high throughput economies -try to boost economy by increasing flow of stuff/energy resources

from environment into economy to make goods/ services

ecological economists-say that no substitutes for natural resources (water, air, soil)
-environment gives free services like climate control and air/ water purification.

three major assumptions of modelof ecological economists 1. resources are limited and we
should not waste them, and there are no substitutes for most types of natural capital
2.we should encourage environmentally beneficial and sustainable forms of economic harmful
and unsustainable forms of economic growth
3. the harmful environmental and health effects of producing economic goods and services
should be included in their market price, so that consumers will know the environmental and
health effects

what is must apply in a truly free market situation In a truly free-market economic system (1)
no com-
pany or small group of companies would control the
prices of any goods or services; (2) the market prices
of goods and services would include all of their direct
and indirect costs (full-cost pricing) ; and (3) consumers
would be provided with full information about the ben-
eficial and harmful environmental effects of the goods
and services available to them.

economic growth vs. economic development -Economic growth is an increase in a

nation's capac-
ity to provide goods and services to people.
-Economic development is the improvement of
human living standards through economic growth.

market failure ex market failures. An important

example of a market failure is the inability of markets to
prevent the degradation of open-access resources, such as
clean air and the open ocean. Such resources are not
bought and sold in the marketplace, because they are
owned by no one and available for use by everyone at
little or no charge.

high-throughput economies which attempt to boost economic growth by increas-

ing the flow of matter and energy resources extracted
from the environment through their economic sys-
tems to produce goods and services

three major assumptions of ecological economists 1. high-throughput economies,

which attempt to boost economic growth by increas-
ing the flow of matter and energy resources extracted
from the environment through their economic sys-
tems to produce goods and services
2. We should encourage environmentally beneficial
and sustainable forms of economic development,
and discourage environmentally harmful and
unsustainable forms of economic growth.
3. The harmful environmental and health effects of
producing economic goods and services should be
included in their market prices (full-cost pricing) ,

indirect, or external costs The market price, or direct price, that we pay for something does
not include most of the indirect, or external, costs of harm to the environment and human health
associated with its production and use. For this reason, such costs are also called hidden costs.
For example, if we buy a car, the direct price we pay includes the direct, or internal, costs of raw
materials, labor, and shipping, and a markup for dealer profit. In using the car, we pay additional
direct costs for gasoline, maintenance, repair, and
insurance.

full-cost pricing Many economists and environmental experts believe

that these harmful external costs should be included in
the market prices of goods and service in what is called
full-cost pricing

A country's economic growth is measured by gross domestic product

(GDP) : the annual market value of all goods and ser-
vices produced by all firms and organizations, foreign
and domestic, operating within a country.

changes in a country's economic growth per person is per capita GDP: the GDP divided by
a country's total
population at midyear.

genuine progress indicator (GPI) environmental indicator (helps monitor environmental

quality and human well-being) that is GDP plus the estimated value of beneficial transactions
that meet basic needs, but in which no money
changes hands, minus the estimated harmful environ-
mental, health, and social costs of all transactions.

How to calculate GPI GDP +benefits not included in market transaction + harmful
environmental social costs

full costs internal costs of production and marketing plus external costs to
human health and the environment.

Internal costs are easy to see and explain. They are costs that a business bases its price on.
They include costs like materials, energy, labour, plant and equipment and overheads.

three reasons why full pricing not widely used 1. First, many producers of harmful and
wasteful products would have to charge more for them,
2. Second, it is difficult to estimate many environmental and health costs.
3. many environmentally harmful businesses have used their political and economic power to
obtain environmentally harmful government subsidies and tax breaks that help them make
profits.

greenwashing:a deceptive practice that some businesses use to spin environmentally harmful
products and services as green, clean, or environmentally beneficial

green taxes, or ecotaxes, Another way to discourage pollution and resource

waste is to tax them. This would involve using green
taxes, or ecotaxes, to help include many of the harmful
environmental and health costs of production and con-
sumption in market prices

three necessities for green taxes would have to be phased in over 1 0-20 years to allow
businesses to plan for the future. Second, income, pay-
roll, or other taxes would have to be reduced by the
same amount as the green tax so that there would be
no net increase in taxes. Third, the poor and lower-
middle class would need a safety net to reduce the
regressive nature of any new taxes on essentials such as
fuel and food.

incentive-based environmental regulations. Rather than

requiring all companies to follow the same fixed pro-
cedures or use the same technologies, this approach
uses the economic forces of the marketplace to encour-
age businesses to be innovative in reducing pollution
and resource waste.

cap-and-trade approach, the government decides on acceptable levels of total pollution or

resource use, sets limits, or caps, to maintain these levels, and gives or sells companies a
certain number of tradable pollution or resource-use permits governed by the caps.

material- flow economy (Figure 23-4) to a service-flow economy. Instead of buying many
goods outright, customers lease
or rent the services that such goods provide.
ex) xerox

Cost-benefit analysis (sec. 23-2)

Direct price
External costs
Lobbying
Market price ...

discount rate rate which is an estimate of a resource's future economic value compared to its
present value

The point at which removing more coal is not worth the cost is where the demand curve
crosses the supply curve

cost-benefit analysis. This is done by comparing estimated costs and benefits for actions such
as implementing a pollution control regulation, building a dam on a river, or preserving an area
of forest.