and public policies to promote
  environmental protection.
• How public policy affects firms and how firms can
  reduce environmental impacts?

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Nature of the course

• Interdisciplinary
• Introductory
• Integrative
• Economics, Ecology, Production Engineering,
  Environmental Science and Engineering, Business
  Management
• Ethics, Philosophy, Psychology. Not covered
• Switch scales often (overarching v/s detailed)
• Cooperative learning

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Course Organization

• All Readings are on-line www.msu.edu/course/eep/25
  5/index.htm
• Class discussions and handouts are very important
  (in transition)
• TA Lulama Traub (ndibong2_at_msu.edu)
• Three exams 25 each
• Study questions will be posted one week in
  advance
• Five in class exercises 5 each
• Extra credits for attendance 0.2 pts/class
  (excluding exam and exercise days)

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The Relationship Between the Economy and the
Environment (RBEE) Model
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The Environment SPACESHIP EARTH
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Environment

• The earths environment consists of air, water,
  land, living organisms, and energy provided by
  the sun. Atmosphere, Hydrosphere, Geosphere and
  Biosphere
• The environment consists of a finite amount of
  matter and a constant flow of energy provided by
  the sun. The suns energy is used in physical,
  chemical, geological, and biological processes
  that transform the quality of matter and energy
  in the environment.

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Sun
Environment
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Natural Capital

• At a particular moment in time, the quantity and
  quality of air, water, land, and living organisms
  is referred to as the stock natural capital.
• Over time, the natural capital stock provides a
  flow of environmental goods and services
• Dynamic, changing (positive or negative?) natural
  capital stock and service flows

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The Economy
People, the artifacts people produce (capital and
consumption goods)
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Since not all matter and energy in the
environment are in the final form people want,
the economy consists of people organized to
transform that matter and energy into economic
goods and services using a stock of human,
social, natural, and manufactured capital.
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Sun
Environment
Economy
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EE Resource extraction

• The economy extracts, withdraws, collects, or
  harvests matter and energy from the environment.
  Examples are mineral, timber, fish, water, coal
  and petroleum extraction
• Economic activity may also involve transforming
  the environment (natural capital) so that it
  produces more raw matter and energy for the
  economy. Examples include agriculture and
  forestry.
• Renewable v/s non-renewable resources

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Sun
Environment
Raw matter and energy from the environment
Economy
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EE Waste Sink

• Wastes and residuals are created during the
  transformation of matter and energy to produce
  economic goods and services
• These wastes are released into the environment
• The environment may or may not in turn transform
  these wastes
• Similarly waste energy (low quality) is released
  into the environment.

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Sun
Environment
Raw matter and energy from the environment
Waste matter and energy into the environment
Economy
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EE Defending against environment

• Physical, chemical, geological, and biological
  processes in the environment can also be
  hazardous to humans.
• Many economic activities are undertaken to
  defend against floods, strong winds, lightning,
  earthquakes, volcanic eruptions, fires, poisons,
  pests, predators, and ultraviolet rays.
• Economic activities may also involve altering the
  environment to prevent harm to humans. Examples
  include drainage systems and eradication of pests
  and predators.

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Sun
Environment
Raw matter and energy from the environment
Waste matter and energy into the environment
Economy
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The RBEE model highlights three ways the economy
affects the environment. First, the economy
takes matter and energy away from the
environment. Second, economic activity directly
transforms the environment to increase the
availability of raw materials, decrease
environmental hazards, and to provide space for
manufactured capital and people. Third, the
economy disposes waste matter and energy into the
environment.
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A Small Economy
Sun
Environment
Economy
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A Large Economy
Sun
Environment
Economy
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When done on a very large scale, these three
types of economic activities can alter the
physical, chemical, geological, and biological
processes in the environment upon which life
(including human life) depends.Are we reaching
that scale?Scientific consensus is Yes.What
should/can we do about it?
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Some details we need to get a sense of

• How are economic goods and services produced,
  allocated and how does the economy work?
• How does the environment operate and produce
  environmental goods and services?
• How do these interact and what are the likely
  adverse impacts?
• How can we reduce these adverse impacts through
  policy, technology, behavior changes?