Introduction to Environmental Economics

Environmental macroeconomics

an analysis approach that places the human economic system within an ecological context to balance the scale of the economic system within ecological constraints

Environmental Microeconomics

the use of microeconomic techniques such as economic valuaion, property rights rules, and discounting to determine an efficient allocation of natural resources and environmental services

Environmental economics

uses a set of models and techniques rooted in the standard neoclassical mainstream of economic thought to apply economic concepts to the environment

Ecological economics

seeks to place economic activity in the context of the biological and physical systems that support life, including all human activities

Externalities

analyzing the costs of environmental damage caused by economic activities or the social benefits created by economic activity

Analytical models

A model is a smplified representation of reality,in the sense that it isolates and focuses on the most important elements of a situation and neglects the others.

Source Function

is its ability to make services and raw materials available for human use

Sink function

is its ability to absorb and render harmless the waste by-products of human activity

Economic Analysis

describes the state of the environment and economy and the changes in it, but also to understand why these conditions exist and how we might bring about improvements in environmental quality

Positive Economics

seeks to understand how an economic system actually operates by looking at the way people make decisions in different types of circumstances

Normative Economics

study of what ought to be - a study to determine what kind of regulation we ought to adopt for a particular environmental problem?

Traditional Approach

seeks to put a price on each natural resource and environmental input to the economy, including estimating a price for inputs not usually included in market transactions, such as clean air and water. Economic techniques can be used to assess the money value of damages caused by pollution and waste disposal

Ecological Approach

standard economic pricing and valuation techniques must either be altered to reflect ecosystem realities or be supplemented by other forms of analysis focusing on energy flows, the carrying capacity of the environment, and the requirements of ecological balance

Subsidy

a payment to a producer to provide an incentive for it to produce more of a good or service