Economics of Regional Resources The historical development of environmental economics (1:1

Dr. Maurizio PROSP R! (PhD) "niversit# of $o%%ia Dept. Pr!M & $acult# of '%riculture (ia )apoli *+, -11.. $o%%ia tel. /012.3312+31.0+4 email:



Stud#in% environment from a social science perspective causes some pro6lems to students:
– –

man# have (almost) no social science trainin% at all those 7ho have social science trainin%, have 6een raised on 8mainstream economics8, and therefore are mainl# focused on economic efficienc#, rather than sustaina6ilit#

The course 7ill focus on 8sustaina6le development8, 7ith some lin9s to some 8deviations8 from mainstream economics (e.%. nvironmental ethics: colo%ical conomics, etc.) ;e 7ants to understand modern environmental pro6lems, 7ith small emphasis on 8real8 social issues of the da#, and stron% interest to7ards lon% term horizon (e.%. ne<t 1.2+. #ears) This approach is (usuall#) of little interest to polic# ma9ers, 6ut more important to ne<t %enerations 22= a contri6ution to the 6uildin% up of the critical mass for approachin% at lar%e pro6lems (e.%. >limate chan%e: immi%ration: desertification) *

%. Aumanistic.) ● 0 . Over%razion% of ran%eland: soil erosion: desertification) 22= resources de%radation 22= povert# 7orsenin% – ● rror in economic plannin% ma# lead to irreversi6le chan%e on the natural assett nvironmental conomics is the ne7 economic paradi%m incorporatin% a diversit# of economic doctrines (i. Mar<ist. )eoclassical. etc. >lassical.. nvironmentalistic.e.ho cares a6out sustaina6ilit#? ● mpirical evidence sho7s us that povert# is a ma@or cause and effect of environmental pro6lems Povert# – ● denies poor people of the means to act in their o7n lon%2term interest creates environmental stress (e.

hat is a 8paradi%m8? B!t is a fundamental economic 6elief. a 6asic unchan%in% economic principle.conomic paradi%ms and nvironment ● . that %overns the 7a# economists vie7 the 7orldC ● >lassical conomic Mar<ist )eoclassical Aumanistic De#nesian nvironmentalism ● ● ● ● ● E .

) Binvisi6le handC Thomas Malthus (1-442130E) Ba6solute scarcit# limitC David Ricardo (1--*213*0) Bdiminishin% returns. due to the need to move to less fertile landC ● mphasis on the po7er of the mar9et to stimulate %ro7th F innovation Pessimism a6out lon%2run %ro7th prospectus The technical pro%ress is not considered Ghon Stuart Mill (13.4213-0) Btechnical pro%ress 7ould provide man9ind8s individualistic material 7antsC ● ● + .>lassical conomic paradi%m 'dam Smith (1-*021-1.

1 Stationar# state S >onstant Real 7a%e Total product . O P Ps Total population .Ricardo8s simple commodit# production model Total )et product P1 P .

Mar<ist paradi%m Darl Mar< (131321330) Bcriticism to the capitalistic societ#. to serve human needs Modern capitalist economic s#stems lead to environmental destruction (pollution F 7astes) ● ● ● - .or9ers are the sole source of net productC Pro%ress defined in terms of material and technolo%ical advance made possi6le 6# e<ploitation of nature )ature to 6e BconIueredC via science. a%%ravatin% environmental contraintsC ● Ha6our theor# value: B.

