POLA02 Midterm Key Concepts

Anthropocene

• a term used to describe the current period in Earth’s history where human activity has become the main force shaping the planet

• This includes things like climate change, deforestation, pollution, and mass extinctions caused by industries, agriculture, and urbanization

• Scientists believe we have entered this new era because humans are changing Earth's ecosystems and geology at an unprecedented scale

Planetary Boundaries  

• are limits on how much humans can change the environment before causing serious, irreversible damage to Earth.

• Scientists have identified key areas, like climate change, biodiversity loss, and pollution, where crossing these boundaries could lead to disasters like extreme weather, food shortages, or ecosystem collapse

• The idea is that if we stay within these safe limits, the planet can remain stable and livable for future generations.

Great Acceleration

• refers to the rapid increase in human activity—like population growth, industrial production, energy use, and pollution—starting around the 1950s

• This sudden boom in economic development, technology, and consumption has led to major environmental changes, including climate change, deforestation, and loss of biodiversity.

• Scientists use this term to show how human actions are transforming the planet faster than ever before in history.

Doughnut Economics

• An economic model proposed by Kate Raworth that envisions a safe and just space for humanity

• It is a way of thinking about the economy that balances human needs and environmental limits

• Imagine a doughnut shape:

  • The inner ring represents the basic needs people must have (like food, water, healthcare, and education). Falling inside this ring means poverty and suffering.

  • The outer ring represents the planet’s limits (like climate change, pollution, and biodiversity loss). Going beyond this ring damages the environment.

  • The goal of Doughnut Economics is to stay in the safe middle zone, where everyone’s needs are met without harming the planet.

Market Fundamentalism

• The belief that free markets can solve all economic and social problems without government interference

• People who support this idea think that business competition, supply and demand, and private companies will naturally create the best outcomes for society.

• However, critics argue that markets alone can't fix issues like poverty, inequality, or environmental damage, and that some government regulation is needed to protect people and the planet.

Government Intervention

• The involvement of the state in regulating or participating in economic activities to correct market failures and promote social welfare.

Neoliberalism

• an economic approach that promotes free markets, privatization, and minimal government intervention in the economy

• Market-led economic policies emphasizing:

  • Liberalization (reducing trade barriers).

  • Deregulation (less government intervention).

  • Privatization (shifting public goods to private entities).

• It became popular in the 1980s and 1990s, with the idea that lower taxes, fewer regulations, and open global trade would boost economic growth.

Washington Consensus

• Refers to a set of policy recommendations from institutions like the IMF and World Bank, encouraging countries—especially developing ones—to cut government spending, privatize industries, and open markets to foreign trade and investment.

• While it led to economic growth in some places, critics argue that it worsened inequality, weakened public services, and made poorer countries dependent on foreign corporations.

Liberalization

• means removing government restrictions on businesses and trade to allow for more free-market competition

• This can include reducing tariffs (taxes on imports), removing business regulations, or allowing private companies to operate in industries previously controlled by the government

• The goal is to boost economic growth, attract investment, and encourage innovation, but it can also lead to challenges like job losses in protected industries or increased inequality.

Minimal State

• government that only provides essential services like law enforcement, national defense, and protecting property rights

• It does not interfere much in people’s lives or the economy, meaning low taxes and limited regulations

• The idea is that individuals and businesses should have maximum freedom, with the government only stepping in to maintain order and protect basic rights.

Environmental Degradation by Markets

• Market externalities contribute to climate change because businesses and individuals often produce greenhouse gases without directly facing the full costs of their actions

  • For example, factories, cars, and power plants emit carbon dioxide, which leads to global warming, but they don’t pay for the environmental damage this causes

  • Since these costs—such as extreme weather, rising sea levels, and health problems—are felt by society rather than the polluters, there is little incentive to reduce emissions without government intervention, like carbon taxes or regulations.

Bounded Rationality

• means that people don’t always make perfectly logical economic decisions because they have limited time, knowledge, and mental capacity.

• In markets, this means that buyers and sellers don’t always act in their best long-term interest. For example:

  • Consumers may buy unhealthy food or overpriced products because of advertising, habits, or lack of information.

  • Businesses may make short-term profit decisions that harm the environment or their own sustainability.

