Article Title: Economics in a Full World
Author/Source: Herman E. Daly
A: List the major ideas, concepts or key points- point by point
Expansion of the economy will interfere with our ecosystems. The biosphere is finite, meaning that it has it's limits and boundaries. The way the economy is now in the U.S is pushing the resources the biosphere can give us. With a loss of these resources, growth is useless to us. Humanity needs to create an economy that can sustain the finite biosphere. Main idea of sustainability is to shift the path of progress from growth and toward development. To have such an economy, there needs to be specifics on what is to be sustained from year to year. Some of these candidates include GDP, “utility,” throughput, natural capital and total capital. Not only do we need those candidates to have an economy that can sustain the biosphere's finite resources, we also need to adjust the economy we have now. Adjustments include taxing, employment, trade, GDP growth and happiness. If no adjustments are made, the world will be come more polluted.
C: Write a reaction paragraph to the article stating your own thoughts on the topic, using specific citations from the article to support your views
Reading this article gave me insight that not only does manufacturing leads to the loss of resources, but also growth of our economy contributes to the loss of our natural resources. The article at first made me think that growing was a great thing to do. The author talked about economic problems, and how to solve it by growing, but it then it shows how growth can affect our earth. Growth of our economy can lead to more pollution of the earth and a loss of natural resources. I think that finding an economy that is great but at the same time can sustain our finite biosphere is hard to do. I believe that if we do find a way to adjust our economy to better both the economy and the earth, can contribute to a sustained biosphere and less pollution.
Author/Source: Herman E. Daly
A: List the major ideas, concepts or key points- point by point
- Growth is thought to be the solution for all the major economic ills of the modern world.
- To get rid of poverty, grow the economy. Don't distribute wealth from the rich to the poor, it will slow growth.
- To get rid of unemployment, increase demand for goods and services.
- Overpopulation? Push economic growth.
- Environmental degradation? Trust in the environmental Kuznets curve, an empirical relation purporting to show that with ongoing growth in GDP, pollution increases but then reaches a maximum and declines.
- Relying on growth in this way might be fine if the global economy existed in a void, but it doesn't.
- The economy is a subsystem of the finite biosphere that supports it.
- When the economy expansion interferes with the ecosystem, we will sacrifice natural capital that is worth more than man-made capital.
- We will then have uneconomic growth, producing bads faster than goods. Makes us poorer, not richer. Once we pass the optimal scale, growth becomes stupid and impossible to maintain.
- Evidence shows that the U.S is already entering the uneconomic growth phase.
- Recognizing and avoiding uneconomic growth is not easy.
- A problem is that people benefit for uneconomic growth and have no reward for changing. Also the national accounts do not register the costs of growth for all to see.
- Humankind must move to a sustainable economy, one that takes heed of the biophysical limits of the global ecosystem so it can operate long into the future. If we don't transition, we may be cursed with an ecological catastrophe that would lower living standards.
- Contemporary economists don't agree that the U.S economy and others are heading to uneconomic growth. They ignore the issue of sustainability and trust.
- Concern for sustainability has a long history dating back to 1848.
- The modern day approach comes from work in the 1960s and 70s. The tradition carried on by ecological economists and subdivisions of mainstream economics called resource and environmental economics.
- Mainstream economists consider sustainability to be a fad and are committed to growth.
- The facts are incontestable: the biosphere is finite, nongrowing, closed and constrained by the laws of thermodynamics.
- Any subsystem, like the economy must cease growing and adapt itself to dynamic equilibrium at some point. Birth rate=death rates. Production rates=depreciation rates.
- Ecological footprint studies show that total energy and materials needed to maintain and replace artifacts have increased.
- As the world becomes full of humans and our belongings, it becomes empty of what was here before. To deal with this pattern of scarcity, scientists need to develop a "full world" economics to replace our "empty world" economics.
- The study of microeconomics, a branch of economics that involves careful measuring and balancing of costs and benefits of activities, businesses and individuals get a clear signal of when to stop expanding an activity.
- When an activity expands, it displaces other enterprise and displacement is counted as a cost.
- People stop when marginal cost=marginal benefit.
- Establishing and maintaining a sustainable economy entails and enormous change of mind and heart by economists, politicians and voters to declare to such a project is impossible.
- An alternative to a sustainable economy is biophysically impossible.
- We must specify what is to be sustained from year to year.
- Economists discussed five candidate quantities: GDP, utility, throughput, natural capital and total capital.
- People think that a sustainable economy should sustain rate of growth of GDP.