)eoclassical paradi%m .alras (130E2111.) B%eneral eIuili6rium theor#C ● conomics is transformed into a ri%orousl# mathematic scientific discipline (a social BscienceC) mphasis moved a7a# from suppl#.illiam Stanle# Gevons (130+2133*) BGevons8 parado<: an improvement in the efficienc# of resource2use leads to an increase in its use Heon . and turnin% to demand Mar9et is supposed to 6e neutral and value2free ' particular mode of human: rational F e%oistic 'lfred Marshall (13E*211*E) Bintroduction of differential calculus into economicsC (ilfredo Pareto (13E3211*0) Boptimum situation: it is impossi6le to ma9e someone 6etter off 7ithout ma9in% 3 someone else 7orse offC ● ● ● .

independent and determined 6# %enetics: instead the# are interdependent !ndividuals are capa6le of altruistic acts: self2interested / altruistic preferences !ndividuals possesses a sense of communit# (extended rationality) Jovernment intervention reIuired to promote a more e%alitarian distri6ution of income amon% people 1 ● ● ● ● .Aumanistic paradi%m rnst Shumacher (1111211--) Beconomic thin9in% is compati6le 7ith spiritualit# as opposed to materialismC ● Mar9 Hutz (11E12 ) Beconomic for the >ommon Jood. in the era or %lo6alizationC Re@ection of the 8rational economic person8 model Preferences are not static.

B%reen revolutionC in the 84. ● Still most of mainstream (neoclassical) economists claim that optimal resource allocation is possi6le 7ith an efficientl# functionin% price !! economics ● conomic %ro7th driven 6# technical innovation appeared to offer limitless pro%ress (i. ● ● .e. (11. in the "S) Ao7ever.s.s. Aou%hton Mifflin. increasin% a7areness of pollution pro6lems Rachel >arson Rachel >arson (114*): BSilent Sprin%C.Post .) (Marine 6iolo%ist) ● ● The 6oo9 inspired 7idespread pu6lic concerns 7ith pesticides and pollution of the environment. !t facilitated the 6an of the pesticide DDT in 11-* in the "S. Technical chan%e 7ill miti%ate the ris9 for resources e<haustion 22= optimistic vie7 of technocentrists 'nti2%ro7th ar%uments raised 6# ecocentrists 1.orld .-211E. startin% from the 84.

7ill miti%ate lon%2run ph#sical resource scarcit# )ature has a mere Binstrumental valueC (use value) ● ● ● ● 11 .nvironmental conomics (1) BtechnocentricC KTR M >OR)">OP!') ● )atural resources are spontaneousl# created. and servin% at man9ind purposes conomic %ro7th conceived in material value terms Prioritar# o6@ective: M'K (J)P) $ree mar9et mechanism and central plannin%. in con@unction 7ith technolo%ical innovation.

nvironmental conomics (*) BtechnocentricC '>>OMOD'T!)J ● Resource conservationism. throu%h %overnmental plannin% Re@ection of the infinite su6stitution amon% resources Pursuin% of a sustaina6le %ro7th. throu%h the settin% of resource mana%ement rules )ature has still a mere Binstrumental valueC (use value) ● ● ● 1* .

to pursue sustaina6ilit# Loth instrumental and intrinsic value in nature are considered ● ● ● 10 .nvironmental conomics (0) BecocentricC >OMM")'H!ST ● Resource should 6e preserved The ri%ht of the %overnment to fi< environmental constraints. !nte%rated farmin%) Decentralization of socio2economic s#stem.%. to compl# 7ith ph#sical and social limits (e. limitin% economic %ro7th.

nvironmental conomics (E) BecocentricC D P >OHOJM ● <treme preservationist position The socio2economic s#stem should ta9e the minimum resource (e. Or%anic a%riculture and de2 industrialization) 'cceptance of 6ioethics: non2human species detains moral ri%hts !ntrinsic value in nature mphasis on a distinction 6et7een instrumental value (useful for human purposes) or intrinsic value (non2 preference2related value. 7hich e<ists also if humans 7ere e<tinct) ● ● ● ● 1E .%.