• Since markets assume that people always make rational choices, this shows a key internal limit—that real-world decisions are often based on imperfect information, emotions, or cognitive shortcuts, leading to inefficiencies or market failures.

Negative Externalities

• when a person or business causes harm to others without paying for the damage

• For example, when a factory pollutes the air, nearby residents suffer from health issues, but the factory doesn’t cover those costs

• These unintended side effects hurt society and often require government action, like taxes or regulations, to reduce the harm

• Role of Government:

  • Regulation (e.g., emissions standards).

  • Market-based instruments:

    • Pigouvian Taxes (e.g., carbon tax, waste tax).

    • Cap-and-Trade Systems (e.g., carbon markets).

Prisoner’s Dilemma

• happens when two political groups or countries could work together for a better outcome, but they choose to act in their own self-interest, which leads to a worse result for everyone.

  • For example, two rival countries might benefit from cooperating on climate change or reducing military spending, but each fears the other won't keep their promise. So, both keep polluting or increasing military budgets, even though working together would be better for both sides

  • This cycle of distrust and competition often leads to gridlock, conflict, or missed opportunities for progress.

Inequality trap

• when poor people stay poor and rich people stay rich because of barriers that make it hard to escape poverty.

  • For example, if someone can’t afford good education or healthcare, they struggle to get better jobs, keeping them in a cycle of low income

  • At the same time, wealthier people have more access to resources, making it easier for them to stay ahead.

  • creates a cycle of inequality that is difficult to break without outside help, like government policies or social programs.

Moral hazard

• happens when people take more risks or act irresponsibly because they know they will be financially protected by government support.

• For example:

  • If a government provides unlimited unemployment benefits, some people might choose not to work, knowing they will still receive money.

  • If banks know they will be bailed out during a crisis, they may take excessive risks, assuming the government will cover their losses.

• This creates a limit to redistribution, because too much financial support can reduce incentives for people or businesses to act responsibly, potentially harming the economy.

Bureaucratic Red Tape

• refers to the complex rules, paperwork, and procedures that slow down government programs, including redistribution efforts like welfare, unemployment benefits, and public services.

• In terms of limits to redistribution, excessive bureaucracy can:

  • Delay aid to those in need due to long approval processes.

  • Discourage people from applying for benefits because of confusing forms and strict requirements.

  • Increase administrative costs, reducing the actual funds available for redistribution.

• This inefficiency limits how effectively governments can reduce inequality, as resources may be wasted on administrative hurdles instead of reaching the people who need them most.

Regulatory Capture

• happens when big businesses influence government regulators to make rules that benefit them instead of the public

• Instead of enforcing fair policies, the regulators start favoring the companies they are supposed to oversee.

•  Leads to "crony capitalism", where government policies favor big businesses over public interests.

  • For example, if a government agency meant to control pollution is too close to oil companies, it might create weak environmental laws that let them pollute more.

  • This makes regulations unfair and hurts consumers, small businesses, and the environment.

Global North vs. Global South Divide

 Developed nations push for regulations, while developing nations argue economic growth should be prioritized.

Old CSR

• was mainly about charity and public image.

• Companies would donate to charities, sponsor events, or support social causes, but these efforts were often separate from their core business and mainly used for good PR.

New CSR

• goes beyond donations and focuses on integrating social and environmental responsibility into business operations.

• Companies now aim to reduce pollution, ensure fair wages, and create sustainable products, making ethical practices a core part of their business strategy, not just a side activity.

• Instead of just "looking good," it is about doing good while still making a profit.

Non-State Market-Driven (NSMD) Certification  

• example of New CSR

• a system where businesses voluntarily follow environmental or ethical standards set by independent organizations rather than government regulations

• Help companies prove their commitment to sustainability or ethical practices, attracting consumers who prefer responsible products

• Example: Forest Stewardship Council (FSC) eco-label for sustainable wood products

Pigouvian Taxes

• a fine on activities that harm society, like pollution taxes on factories that release carbon dioxide

• The goal is to make businesses pay for the damage they cause and encourage them to reduce harmful activities

  • For example, a tax on plastic waste makes companies use less plastic.

Cap and Trade System

• a system that limits the total amount of pollution allowed and gives companies permits to emit a certain amount

• If a company pollutes less, it can sell its extra permits to another company that needs them.

• This system rewards businesses that reduce pollution while still allowing flexibility for companies that need time to adjust.