- Trying to define sustainability in terms of constant GDP is problematic because GDP combines qualitative improvement with quantitative increase. Sustainable economy must stop growing at some point, but need no stop developing.
- Main idea of sustainability is to shift the path of progress from growth and toward development.
- Next is the utility. It refers to the level of satisfaction of wants. Neoclassical economic theorists favored defining sustainability as the maintenance of utility over generations.
- The definition is useless in practice. Utility is an experience. It has no unit of measure and cannot be bequeathed from one generation to the next.
- In contrast, natural resources can be measured and passed on.
- People can measure their throughput by taking them from low-entropy sources in the ecosystem, transforming them into useful products and dumping them back in the environment as high entropy wastes.
- Sustainability can be defined in terms of throughput by finding environment's capacity for supplying the resource.
- To economists, resources are a form of wealth that ranges from stocks of raw materials to finished products and factories.
- There are two types of capital, natural and man-made. Economists believe that man-made capital is a good sub for natural.
- Ecological economists believe that natural and man-made are complements than subs.
- Natural capital should be maintained on its own, because it became the limiting factor. The goal is called strong sustainability.
- Policy for maintaining natural capital is called the cap-and-trade system.
- It is a limit placed on total amount of throughput allowed in conformity with capacity of the environment to regen resources or to absorb pollution.
- Right to deplete sources is now a scarce asset that can be bought and sold on a free market.
- Cap-and-trade systems have been implementations include the EPA's scheme for trading sulfur dioxide emission permits to limit acid rain.
- Product lifetimes-Transition to a sustainable economy would require many adjustments to economic policy.
- A sustainable economy needs a "demographic transition" not only of people but of goods. Production rates should equal depreciation rates. Rates could be equal at high or low levels.
- Lower rates are better both for sake of greater durability of goods.
- GDP growth- Because of qualitative improvements and enhanced efficiency, GDP could still grow with constant throughput.
- Environmentalists would be happy because throughput would not be growing. Economists would be happy because GDP would be growing.
- This form of growth should be pushed as far as it can go.
- The financial sector- in a sustainable economy, lack of growth would cause interest rates to fall. The financial sector would probably shrink because low interest and growth rates could not support the enormous superstructure of financial transactions.
- In a sustainable economy, investment would be mainly for replacement and qualitative improvement.
- Trade- Free trade wouldn't be feasible in a world having both sustainable and unsustainable economies. Unsustainable economies could underprice the sustainable rivals, because they don't pay the cost of sustainability.
- Taxes- a govt. concerned with natural resources more efficiently would alter what it taxes. Instead of taxing the income earned by workers and businesses, it would tax the throughput flow.
- Employment- In a sustainable economy, maintenance and repair become more important. Being more labor-intensive than new production and relatively protected from offshoring,these services may provide more employment.
- Happiness- one driving force of unsustainable growth has been axiom of insatiability. People will always be happier consuming more. Research by experimental economists is leading to rejection of the axiom. Evidence shows that growth does not always lead to happiness.
- If we don't make these adjustments to achieve a sustainable economy, the world will become ever more polluted. Losses may continue to be masked by the faulty GDP-based accounting that measures consumption of resources as income. Avoiding this will be hard. but the sooner we start, the better.
Expansion of the economy will interfere with our ecosystems. The biosphere is finite, meaning that it has it's limits and boundaries. The way the economy is now in the U.S is pushing the resources the biosphere can give us. With a loss of these resources, growth is useless to us. Humanity needs to create an economy that can sustain the finite biosphere. Main idea of sustainability is to shift the path of progress from growth and toward development. To have such an economy, there needs to be specifics on what is to be sustained from year to year. Some of these candidates include GDP, “utility,” throughput, natural capital and total capital. Not only do we need those candidates to have an economy that can sustain the biosphere's finite resources, we also need to adjust the economy we have now. Adjustments include taxing, employment, trade, GDP growth and happiness. If no adjustments are made, the world will be come more polluted.
C: Write a reaction paragraph to the article stating your own thoughts on the topic, using specific citations from the article to support your views
Reading this article gave me insight that not only does manufacturing leads to the loss of resources, but also growth of our economy contributes to the loss of our natural resources. The article at first made me think that growing was a great thing to do. The author talked about economic problems, and how to solve it by growing, but it then it shows how growth can affect our earth. Growth of our economy can lead to more pollution of the earth and a loss of natural resources. I think that finding an economy that is great but at the same time can sustain our finite biosphere is hard to do. I believe that if we do find a way to adjust our economy to better both the economy and the earth, can contribute to a sustained biosphere and less pollution.