State intervention is reIuired 1+ ● ● ● ● . emer%ed at the 6e%innin% of the *.. and not 8rational economic person8) !ndividual preferences are centur#.. inte%rates later neoclassical economics into the anal#sis conom# is vie7ed as a d#namic process. (8cultural person8.A. 1111. states. 'merican conomic Revie7).. Mar9et is conceived as a result of the comple< interaction of various institutions: individuals. and one individual holds 6oth.1 Bcommon propert# can 6e successfull# mana%ed 6# local communitiesC This is a minorit# doctrine.2 ) )o6el in 1111 Btransaction costs to e<plain the limits and the nature of firmsC ● linor Ostrom (11002 ) )o6el in *. and its evolution is 6ased on cultural determinism. >oase (111. and chan%e over time. firms. social norms. The Bne7 institutional economicsC. in late *. th centur# (Aamilton .!nstitutional conomics paradi%m Ronald A. private and pu6lic preferences nvironmental pro6lems are @ud%ed to 6e an inevita6le result of economic %ro7th in advanced industrial economies.

the most efficient solution to pollution dama%e situations is a 6ar%ainin% process 6et7een polluter and sufferer: each could compensate the other.): %iven certain assumptions.(ariants of )eoclassical paradi%m (!): The propert# ri%ht approach ● Pu6lic decision ma9er. is pursuin% self2interest 22= M'K his o7n utilit# The pu6lic sector provides no incentives for politicians or 6ureaucrats to resist pressures from interest %roups Misallocation of environmental resources cauesd 6#: – – ● ● Mar9et failures Jovernment failures ● >oase theorem (>oase. accordin% to 7ho possesses propert# ri%hts – Polluter has the ri%ht: the sufferer can compensate him not to pollute Sufferer has the ri%ht: the polluter can compensate to tolerate the dama%e 14 – . 114. similarl# to private individual.

rather than an optimizin% principle ● 1- .(ariants of )eoclassical paradi%m (!!): The materials 6alance approach ● Pollution is a pervasive and inevita6le phenomenon. such that: mar%inal net private 6enefits N mar%inal e<ternal dama%e cost ● Pro6lem: difficult# to define the 8accepta6le8 levels of environmental Iualit# Pollution control polic# 6ecomes an iterative search process 6ased on a 8satisf#in%8 (e<tended rationalit#). reIuirin% %overnment intervention (re%ulation or incentives) 'n optimum (efficient) level of pollution can 6e defined: – ● Min (pollution) .

) Re@ection of infinite su6stituta6ilit# >onstraints ma# 6e refined over time (fle<i6ilit#) 'nal#sis 6ased on cost2effectiveness approach (instead of >L') '7areness of the irreversi6ilit# of localized dama%e to ecos#stem – – – – 13 . Hand use zonin%: am6ient environmental Iualit# standards for air.e.Polic# anal#sis (alternative) frame7or9s ● >ost26enefit (>L'): it implies – – – – Monetar# valuations (not al7a#s possi6le) !nfinite su6stituta6ilit# Positive rates of discount Hon%2term resilience capacit# ● $i<ed standard: it implies – Plannin% activit#. 6ased on settin% of environmental constraints (i. radiations. 7ater. etc.

environmental economics has identified 0 6asic t#pes of values: – – – (alues e<pressed via individual preferences Pu6lic preferences value.TP) .T') ● Ao7ever. dependin% on their attitude to satisf# human needs: There ma# e<ist a lot of assi%ned values to the same o6@ect. e<pressed via social norms $unctional ph#sical ecos#stem values 11 .illin%ness to accept (. 7hich ma# 6e – – .illin%ness to pa# (.conomic and nvironmental values ● Mainstream economics assi%ns values to o6@ects.

Total economic value ● >onsists of t7o main elements: use value and nonuse value Direct use value: .T' for onl# an actual use of the %ood or service. ● ● ● ● ● . !t tends to dominate the total value of most ordinar# (non environmental) %oods !ndirect use value: special functions of some ecos#stems Option (alue: Joods and services are valued for their potential to 6e availa6le in the future <istence value: reflects 6enefits from simpl# 9no7in% that a certain %ood or service e<ists LeIuest value: refers to 6enefits from ensurin% that certain %oods 7ill 6e preserved for future %enerations *.TP or .

