Economics and the environment

1. Economics and the environment • Introducing some dominant strains of economic thinking: • Economic valuation/The Market • Efficiency • Cost/Benefit analysis 1

2. The Economic approach • Assumption of self interest and self-determination of “good” and “value” • Market as sphere that determines value of anything—a freedom • Nothing has intrinsic value and all value is human made • Supply/Demand • Some Ideals: • Transactions occurring are cooperative and mutually beneficial • Pareto Optimal (equilibrium of transaction and efficiency, that is no waste) • Environment is a cost and a benefit • Earth is a natural resource to be exploited in service of everyone! 2

3. Economics and the environment • Environment matters only if it is given market value • Property is dominant way of valuation • Optimal transactions are supposed to diminish waste, even pollution • Negative Externalities and market failure • Scarcity: Is it natural or artificial or a little of both? • Environmental policy based on a culture or society valuing this good and taking it into account in CB analysis • Role of Corporations and Firms: nature as the commons • Consumer sovereignty: Can consumers really change things? 3

4. Economics and the environment • Current state: • Environment is a low cost, an input that is cheap • Policy initiatives: • Taxation, Trade and Cap (Environmental Credits), Fines • Push for the environment being a significant value in market transactions • Fiscal ethics: monetary value determines all other values! • Economics as the dismal science. Pseudoscience • Government policy is dominated by CB 4

5. Baxter: people or penguins • Why either? Only 2 choices? • Clean air and water is a value, determined by wants and desires. Not a good in itself. Counterintuitive? • Attempts to set out objectives for pollution control based on preferences • Notion of General want or societal good, highly dubious and dependent on political system, degree of democracy • The 4 objectives, each part of a larger Economic approach • Classical Economics vs Alternative Economics 5

6. 4 Criteria • 1. The sphere of freedom: “every person should be free to do whatever he wishes in contexts where his actions do not interfere with the interests of other human beings.” • 2. Waste as bad thing, scarcity defines existence and not all satisfactions can be granted to everyone (inequality?) • 3. Humans are ends and not means, absolute right of dignity is equal • 4. Individuals retains and preserve the incentive and opportunity to improve his satisfactions. That is everyone has an equal opportunity in the marketplace. Some restraints for purpose of necessary redistribution to avoid abject privation--poverty 6

7. Application • Avoiding pollution is a value and not a fact • Environment is a value and not a good in itself • Is the economic approach really people-oriented as opposed to environment oriented? • Purports to reflect reality of how people think and act • Or, is it a reflection of how people have been regulated to think and act? • Back to Hobbes: The state manufactures an artificial freedom and is a contract with propertied men • Humans as surrogates for plant and animal life • Assumption: this is the only practical system 7

8. Penguins • Cannot count penguins, only humans. • Normative statements are not applicable to the non-human world • Nature is void of normativity! Eg. “Was it right for the first amphibian to crawl up out of the primordial ooze?” • Polluting and exploiting the environment is not wrong because nature has no normative state • Whatever level of pollution we currently have is right because it is a choice we have made based on our current actions • It would be wrong if our actions were altered or choices made to stop it 8

9. Optimal pollution • Pollution is a consequence of us seeking goods and getting satisfactions, i.e. travel, manufactured goods, electricity to use computers, projectors, etc. • If we want lower levels, we will need to give up some goods • Are you convinced by this? At the heart of C/B • Trade-offs • Limited resources and choices • Example of building a dam, assumption of sacrifice • What is the proper allocation of resources? Do the people choose? 9

10. assumptions • Wants drive the good or the allocation of goods • Should the market system dominate how goods are allocated? • Why not needs? • Remember Rawls! • Dollars as claim checks that determine allocation • Diverting monies is necessary. • Is there a scarcity of capital? • Trade offs are necessary only if monies are limited • Why should monies determine this? • Social capital 10

11. Mode of production • Trade offs are dependent on how we produce and who controls this mode • Resource use is dependent on existing technologies and productive capacities. Baxter recognizes this • Technologies are currently inefficient, wasteful • i.e. energy sources and the conservation of energy! • With renewable and highly efficient energy, the rationality of the tradeoff notion is tempered 11