Untitled Quiz

Week 7: The Problem of Sustainability & Economic Growth

• Topic: Sustainability and economic growth
• Course: ADMN 509 Economics for Policy Analysis
• Instructor: Katya Rhodes
• University: University of Victoria

Acknowledgment of Traditional Territory

• Recognition of the Lekwungen peoples on whose traditional territory the university stands.
• Acknowledgment of the Songhees, Esquimalt, and WSÁNEĆ peoples, whose historical relationships with the land continue.

Camas Lily Culture in Lekwungen Territory

• Camas lilies are significant to the Coast Salish peoples, especially for their edible bulbs.
• Camas were a dietary staple until the early 1900s.
• European colonization led to the suppression of camas cultivation.
• There's a resurgence of interest and education in camas cultivation in Lekwungen territory
• Historical techniques are used to cultivate camas and avoid "death camas" plants
• A restoration project has reintroduced camas to the University of Victoria campus, promoting ecological education and cultural importance.

Course Outline Topics

• Week 1: Introduction to economics
• Week 2: Supply and demand
• Week 3: Market efficiency and market failures
• Week 4: Economic trade-off analyses
• Week 5: Mid-term exam + Economic valuation methods
• Week 6: Policy evaluation
• Week 7: The problem of sustainability & economic growth & Assignment 1 due.
• Week 8: Economics of environmental pollution + guest lecture on Indigenous Economies
• Week 9: Renewable and non-renewable resource economics + guest lecture with BC policy-makers
• Week 10: Reading break (no class)
• Week 11: Special topics Assignment 2 due
• Week 12: Final exam

Reading for Next Week

• Feir, Donn L. "Policies for Other People: Reflections from an Economist on Research and Federal Policy Regarding Indigenous Nations in Canada after 1975." Canadian Public Policy 50, no. S1 (2024): 36-61.
• https://www.utpjournals.press/doi/pdf/10.3138/cpp.2023-051

Week 7: Learning Objectives

• Classify key environmental problems
• Human-based capital vs. natural capital
• Define and depict weak vs. strong sustainability
• Relate the first and second laws of thermodynamics to economic and ecological sustainability concepts
• Compare and contrast the "growth paradigm" with "steady-state" principles
• Define and discuss the appropriateness of GDP and alternative indicators for measuring societal well-being

Environmental Challenges

• The text discusses numerous environmental challenges, including water use, atmospheric CO2 concentration, species extinction, ozone depletion, loss of tropical rainforests/woodlands, land use, and environmental pollution.

The Great Transformation

• Land use has become more intensely used by humans since 2000.
• Relevant maps show the increased intensity and distribution

Environmental Kuznets Curve (EKC)

• Observation that environmental degradation can improve after a certain level of per capita income is reached. Turning points exist in various environmental problems, with household sanitation experiencing the biggest improvement

What Explanations for EKC Shape?

• Emissions and impacts rise as countries industrialize.
• Increased incomes enable more efficient technology, impacting values, and policies
• Citizens support pro-environmental government
• Governments enact more pro-environmental policies

But, EKC May Depend on Scale and Type of Pollution

• Household sanitation, urban pollution, and greenhouse gas emissions impact how economic progress affects environmental degradation

Thinking Further about GPD: Exxon-Valdez Oil Spill Example

• Example showing how various activities related to a spill can be marked as positives, negatives, or zero

Is GDP a Good Measure of Progress towards Sustainability?

• GDP doesn't account for resource depletion, environmental degradation, equity and distribution, social issues, and non-market services.

Conceptualizing “Capital” and Sustainability

• Understanding the different types of capital (physical, intellectual, human, natural).
• Different concepts of capital and how they relate to different ideas of sustainability

Can Sustainability be Defined?

• The idea of sustainability is often an exhortatory term rather than a concrete definition
• Values and biases of the speaker often influence the definition.

Understanding Natural Capital

• Capital is defined as all the goods and services used to create products.
• There are four major types of capital: physical, intellectual, human, natural
• The production function showcases how GDP depends on both capital and labor

Two Definitions of Sustainability

• Weak sustainability suggests natural and human capital are perfect substitutes.
• Strong sustainability shows that natural and human capital are complements and required for the economy's sustainability.

