Chapter 20: Environmental Economics and Policy

Factors that influence Supply

Input prices, technology, expectations of future prices, and number of people selling the product

Factors that influence Demand

Income, prices of related goods, tastes, expectations, and the number of people who want the good

Law of Demand

When the price of a good rises, the quantity demanded falls - when the price of the good falls, the quantity demanded rises

Law of Supply

When the price of a good rises, the quantity supplied of that good will rise - when the price of a good falls, the quantity supplied will fall

Gross Domestic Product (GDP)

The value of all products/services produced in a year in a given country - includes consumer spending, investments, government spending, and exports minus imports - pollution and land degradation are not included - societies that have illness/elderly appear to have a higher GDP (paying for healthcare) - GDP doesn’t show the true cost of production - some scientists say to increase GDP in developed countries because as GDP increases population growth slows

Genuine Product Indicator (GPI)

A measure of economic status that includes personal consumption, income distribution, levels of higher education, resource depletion, pollution, and the health of the population - while GDP rises with time, GPI flattens out or decreases

The Kuznets Curve

As per capita income in a country increases, environmental degradation first increases and then decreases - not easily applicable to all situations

Technology Transfer

Less-developed countries adopt technological innovations that were developed in wealthy countries

Leapfrogging

Less-developed countries use new technology without first using the precursor technology (ex. solar cells without having a solid electrical grid)

Natural Capital

The resources of the planet, such as air, water, and minerals

Human Capital

Human knowledge and abilities

Manufactured Capital

All goods and infrastructure that humans produce

Environmental Economics

Examines the cost and benefits of various policies and regulations that seek to regulate or limit air and water pollution and other causes of environmental degradation

Ecological Economics

The study of economics as a component of ecological systems

Valuation

Assigning monetary value to intangible benefits and natural capital (ex. nature preserves)

Sustainable Economic Systems

Would rely more on economic services and the reuse of existing manufactured materials and less on resource extraction that requires energy - takes some of the waste stream and reuses it in the production and consumption cycle (more renewable energy, waste-to-energy systems)