1. PowerPoint ® Lecture prepared by Gary A. Beluzo Ecological View of the Economy 10

2. Copyright © 2007 McGraw-Hill Publishing Company STUDENT LEARNING OUTCOMES Identify the key differences between the circular flow and ecological views of the economy. Define the four steps of the economic process. Describe the connection among economic growth, energy, and materials use. Understand the reasons behind international differences in affluence. Identify the reasons why green accounting is important for sustainability. After reading this chapter, students will be able to

3. Copyright © 2007 McGraw-Hill Publishing Company The 2004 U.S. Economy (Costs and Benefits) Gross National Product (GNP) most widely used index of a society’s economic well-being. What is the environmental cost? To produce 11.7 trillion dollars of GNP in 2004 100 x 10 15 BTUs of fossil fuels 140 million metric tons of copper, lead and other metals 170 million metric tons of wood products Consumed 630 million metric tons of food. Eroded 20 million metric tons of soil 5,900 million metric tons of CO 2 214 million metric tons of MSA 1.5 million metric tons of hazardous chemical waste. Quality versus Quantity of Life?

4. Copyright © 2007 McGraw-Hill Publishing Company Two Views of the U.S. Economy The linear view The circular view

5. Copyright © 2007 McGraw-Hill Publishing Company The Economic System Production and Consumption of Goods and Services Goods Services Production Firms Labor and Capital = Factors of Production Technology Utility Consumption

6. Copyright © 2007 McGraw-Hill Publishing Company Linking Production and Consumption The Circular Flow Model

7. Copyright © 2007 McGraw-Hill Publishing Company What’s Missing? The Role of Government

8. Copyright © 2007 McGraw-Hill Publishing Company Steps of the Economic Process Links to the Environment Creating Natural Resources Providing a Habitable Environment The Production of Goods, Services, and Wastes Waste Assimilation

9. Copyright © 2007 McGraw-Hill Publishing Company Step 1. Creating Natural Resources Biogeochemical cycles produce natural resources Highly concentrated energy and/or materials High degree of organization

10. Copyright © 2007 McGraw-Hill Publishing Company Environmental Energy Cost

11. Copyright © 2007 McGraw-Hill Publishing Company Step 2. Providing a Habitable Environment Ecosystem Services Values that people derive, directly and indirectly, from ecosystem functions. Chemical composition of the atmosphere Climate control Nutrient recycling Soil formation Pollination Habitat for biodiversity Regulation of hydrologic cycle

12. Copyright © 2007 McGraw-Hill Publishing Company Step 3. Production of Goods, Services, and Wastes Law of Conservation of Matter and the Laws of Thermodynamics determine- The energy, materials, and waste that will result from the production of goods and services

13. Copyright © 2007 McGraw-Hill Publishing Company Step 4. Waste Assimilation Ability of the environment to absorb, detoxify, and disperse wastes in a way that makes them less harmful. Biodegradable Persistent Nondegradable

14. Copyright © 2007 McGraw-Hill Publishing Company Economic Growth

15. Copyright © 2007 McGraw-Hill Publishing Company Comparing Levels of Affluence

16. Copyright © 2007 McGraw-Hill Publishing Company Changing Technology

17. Copyright © 2007 McGraw-Hill Publishing Company Affluence and Materials use 1900 U.S. used 20 elements U.S. Renewable resources such as forestry and agriculture Cotton, wool, rayon Now U.S. uses all 92 elements Nonrenewable Petrochemicals Polyesters, acrylics, nylon

18. Copyright © 2007 McGraw-Hill Publishing Company Economic Growth, Energy, and Materials Why are many environmental goods and services not included in the GDP? Market Failures Private property Public property Common property “Tragedy of the Commons”

19. Copyright © 2007 McGraw-Hill Publishing Company Valuing Environmental Goods and Services So, how do we measure the economic value of these environmental goods and services? Direct Market Valuation

20. Copyright © 2007 McGraw-Hill Publishing Company The Global Distribution of Ecosystem Services Figure 10.19

21. Copyright © 2007 McGraw-Hill Publishing Company Impacts of Environmental Degradation Resource Quality Depletion and exhaustion Opportunity Costs

22. Copyright © 2007 McGraw-Hill Publishing Company Degradation of Oil Resources

23. Copyright © 2007 McGraw-Hill Publishing Company Accounting for Environmental Degradation Environmental Accounting Income and wealth Green National Accounts