Transcript Economic Issues in Decision Making

Presentation on Sustainable Tourism
by UWI Sustainable Economic
Development Unit (UWI/SEDU)
to the OAS IDSD Workshop
Module I
Economic Issues in Decision Making
Trinidad and Tobago
October 27th – 31, 2003
Presented by Sharon Hutchinson &
Marlene Attzs
Content of Presentation
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Meaning and importance of growth
The meaning and importance of development
The role of sustainable development in Latin
America and the Caribbean
The link between the environment and the economy
Choices in the economy: Viewing the economy as an
economic good
Economic Indicators in Decision Making
Slide 2
Economic Growth
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Economic Growth… traditionally equated
with increases in GDP/GNP
GDP… total output for final use produced by
residents and non-residents of a country.
GDP doesn’t include deductions for
depreciation of physical capital or
depletion/degradation of natural resources
Economic Indicators in Decision Making
Slide 3
Economic Growth (cont’d)
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GNP… GDP + net factor income from abroad
which is income residents receive from
abroad for factor services less payments to
non-residents who contribute to the domestic
economy.
Economic Indicators in Decision Making
Slide 4
Economic Growth (cont’d)
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Hence we could speak of :
+tive (increasing) rates of economic growth –
if GDP increased from one period to another
-tive (decreasing) rates of economic growth if GDP decreased from one period to another
Constant rates of economic growth – if GDP
remained the same from one period to
another
Economic Indicators in Decision Making
Slide 5
From Economic Growth to
Economic Development
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Aristotle, “Wealth is evidently not the good
we are seeking for it is merely useful for the
sake of something else”
ED can be thought of as beginning where EG
ends that is, at the heart of ED is the notion
of human well being… how do we use
economic performance, measured by EG, to
enhance people’s lives? To improve their well
being?
Economic Indicators in Decision Making
Slide 6
Review of Economic Development
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Development … creating conditions for the
realisation of human personality
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Development.. .based on three criteria: whether
there has been a reduction in poverty,
unemployment and inequality
Economic Indicators in Decision Making
Slide 7
Indicators of Development
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Adequate Educational Levels
Freedom of Speech
Citizenship of a country that is truly
independent (both economically and
politically)
Others conditions – sense of security;
freedom of worship etc…
Economic Indicators in Decision Making
Slide 8
Development: which way now
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The process of Economic development has
to be concerned with what people can and
cannot do e.g. whether they can live long,
escape avoidable morbidity, be well
nourished, be able to read and write and
communicate, take part in literary and
scientific pursuits etc.
Economic Indicators in Decision Making
Slide 9
Other indicators of Development
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Reduction in poverty. How do we measure if
someone is poor?
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Head count ratio… proportion of population below
the poverty line
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Income gap ratio…measures the depth of poverty by
the extent of the gap between the poverty line and
average income of the poor as a proportion of the
poverty line
Economic Indicators in Decision Making
Slide 10
Key definitions
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Poverty Line …. The percentage of the
population living below the specified poverty
line. * $11 a day (per person for a family of
three)—at 1994 international prices, adjusted
for purchasing power parity.
Economic Indicators in Decision Making
Slide 11
Other composite measures used to
describe development
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HDI … human development index
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GDI.. Gender Development Index
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GEM … Gender Empowerment Index
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HPI.. Human Poverty Index
Economic Indicators in Decision Making
Slide 12
Development Indices
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HDI… measures average achievement of a
country in basic human capabilities, health,
income distribution, education
Economic Indicators in Decision Making
Slide 13
Development Indices
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GDI… measures achievements in same
capabilities as HDI but takes account of
inequalities between women and men. GDI
can be thought of as a discounted HDI
Economic Indicators in Decision Making
Slide 14
Development Indices
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Gender Empowerment Measure (GEM)…
examines whether women and men are able to
actively participate in economic and political life
and take part in decision making.
Economic Indicators in Decision Making
Slide 15
Development Indices
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Human Poverty Index (HPI)…focuses on the
way the poor and deprived fare in each
community. Uses the same indicators as HDI
but combines elements of “deprivation” to
provide an aggregate judgement on the extent of
poverty.
Economic Indicators in Decision Making
Slide 16
Development Indices
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HPI..
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Longevity : HPI uses the % of people expected to die
before age 40;
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Knowledge : HPI uses the rate of illiteracy
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Lack of a decent standard of living : a composite
index which includes % of people with access to
health service and safe water; % of malnourished
children <5yrs old
Economic Indicators in Decision Making
Slide 17
Sustainable Development
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What do we mean by sustainable
development?
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Based on Seers’ definition of “development”
i.e. to be concerned with “…creating
conditions for the realisation of human
personality…”
Economic Indicators in Decision Making
Slide 18
Sustainability of Development
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Sustainability … a characteristic of a process
or a state that can be maintained indefinitely.
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Sustainability therefore refers to a process or
a state that is not constrained by time or
space
Economic Indicators in Decision Making
Slide 19
Why Sustainable Economic
Development?
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Why be concerned with sustainable
economic development?
Economic Indicators in Decision Making
Slide 20
Meaning of Sustainable
Development
“Development that meets the needs of the present
generation without compromising the ability of future
generations to meet their own needs. SD is not a
fixed state of harmony but rather a process of
change in which the exploitation of resources, the
direction of investments … are made consistent with
future as well as present needs.” (UNCED, 1987,
p.8)
Economic Indicators in Decision Making
Slide 21
SD vs ED
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Exploitation of resources can either be
“responsible” (and leave something for future
generations) or “irresponsible (use it up
now!!)
Economic Indicators in Decision Making
Slide 22
What is Unsustainable
Development?
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Development which compromises future
development possibilities either (a) via excessive
resource depletion and waste generation or (b)
imposing too heavy a burden of environmental
degradation or cleanup © not ensuring that the rents
that accrue from current exploitation are invested so
that future generations can share
Economic Indicators in Decision Making
Slide 23
Economic Growth (GDP)
Increases in Material Output
Economic Development
Greater emphasis on social objectives
e.g. poverty, education, health,
Sustainable Economic Development
Recognising the need for environmental
Protection, inter- and intra-generational
equity.
Economic Indicators in Decision Making
Slide 24
SD and ED
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SD adds to our understanding of ED by:
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Providing an explicit recognition that development
and the environment are not mutually exclusive
Integrating environmental concerns into traditional
development economics
Incorporating social and environmental concerns into
economic decision-making
Seeking to ensure the economically efficient
management of natural resources
Economic Indicators in Decision Making
Slide 25
Tradeoffs among the Three Main objectives
of Sustainable Development
Economic Efficiency
Social Equity
Economic Indicators in Decision Making
Preservation of the
Environment
Slide 26
The Economics of Sustainable
Development
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The economic goal is: “… to maximize the
net welfare of economic activities while
maintaining or increasing the stock of
economic, ecological and sociocultural
assets over time…. and providing a safety
net to meet basic needs and protect the
poor.”(Mohan Munasinghe, 1993:16)
Economic Indicators in Decision Making
Slide 27
Figure : Interface between the economy
and the environment
The Source Function of
the Environment.
E.g. Minerals, Soils
and Biodiversity
The Economy
The Sink Function of the
Environment from waste
from production and
consumption
i.e. solid,
liquid, gaseous,
Toxic waste
Natural Events / DisastersInterface
-StormslHurricanes/Flooding
-Earthquakes
-Volcanoes
-Viruses (HIV/ AIDS,SARS)