1. Lecture 14 Reading Materials

2. Kerschner’s paper Dematerialisation - refers to the absolute or relative reduction in the quantity of materials required to serve economic functions in society. In common terms, dematerialization means doing more with less. For eg. Service sector Economy is an isolated system Resources are assumed, in principle, to be substitutable without restrictions Rejects the concept of absolute scarcity

3. Resources have absolute limits beyond which availability is nil Price mechanism cannot reflect the absolute scarcity, it can only deal with relative scarcity (relative prices). Absolute scarcity of sink – a major problem

4. Weak Sustainability Weak interpretation of sustainability is also based on factor substitutability. Human-made capital is assumed to be a perfect substitute for natural capital. Thus the loss or degradation of the stock of natural capital (resources and sinks) to future generations is being compensated by what is being created by humans (structures erected, technologies developed, knowledge gathered, etc.).

5. Natural capital and man-made capital are indeed supplements and not substitutes. This has often been illustrated on the example of the fishing industry. Historically, in an ‘empty-world-economy’ (see below), the scarce factor were the fishing boats (manmade capital). This role has been changed over the last decades. Now that we live in a ‘full-world-economy’ the scarce factor is fish (natural capital). New fishing boats equipped with high-tech instruments are in total not increasing the amount of fish caught, instead the opposite is true. Meanwhile overfishing has lead to a decrease in the world stock of fish, which has dramatically reduced their reproductive capacity. Hence the fishing industry has clearly exceeded the limits of the newly scarce factor

6. Time - There is no such thing as uncertainty; everything is known either with absolute certainty or in the form of some probability distribution. Reversibility - Reversibility therefore leaves humanity free to cut down forests, because they could be replanted; contaminate its freshwater supply, because it could be de- polluted; exploit species to extinction, because they could be re-introduced from stocks in zoos and botanical gardens or be reproduced in genetic engineering laboratories, etc.; In reality, “of course, all real economic (and other) processes are irreversible.” Technological optimism seems to act as a reinforcing and ‘gap-filling’ mechanism in neoclassical economic theory. It facilitates both, the assumption of factor substitutability (i.e. the rejection of absolute scarcity) as well as the assumption of reversibility. Human technological progress appears to be the panacea for mainstream economists.

7. The sections from Measures of Economic Growth - Leave it out, we will take it up after mid semester. So read only upto page 8

8. Beder’s Paper Weak sustainability and substitutability – Environmental economists interpreted sustainable development as development that maintains capital for future generations where capital is the total of human capital (skills, knowledge and technology) and human-made capital (such as buildings and machinery), as well as natural capital (environmental goods).

9. This view is referred to as weak sustainability, based on work by Robert Solow (1974), which argued that the requirement to keep the total amount of capital constant ‘is consistent with ‘running down’ natural capital—i.e. with environmental degradation’ because human-made capital can be substituted for natural capital This assumes that a community can continue to use up its natural resources and degrade its natural environment just as long as it is increasing its wealth and infrastructure by an equivalent economic value. The fact that a region is becoming a more sterile, artificial and dangerous place in which to live is supposedly compensated for by the comforts and entertainments that residents are able to buy.

10. Ecosystem Services The Millennium Ecosystem Assessment (MA) was called for by the United Nations Secretary-General Kofi Annan in 2000. Initiated in 2001, the objective of the MA was to assess the consequences of ecosystem change for human well-being and the scientific basis for action needed to enhance the conservation and sustainable use of those systems and their contribution to human well-being. The Millennium Ecosystem Assessment (MA) defined ecosystem services as including provisioning services (such as food, water, fibre and fuel), regulating services (such as carbon sinks, flood mitigation and waste treatment), cultural services (for example spiritual values, aesthetic pleasure and recreation) and support services (for example soil formation and nutrient recycling)