Strong vs. Weak Sustainability

• Figures show differences between models using two notions of capital and well-being

Definitions of Sustainability

• Brundtland Commission: meeting present needs without compromising future generations
• UNESCO: leaving future generations with clean water, air, and soil
• Solow: previous generations are as capable as the one in existence

Neoclassical Economics View (e.g., Solow):

• Weak sustainability—substitution between natural and human capital is possible
• Non-declining welfare per capita
• Environment is a means to an end, not the goal.
• Society doesn't care how welfare is produced.
• Hartwick-Solow Rule: reinvest resource profits into other forms of capital

Ecological Economics View (e.g., Daly):

• Strong sustainability—substitution between natural and human capital is often impossible.
• Critical level of natural capital is required for production.
• Critical level accounts for resilience and precautionary principles
• Nature has more than instrumental value—other species rights exist

Thermodynamics, Biophysical Limits, and Sustainability

• Explains the concept of open, closed, and isolated systems and relates them to sustainability

Neoclassical Economics: Open, Closed, or Isolated?

• Economic systems are open systems, exchanging with other parts of the biosphere.

“Economy in Environment” or Ecological Economics: Open, Closed, or Isolated?

• Describes the global ecological system as an open system in which the economic system also exchanges with the environment.

Laws of Thermodynamics

• First Law: Conservation of energy and matter
• Second Law: Entropy—systems naturally move toward disorder; "losses" exist

Example: Canada's Energy Flow

• Diagram showing energy flows within and to Canada. Illustrates the interconnectedness of energy systems
• Illustrates conversions of energy and limitations from energy

Are There Limits to the Economic System? The Biosphere?

• Diagrams illustrate the exchange of resources and wastes between the economic and ecological spheres, highlighting their interaction..

Is It a Question of Scale? Daly and "Full World" (Large Scale) Economics

• The graph diagrams illustrate the concept of scale in relation to resources, production, consumption, and waste generation in the economy and the environment, stressing the idea of interconnected limits.

Daly

• Exponential economic growth since WWII has resulted in a "full world."
• Neoclassical assumptions about ample resources no longer apply.
• The current system creates more waste and depletes resources from global ecosystems.

Controversy of Economic Growth and Sustainability

• Pessimists (Malthus, Club of Rome): Resource limits inevitable, exponential growth is unsustainable
• Optimists (Simon, Nordhaus): Human ingenuity, new materials, and other resources are sufficient.

Which Statement Best Fits ...Thermodynamic Limits?

• Several possible stances on thermodynamic constraints and their effects on economic systems

Is Decoupling of GHGs from GDP Possible?

• Graph showing historical data on GDP and GHG emissions and some countries and territories showing decoupling.

Decoupling Countries and Territories: 2010-2019

• Map visualizer shows which regions or countries are better in decoupling between GDP and CO2

Alternatives to Growth

• The various alternatives include numerous indexes, for example GPI, HDI, and others)

Daly's (2004) Steady-State Principles

• Principles necessary for a sustainable economy: harvest maximum yield on renewable resources and keep nonrenewable resources to a minimum

Indicators for Alternatives to GDP

• Several sustainable indicators that alternative to GDP, include HDI, Green-adjusted GDP, GPI, ISEW

Genuine Progress Indicator (GPI)

• Indicator accounts for income distribution, volunteer work, family breakdown, crime, resource depletion, pollution, and loss of farmlands and wetlands

The BC NDP–Green Party Confidence and Supply Agreement

• Three objectives are outlined: affordability, services, and sustainable economic growth.
• GPI is a tool that can assist this goal.

Pembina (2005): 2 Different Views of Alberta (1961-2003)

• GPI and GDP growth are compared side-by-side, showing different aspects of progress

USA Genuine Progress Indicator

• Illustrates US GDP and GPI from 1950 to about 2000

Measuring Happiness Directly

• Describes Bhutan's Gross National Happiness Index
• Describes how happiness can be used as a measure of success

Happiness and GDP: What is the Relationship...?

• Correlation between GDP and happiness. A rise in GDP doesn't translate to a rise in happiness.

Side Note: Pro-Environmental Behaviour (PEB)

• Study showing that pro-environmental behavior is linked to higher life satisfaction

Which Indicator?

• A question about the best measurement of progress and well-being

Sustainability Debate Exercise

• Introduces an exercise for discussion
• Shows the resolution and role assignment.

Debate Rules

• Information on the format of how the debate will proceed

Debate Format

• Specific instructions for the debate

Debate Teams

• The resolution for the debate
• Teams given and what their position will be