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Chapter 1: Why Study Economics?

Chapter 1: Why Study Economics?. Ecological Economics: Principles and Applications By Herman E. Daly and Joshua Farley. Chapter 1: Overview. Introduce general definitions and concepts of the field of economics and how ecological economics differs. Compare and contrast growth and development.

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Chapter 1: Why Study Economics?

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  1. Chapter 1: Why Study Economics? Ecological Economics:Principles and ApplicationsBy Herman E. Daly and Joshua Farley

  2. Chapter 1: Overview Introduce general definitions and concepts of the field of economics and how ecological economics differs. Compare and contrast growth and development. Brief overview of the co-evolution of economics with human cultures.

  3. What is Economics? Economics is the study of the allocation of limited, or scarce, resources among alternative, competing ends. In a sense economics aims to understand what “we” desire and what we’re willing to give up.

  4. Economic Inquiry Three critical questions of economic inquiry: 1. What ends do we desire? 2. What limited, or scarce, resources do we need to attain these ends? 3. What ends get priority, and to what extent should we allocate resources to them?

  5. Economic School of Thought Neoclassical Economics: Favors continuous growth to provide all desired goods and services demanded by the market. Pareto efficient - when there is no other allocation in which some other individual is better off and no individual is worse off. Rarely considers question 3 of economic inquiry.

  6. Ecological Economics One way ecological economics differs from neoclassical economics is its consideration of environmental limits. “Ecological economics distinguishes itself from mainstream economics in its preanalytic vision of the economic system as a subsystem of the sustaining and containing global ecosystem.” Pg 57

  7. Ecological Economics Environmental Economics (Subset of Neoclassical Economics) Ecological Economics Economy Earth Systems Economy Earth Systems

  8. Three Economic Terms Growth: measurable increase in size, or increase in throughput. Throughput: the flow of natural resources from the environment, through the economy, and back to the environment as waste. Development: The advancement of political and social freedoms1. The increase in quality of goods and services, as defined by their ability to increase human well-being. 1. Sen, A. 1999. Development as Freedom.New York: Alfred A. Knopf, Inc.

  9. Growth vs Development While growth measures an increase in throughput, development measures the increase of prosperity, freedom, and health. Development can occur independent of economic growth. At what point will unending growth (increase of throughput) defy ecological restraints? Because there is such a growth boundary, how should the economy adapt.

  10. Three more terms Scale - The relationship between the size of an economy and ecosystem that supports it. Allocation - The apportionment of resources to different goods and services Distribution - The apportionment of resources between different individuals (in space and time).

  11. Coevolutionary Economics Economic, social, and political systems adapt to changes in the environment and also provoke environmental change.

  12. Coevolutionary Economics Hunter-Gatherers - Making up 90% of human history. Small, highly mobile groups of people with low value for property rights and material goods. Agriculture and food storage - led to increased population and patters of a more sedentary lifestyle. Industrial Revolution - use of non-renewable resources begins. International Trade - Everyday commodities now travel thousands of miles.

  13. In Review Neoclassical and ecological economics both study the allocation of scarce resources. Neoclassical economics places more faith in “the market” for proper allocation or scarce resources. Ecological Economics understands that the global economy operates within the global ecosystem.

  14. Why Study Economics? To understand what markets do well. To understand the ways in which the unregulated market is inadequate for the allocation of ecosystem goods and services.

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