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Economic Lessons for Ecological Literacy

Explore Pareto Efficiency, Welfare Economics, and Policy Implications in balancing economic growth with environmental responsibility, with insights on societal organization and ecological economics.

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Economic Lessons for Ecological Literacy

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  1. I have seen the enemy,and he is an economistEconomic lessons for the ecologically literate Jon D. Erickson Rubenstein School of Environment and Natural Resources University of Vermont

  2. Academic Autism Autism, a disorder characterized by: • Absorption in self-centered subjective mental activity (such as daydreams, fantasies, delusions, and hallucinations) • Marked deficits in communication and social interaction • Marked withdrawal from reality • Abnormal behavior, such as . . . excessive attachment to certain objects

  3. Pareto Efficiency When no one can be made better off without harming someone else

  4. Fundamental Theorems ofWelfare Economics • Pareto Efficiency implied by: • Maximization of consumer preferences under budget constraints. • Maximization of profits under technology constraints. • Any Pareto Efficient outcome can be supported with lump sum transfers.

  5. Policy Implications Theorem 1  Exhaust Pareto Improvements Theorem 2  Exhaust Potential Pareto Improvements MB = MC

  6. Organization of Society Maximize individual well-being (utility) • Maximize per capita consumption  Maximize per capita GDP (production)  Maximize GDP  Specialization & exchange  Free market capitalism  World trade  Globalization  Maximize GWP

  7. Pillars of the First Theorem • A theory of human behavior based on an isolated, rational, self-maximizing individual at a point in time • A theory of firm behavior based on perfect competition, production as allocating fixed resources, and exogeneous technical change

  8. The Efficiency Criterion requires we: • Ignore interpersonal, intergenerational, and interspecies comparisons • Accept the rational actor model of human behavior • Accept perfect competition • Accept an economic system devoted to material production, free of social and biophysical constraints

  9. The Ecological Economics Umbrella • Human economy as a social system embedded in a biophysical universe • Efficiency as a third-tier goal, behind sustainable scale and equitable distribution • Allocation of scarce means among alternative desirable ends

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