4. But not all countries are growing exponentially?

5. Demographic Transition Model (DTM) – predictable shifts in birth and death rates associated with modernization

6. Some have done extreme interventions …

7. What are the good and the bad sides of these population policies?

8. Alternative interventions …

9. What have we learned? Is there a link between population, scarcity and environmental impacts? Is population alone enough to explain the state of the environment? Would we be able to predict population trends based on environmental limits alone? Are we able to control population and is it ideal? There is still a lot of debates and the relationship is complex!

10. Markets and Commodities Environment and Society Lecture 2 and 3

11. How do markets (and the discipline of neoclassical economics) perceive human behavior?

12. The Market Response Model Resource Availability Resource Scarcity Supply Increases Demand Decreases Search for new sources; Increased output in known sources Use of Substitutes; Increased Efficiency; Recycling

13. What does conservation lead to? The Jevons’ Paradox William Stanley Jevons (1835 – 1882)

14. Jevons’ Paradox Efficiency of resource use actually increases consumption of that resource. Can you think of other examples?

15. How do we handle environmental bads? The Coase Theorem Ronald Coase (1910 - 2013) Environmental harms can be most efficiently controlled through contracts and bargaining between parties.

16. Negative Environmental Externalities The spillover of an environmental cost, as where industrial activity at a site leads to pollution off- site that must be paid for by someone else.

17. Coase Theorem Where else can we apply Coase Theorem? Condition: Transaction cost must not be inhibiting

18. Coase Theorem In real world, transaction costs are almost always inhibiting – Coasean bargaining is inefficient; The assumption of complete information; Incentive to free-ride; Poorly defined property rights; Always disparate socio-economic realities between parties (i.e. power dynamics); Issues with Coase Theorem:

19. Market-Based Instruments Green Taxes Cap and Trade Green Consumption

20. Market-Based Instruments: The Green Taxes Green taxes: changing the environmental decision-making behavior of individuals and firms by manipulating prices. Taxes can: -Lead to discovery of new resources; -Drive innovations to substitute -Encourage alternatives -Alter consumption patterns

21. Market-Based Instruments: The Green Taxes Example: The Singapore Vehicle Taxation Did it work? What were the outcomes? What are the problems?

22. Market-Based Instruments: The Green Taxes Some issues with Green Taxes -Can be a very unpopular policy (good luck passing it in Congress!) -Can it effectively change behaviors? Socio- economic status of individuals and firms change. -How are revenues used by the government?

23. Market-Based Instruments: Cap and Trade Cap and Trade: Imposition of a total limit of pollution in a jurisdiction and shares of that total are distributed and traded among individuals and firms causing the pollution.

24. Market-Based Instruments: Cap and Trade

25. Some issues with Cap and Trade -Encourages business- as-usual activities; -Measurement issues and cheating; -Perverse incentives due to permit allocation -Complicated market

26. Market-Based Instruments: Green Consumption Green Certification: Programs to certify commodities for the purposes of assuring their ecological credentials.

27. Market-Based Instruments: Green Consumption Some issues with Green Consumption -Greenwashing (exaggerated or false marketing of a product, good, or service as environmentally friendly); -Reactive rather than proactive response; -Voluntary both on the part of the firm and the individual; -Possible justice issues and impacts on producers on the ground (e.g. farmers and community forest managers)

28. Does the government have a role in Market-Based Instruments?

29. Do we need a fundamental change in the way we think about our economy?

30. For the longest time, we portray out economy as a circular system.

31. But how is our economy structured? Nicholas Georgescu- Roegen (1906-1994) Based on second law of thermodynamics, we have been using low entropy stocks (fossil fuels) to organize ourselves. Once used, stock energy becomes unusable. What happens when we run out of fossil fuels?

32. A Paradigm Shift: Thinking from “Empty” to “Full” World

33. How do we currently measure welfare and economic performance? The Macro Perspective

34. Gross Domestic Product = Consumer Spending + Government Spending + Business Spending on Capital + Nation’s Total Net Exports The Macro Perspective Developed by Simon Kuznets, but warned that it should not be used as measure of welfare.

35. What are the problems with using GDP as measure of “how well we are doing”? The Macro Perspective -Measures also “defensive expenditures” (expenditures associated with unwanted consequences of economic activities); -Measures depletion of natural capital as a “good thing”; -Does it really measure our “welfare”?

36. GDP is not a bad measure per se. It just does not give us a comprehensive picture of how we are doing.

37. Are there alternative measures? Yes! The Macro Perspective -Alternative 1: Index of Sustainable Economic Welfare (Daly and Cobb 1989); ISEW = personal consumption + public non-defensive expenditures - private defensive expenditures + capital formation + services from domestic labor - costs of environmental degradation - depreciation of natural capital

38. The Macro Perspective -Alternative 1: Index of Sustainable Economic Welfare (Daly and Cobb 1989);

39. The Macro Perspective -Alternative 2: Human Development Index (UNDP 1990);

41. But how SHOULD we measure welfare, really?

42. Max-Neef’s Matrix of Human Needs Subsistence (food, shelter, work) Protection (social security, insurance, health systems, rights, family) Affection (friendship, family, partnerships) Understanding (literature, education, teachers) Participation (Rights, responsibilities, duties, privileges) Idleness (Games, spectacles, parties, peace of mind) Creation (Abilities, skills, work) Identity (Symbols, language, religion, habits, customs, sexuality, values, norms, memory) Freedom (Equal rights)