Ecological Macro-economics: GNP

Policy paper ● Comments on all proposals will be done today (sorry for delay) ● 1000 word introduction to problem due on 9/26  Begin with relevant chapters from textbook. I provided additional suggestions for most of you.

Headlines ● Wall St. Exploits Ethanol Credits, and Prices Spike ● Why Janet Yellen, Not Larry Summers, Should Lead the Fed ● Inequality in America - The Data Is Sobering ● Can the Government Actually Do Anything About Inequality

Questions for Next Few Classes ● Why is macroeconomics important, and how is it different from microeconomics? ● What is ecological macroeconomics? ● Is GNP a measure of value? (brief) ● What is money and how does it work? ● What is the role of speculation, and how has it contributed to the current crisis? ● What can we do about the current ‘crisis’? (a question for the next several weeks)  Read about the crisis daily! We have done nothing to solve it. It has not gone away.

Microeconomics

What is Macroeconomics? ● Focus on economy as whole  Aggregate demand, GDP  Unemployment  Growth rate  Price levels (inflation)

Goals of Conventional Macroeconomics ● Continual economic growth  To provide for ever-increasing numbers of people  To improve the environment ● Environmental Kuznets Curve  To end poverty and distribution problems ● Conventional Kuznets Curve  To provide enough jobs

Goals of Conventional Macroeconomics ● Stabilize prices  Why do we want stable prices? ● Provide full employment  What is full employment?

What Does Microeconomics Say about the Macroeconomy? ● The invisible hand  Allocative function of prices ● Say's law  Supply creates it's own demand

Why Do we Need Macroeconomics? ● Great depression  What happened? ● What happens when there's too much aggregate demand?  Inflation  Ecological degradation (ignored by conventional macro)

Emergence of Macroeconomics ● Response to crisis ● Created new indicators  GNP  Unemployment  Inflation ● New policy tools (or at least new understanding)  Monetary policy  Fiscal policy

Emergence of Macroeconomics ● New Institutions  New activism of fed  Social security  Social welfare  IMF  World Bank  ITO--> GATT -->WTO ● How does this relate to emergence of ecological economics?

Ecological Macroeconomics An end to growth 'optimal stopping rule' for the economy  Efficient allocation between market and non- market goods ● Fair distribution  Fair distribution of the commons  Fair return to labor and capital ● Job and income stability ● Price stability means to above ends

The Real(?) Economy: GDP

What is GNP? ● Market value of final goods and services purchased by households, government and foreigners (net) in a given year ● Returns to labor (wages), capital (interest), and natural resources (rent) ● GNP: based on ownership ● GDP: based on physical location ● Real vs. nominal ● What is opportunity cost of increasing GNP?

What are flaws with GNP? ● Depends on what it is intended to measure ● Defensive expenditures ● Depletion of natural capital ● Changing costs, e.g. computers

Uneconomic Growth: Essential Resources and GNP How do we maximize contribution of food to GNP?. i.e. who should get it?

What are alternatives to GNP? ● Income based  MEW  ISEW  GPI ● Ends based  GNH  Quality of life

GNP: Benefit or cost? ● US healthcare system ● Technological advance (e.g. computers) ● Defensive expenditures