Ecology and Economics
Ecology and Economics
Chapter 16
Economics
The scientific study of the choices made by individuals and societies in regard to the alternative uses of scarce resources which are employed to satisfy wants
Put otherwise, economics studies what, how and for whom society produces. This involves analyzing the production, distribution and consumption of goods and services.
Economics
Emerged from moral philosophy
Is a social science
Focus on good of society as a whole
Historically, material security is reward for good moral conduct
Now, morals cannot be contemplated until material goods are met
Individual materialism has become an end in itself
Classical economics
Adam Smith
Founder of economics
Argued that markets induce people to behave in the common interest as if they were guided by a higher authority
“Invisible hand”
Classical economics
1800’s
de Sismondi questioned the view of growth in economic activity as an end in itself
“Water, just as much as work, as much as capital, is necessary for life. But one can have too much, even of the best things in life.”
Classical economics
Ruskin stated “The real science of economy..is that which teaches nations to desire and labor for the things that lead to life, and which teaches them to scorn ...the things that lead to destruction.”
To Ruskin, wealth was more than the measurement of a man’s possessions; it included the capability to use them in an appropriate manner
Neoclassical economics
Neoclassical economics emerged in late 19th century
Saw economic growth as perpetual, desirable and necessary condition of economic activity
Perceptions of nature in neoclassical economics
Problems in neoclassical economics
A. C. Pigou defined an externality as a phenomenon that is external to markets and thus does not affect how markets operate
Biodiversity loss and pollution are externalities to markets
True environmental costs are not included
Problems in neoclassical economics
Substitution
Human capital and natural capital are considered substitutable
Assumes that production cannot be diminished by lack of one
Problems in neoclassical economics
Common access resources
“Tragedy of the Commons”
Tragedy will happen if access to lands is not controlled
Costs of exploitation are shared by many, but benefits of exploitation are accrued by those who exploit (Hardin 1968)
Commons = rights or property owned by a group, i.e. not private property
Community-owned grazing lands
20 farmers, each with 5 cows
Available grass supports 1000 kg milk/day
Each cow = 10 kg milk/day, each farmer gets 50 kg milk
Community-owned grazing lands
One farmer adds a cow, increasing herd to 101
Average milk production = 9.9 kg/day (1000 kg/day distributed among 101 cows)
But, this farmer now has six cows, so his production has increased!
6 cows * 9.9 kg/day = 59.4 kg/ day
Grazing on public land in the west costs 1/5 of grazing on private land
Government (taxes) pays costs of overgrazing
Distribution of costs and benefits
Problems in neoclassical economics
Short term gains (benefits for current people) valued over long term gains (benefits for future generations)
Steady-state economics
1800’s
John Stuart Mill envisioned economies becoming mature and reaching a steady state
Steady-state economics
Sees economy as “an open subsystem of a finite and nongrowing ecosystem (the environment)”
Steady-state vs. neoclassical economics
Steady-state recognizes that:
The ecosystem is the ultimate source of all products and services
Individuals exist in communities, and community values must, in some cases, supercede individual values if the community is to persist
Intermediate ends of material wants are superceded by ultimate ends to develop virtue and character that distinguish the highest and best condition of being human
Environmental economics
Seeks to integrate economic considerations with ecological considerations more fully
Natural resouces
Non-renewable resources can be depleted
Renewable resources will last indefinitely if used wisely
How can we place a monetary value biodiversity?
Direct values
Indirect values
Values of goods from species
Species harvested and sold $2 trillion, 6% of global domestic product
Wild species = 24.4 % of total
Value of fisheries
Annual world catch = $50-100 billion
Most important source of animal protein
US sport fishery was $38 billion in 2001
‘Ecosystem services
Purification of air and water
Mitigation of drought and floods
Generation and preservation of soils and fertility
Decomposition of wastes
Crop pollination
Control of agricultural pests
Protection from uv radiation
Estimate of total value of services: $33 trillion/year
Global ecosystem services
Totalled $33 trillion per year (Coxtanza et al. 1997)
Ecotourism
$101 billion per year in US in nature-centered recreation
Potential values
Species or genes that could be valuable in the future
Existence values
Value of knowing species exists
How much would you pay?
Uses
Consumptive versus non-consumptive
Generally, goods are consumptive, while services and existence values are non-consumptive
Costs of conservation actions
Direct
Opportunity costs
Loss of possible revenue
1 hectare of forest = $20,000
1 pair spotted owls needs 1000 hectares = $20 million to provide 1 pair habitat
Distributions of benefits
Goods - producers then consumers
Services - everyone, especially clean air and water
Potential values - future generations
Distribution of costs
Direct costs - taxpayer, consumers, owners, volunteers
Opportunity costs - those directly involved with resource (e.g. farmers, loggers, developers)
Opportunity costs
Often higher for local, poor people
Example: Government establishes a national park to protect gorilla habitat
Costs Europeans and Americans relatively little to join a conservation group or visit the park
Can cost an African farm family their livelihood
Solutions
Have regulations and privatize resources to prevent the “tragedy of the commons”
Share costs
Conservation easements, Debt-for-nature swaps, international aid