GEOG 352: Managing Natural and Social Capital

1
GEOG 352 Managing Natural and Social Capital

• Day 3

2
Housekeeping Items

• SOLUTIONS is holding its inaugural meeting of the
  semester in the log cabin at 430 today.
• The deadline for proposals for the WDCAG
  conference is the 16th (this Friday) see the
  details in the Call for Papers and Posters on the
  Geography web site.
• On Thursday, February 26th, there is a free
  webinar on achieving greenhouse gas neutrality
  for institutions that is open to faculty and
  students (see the note in the folder).

3
Housekeeping Items

• Anyone need an outline?
• I'm passing around a sign-in sheet and a folder
  of items of possible interest.
• Any reactions to Raimo's talk?
• I haven't been able to determine exactly when the
  Ladakh video was made, and I haven't been able to
  find any recent material on Ladakh. Most of
  Helena Norberg-Hodge's publications (which are
  not only about Ladakh) end around 2001/ 2002, but
  Wikipedia has a good history.

4
Field and Olewiler Readings

• The readings for last week were excerpts from
  Environmental Economics by Barry Field and Nancy
  Olewiler. These authors define economics as the
  study of how and why people whether they are
  consumers, firms, non-profit organizations, or
  government agencies make decisions about the
  use of valuable resources.
• They specify that environmental economics which
  is not the same as ecological economics is
  about how economic activities affect our natural
  environment the atmosphere, water, land, and an
  enormous variety of living species.

5
Field and Olewiler Readings

• This sub-field of economics is said to address
  why economic actors waste natural resources and
  dump pollutants into the environment, and what
  can be done about it i.e. what the most
  effective tools are for modifying people's
  behaviour. As with mainstream economists in
  general, environmental economists' overriding
  concern is with economic efficiency (more on this
  later), and secondarily with equity/ fairness and
  environmental quality.
• The authors argue that morality in environmental
  issues won't take use very far. In fact, they
  make the surprising observation that people
  largely do what they do because of the
  institutional context in which they are operate.

6
Field and Olewiler Readings

• What are some examples of this, and why is
  admission potentially surprising coming from
  economists?
• What do you think of the statement people
  pollute because it is the cheapest way they have
  of solving a certain practical problem how to
  dispose of the waste products remaining after
  production and consumption of a good?
• If we combine Field and Olewiler's perspective on
  the limitations of a moral approach with Jonathan
  Porritt's musings, then we can see a certain
  sequencing in the process of social change.
  First, we need to pose issues of morality, then
  the necessity of change, then the desirability of
  change, and finally the concrete possibility.
  examples?

7
Field and Olewiler Readings

• Field and Olewiler discuss the importance of
  economic incentives as a means for changing
  behaviour of individuals and firms. Whether
  material or non-material, an 'economic
  incentive' is something in the economic world
  that leads people to channel their efforts at
  production and consumption in certain
  directions.
• They challenge the notion that profit-seeking is
  the main reason for pollution. What do you think
  about this assertion? They also argue that lack
  of ownership rights to environmental resources
  means that there are few incentives to take the
  environmental consequences of our actions into
  account. Comments?

8
Field and Olewiler Readings

• They also introduce the notion of externalities
  those costs or benefits not directly paid for by
  producers or consumers, and provide a good
  overview of what they are relative to the
  operation of private motor vehicles.
• In response to this, they discuss some possible
  ways of inducing people to change their
  behaviour AirCare, taxing kilometres travelled
  or making gas more expensive, a tax on vehicle
  ownership, or a buyback program for older cars.
• For corporations, there are regulations
  controlling emissions or fuel efficiency averages
  for corporate fleets, or limits on sulphur
  content in gasoline, etc.

9
Field and Olewiler Readings

• In general, they favour approaches that
  restructure the incentives facing firms and
  consumers in such a way that it mobilizes their
  own energy and ingenuity to find ways of reducing
  their impacts on the environment, rather that
  adopting highly prescriptive regulations.
• They include a discussion of cost-benefit
  analysis, one of the possible topics for the tool
  presentations, and they talk indirectly about
  natural capital, as well as about social capital,
  but their definition of it is wrong.
• Don't worry about the discussion of production
  possibility frontiers, or any of the confusing
  charts or algebraic notions. However, we will be
  returning to the idea of the Environmental
  Kuznets Curve.

10
Field and Olewiler Readings

• They discussion the related issue of whether
  pollution havens actually exist in developing
  countries, and this is another possible topic for
  our debates.
• In Chapter 4, they discuss the notion of social
  efficiency whereby one needs to consider all the
  groups in society that benefit from a particular
  form of production and all those who suffer
  costs, including in the area of non-market
  values. However, they do not consider other
  species in this calculus. They note that benefits
  also need to be considered in terms of equity, so
  that not all the benefits accrue to the rich.

11
Field and Olewiler Readings

• They note that in terms of social cost
  accounting, Social costs Private costs
  External (environmental) costs and suggest that
  when external costs are present, private markets
  will not normally produce quantities of output
  that are socially efficient. (They give the
  example of road use.)?
• They discuss open-access resource systems, such
  as fisheries or groundwater, which is something
  we will be discussing later in the semester. They
  see the over-exploitation of these as resulting
  from a lack of property rights, a theme we will
  return to later.

12
Field and Olewiler Readings

• They talk about external benefits where producers
  or consumers have the economic responsibility for
  specific things, such as farmland or quiet
  lawnmowers, which produce benefits for society,
  but for which the economic actor is not
  compensated.
• Some external benefits are public goods that
  is, no one can be excluded from their use or
  enjoyment, and one person's use does not exclude
  another. The examples they give are the
  protection offered by standing armies or clean
  air.

13
A Critique of the Assumptions of Traditional
Economics

• I hope you got a chance to read my review of The
  Living Economy, edited Paul Ekins (not Elkins, as
  was stated in the review).
• There are many assumption of traditional
  economics which can be held up to question, but
  the ones I would like to focus on here are as
  follows
• humans are utility-maximizing individuals
• self-interest (the invisible hand) tends to
  lead
• to an automatic increase in social
  well-being

14
A Critique of the Assumptions of Traditional
Economics

• on a grander scale, that pursuit of
  comparative
• advantage and increased trade necessarily
  leads
• to a rise in global well-being
• that economic efficiency tends to lead to
• enhanced social well-being
• that when natural capital is depleted, other
• forms of capital can be substituted for it
  
• i.e. technology will come to the rescue.
• Any comments on any of these? To get into them I
  would like to read some passages from a standard
  economics book.
• Please read the Lutz article for Wednesday.