. 113-: The Jlo6al Possi6le. su6@ect to su6stituta6ilit# 6et7een resources and technolo%ical pro%ress ● *1 .) Mid of 113. and optimistic 8cornucopian technocentrist8 approach. and creation of national environmental protection a%encies in the )orth. 11-*) 113. Report (Larne#. and the pu6lication of the Resourceful arth report (Simon nd Dahn. Repetto.> D. confined to the )orth 11-*: esta6lishment of the ") nvironmental Pro%ramme. De6ate a6ut the uneven distri6ution of resources uses across re%ions and population – – ● ' 7or9in% definition of sustaina6le development: ma<imization of the net 6enefits of economic development (real per capita income F social 7elfare).s: re6irth of environmentalism. 113.).. 113+). su6@et to maintainin% the services F Iualit# of natural resources over time This implies: a) use rate for rene7a6le natural resources O re%eneration rate 6) optimize efficienc# of natural resources use...Sustaina6le conomic %ro7th and development ● Aistorical development of environmentalism – – 114. 7ith pessimistic vie7s of the "S Jlo6al *. Pessimistic ve7s of the Meado7s Report (Meado7s et al. 113.orld >onservation Strate%# (!">). 113E) The term 8sustaina6ilit#8 has appeared in the .s: principle that 7orld8s resources are sufficient to meet lon%2term human needs (Our >ommon $uture.: contradictin% si%nals.

)or%aard (11E02 ) Bor%anisms activel# see9 alternatives in their environment or chan%e 7hat the# findC ● ver#thin% is interloc9ed.colo%ical F >o2evolutionar# economic paradi%m Richard L. #et ever#thin% is chan%in% accordance 7ith the interloc9edness conomic development vie7ed as a process of adaptation to chan%in% environment. 7hich 7ill also 6e a source of environmental chan%e: 0 sources of chan%e (none of them alone e<plain all chan%e: – – – ● ● Lreac9do7n of ecolo%ical eIuili6rium Demands of technical consistenc# Development of ne7 forms of need ● >o2evolutionar# perspective: provides a lin9 6et7een ecolo%ical and economic anal#sis ** .

2 ) Btechnolo%ical and institutional histor# 7ith profound concerns for the role of technolo%# in societ#C Sidne# J. natural selection) – ● mphasis on shoc9s and technolo%ical innovation Geroen van den Ler%h (114+2 ) Bunderstandin% ho7 to foster a social2technolo%ical transition to a sustaina6le ener%# s#stemC *0 .inter.inter (110+2 ) Bevolutionar# economics. 113*) The economic s#stems evolves under the effect of t7o strivin% forces: – ● The creation of diversit#. and especiall# technolo%ical chan%e (strate%ic mana%ement)C ● The rational 6ehaviour of individuals is replaced 6# 6ounded rationalit#.volutionar# conomics paradi%m Richard R. 7hich can ta9e the form of ha6its.%. throu%h the application of various mechanisms The reduction of diversit# (e.)elson (110. routines. . m#opia and imitation ()elson F .

$inal remar9s ● nvironmental conomics deals 7ith – – – – – – – Suppl# F demand of non2mar9eta6le %oods !ncomplete information volvin% s#stems (economic: ecolo%ical) "ncertaint# >omple<it# (ever#thin% is mutuall# interconnected) Pro6lems affectin% other 8or%anisms8 and future %enerations Pu6lic. rather than private costs F 6enefits ● conomists have a 7ide choice amon% alternative paradi%ms: orthodo< (e. dependin% on the settin% of assumptions and h#pothesis underl#in% the case of stud# *E ● . )eoclassical) vs. etherodo< (ne7 paradi%ms 7hich 8the frontier8 for researchers) conomists tend to 6e fascinated either 6# too o6solete models.%. or too naive tools: each tool ma# 6e suita6le for a certain anal#sis.

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