GEOG 352: Managing Natural and Social Capital

1. Day 3 GEOG 352: Managing Natural and Social Capital

2. Housekeeping Items • SOLUTIONS is holding its inaugural meeting of the semester in the log cabin at 4:30 today. • The deadline for proposals for the WDCAG conference is the 16th (this Friday) – see the details in the Call for Papers and Posters on the Geography web site. • On Thursday, February 26th, there is a free webinar on achieving greenhouse gas neutrality for institutions that is open to faculty and students (see the note in the folder).

3. Housekeeping Items • Anyone need an outline? • I'm passing around a sign-in sheet and a folder of items of possible interest. • Any reactions to Raimo's talk? • I haven't been able to determine exactly when the Ladakh video was made, and I haven't been able to find any recent material on Ladakh. Most of Helena Norberg-Hodge's publications (which are not only about Ladakh) end around 2001/ 2002, but Wikipedia has a good history.

4. Field and Olewiler Readings • The readings for last week were excerpts from Environmental Economics by Barry Field and Nancy Olewiler. These authors define economics as “the study of how and why people – whether they are consumers, firms, non-profit organizations, or government agencies – make decisions about the use of valuable resources.” • They specify that environmental economics – which is not the same as ecological economics – is about how “economic activities affect our natural environment – the atmosphere, water, land, and an enormous variety of living species.”

5. Field and Olewiler Readings • This sub-field of economics is said to address why economic actors waste natural resources and dump pollutants into the environment, and what can be done about it – i.e. what the most effective tools are for modifying people's behaviour. As with mainstream economists in general, environmental economists' overriding concern is with economic efficiency (more on this later), and secondarily with equity/ fairness and environmental quality. • The authors argue that morality in environmental issues won't take use very far. In fact, they make the surprising observation that people largely do what they do because of the institutional context in which they are operate.

6. Field and Olewiler Readings • What are some examples of this, and why is admission potentially surprising coming from economists? • What do you think of the statement: “people pollute because it is the cheapest way they have of solving a certain practical problem: how to dispose of the waste products remaining after production and consumption of a good”? • If we combine Field and Olewiler's perspective on the limitations of a moral approach with Jonathan Porritt's musings, then we can see a certain sequencing in the process of social change. First, we need to pose issues of morality, then the necessity of change, then the desirability of change, and finally the concrete possibility. [examples?]

7. Field and Olewiler Readings • Field and Olewiler discuss the importance of economic incentives as a means for changing behaviour of individuals and firms. Whether material or non-material, “an 'economic incentive' is something in the economic world that leads people to channel their efforts at production and consumption in certain directions.” • They challenge the notion that profit-seeking is the main reason for pollution. What do you think about this assertion? They also argue that “lack of ownership rights to environmental resources means that there are few incentives to take the environmental consequences of our actions into account.” Comments?

8. Field and Olewiler Readings • They also introduce the notion of externalities – those costs or benefits not directly paid for by producers or consumers, and provide a good overview of what they are relative to the operation of private motor vehicles. • In response to this, they discuss some possible ways of inducing people to change their behaviour: AirCare, taxing kilometres travelled or making gas more expensive, a tax on vehicle ownership, or a buyback program for older cars. • For corporations, there are regulations controlling emissions or fuel efficiency averages for corporate fleets, or limits on sulphur content in gasoline, etc.

9. Field and Olewiler Readings • In general, they favour approaches that “restructure the incentives facing firms and consumers in such a way that it mobilizes their own energy and ingenuity to find ways of reducing their impacts on the environment,” rather that adopting highly prescriptive regulations. • They include a discussion of cost-benefit analysis, one of the possible topics for the tool presentations, and they talk indirectly about natural capital, as well as about socialcapital, but their definition of it is wrong. • Don't worry about the discussion of production possibility frontiers, or any of the confusing charts or algebraic notions. However, we will be returning to the idea of the Environmental Kuznets Curve.

10. Field and Olewiler Readings • They discussion the related issue of whether pollution havens actually exist in developing countries, and this is another possible topic for our debates. • In Chapter 4, they discuss the notion of social efficiency whereby one needs to consider all the groups in society that benefit from a particular form of production and all those who suffer costs, including in the area of non-market values. However, they do not consider other species in this calculus. They note that benefits also need to be considered in terms of equity, so that not all the benefits accrue to the rich.

11. Field and Olewiler Readings • They note that “[i]n terms of social cost accounting, Social costs = Private costs + External (environmental) costs” and suggest that “when external costs are present, private markets will not normally produce quantities of output that are socially efficient.” (They give the example of road use.)‏ • They discuss open-access resource systems, such as fisheries or groundwater, which is something we will be discussing later in the semester. They see the over-exploitation of these as resulting from a lack of property rights, a theme we will return to later.

12. Field and Olewiler Readings • They talk about external benefits where producers or consumers have the economic responsibility for specific things, such as farmland or quiet lawnmowers, which produce benefits for society, but for which the economic actor is not compensated. • Some external benefits are public goods – that is, no one can be excluded from their use or enjoyment, and one person's use does not exclude another. The examples they give are the protection offered by standing armies or clean air.

13. A Critique of the Assumptions of Traditional Economics • I hope you got a chance to read my review of The Living Economy, edited Paul Ekins (not Elkins, as was stated in the review). • There are many assumption of traditional economics which can be held up to question, but the ones I would like to focus on here are as follows: • humans are utility-maximizing individuals; • self-interest (the “invisible hand”) tends to lead to an automatic increase in social well-being;

14. A Critique of the Assumptions of Traditional Economics • on a grander scale, that pursuit of “comparative advantage” and increased trade necessarily leads to a rise in global well-being • that “economic efficiency” tends to lead to enhanced social well-being • that when natural capital is depleted, other forms of capital can be substituted for it – i.e. technology will come to the rescue. • Any comments on any of these? To get into them I would like to read some passages from a standard economics book. • Please read the Lutz article for Wednesday.