Transcript continued - Human Kinetics

C H A P T E R
5
Economics, Prosperity,
and Sustainability
Chapter 5: Economics, Prosperity, and Sustainability
Learning Outcomes
• Understand how economics relates to every aspect
of modern life.
• Explain how environmental problems are derived
from economic activity.
• Explain the different economic paradigms.
• Explain differences between standard of living and
quality of life.
• Understand why quality of life is more desirable.
• Understand how to better measure progress.
Economics
• Exchange of materials in limited supply;
driven by the supply–demand paradigm
• Adam Smith (1700s) – father of economics
– “ . . . no society can be surely flourishing and happy,
of which the greater part of the members are poor
and miserable.”
• Neoclassical economics – early 20th century
– Wealth = happiness (not the same for peasants of
this time)
Industrialization
• Standard of living increased and community
benefits decreased.
• People became dependent on factories for
their livelihoods.
• Pyramid hierarchy – Multiple workers,
foreman, worker, head boss.
• Environmental problems increased.
Types of Economics
• Subsistence
• Capitalist market economy
• Centrally planned economy
• Hybrid capitalist and legislative oversight
Current Standard of Living
• Global economy driven by two sources:
– Technological innovations
– Deregulations, privatization, and global trade
• People are currently using natural
resources twice as fast as they can recover.
• People have become apathetic to nationallevel decisions.
Assumptions of the Current
Economic Model
• Resources are infinite or substitutable.
• Future effects of current decisions do not
matter.
– Live for today
• Costs and benefits are internalized to the
individuals in the transaction.
– No external costs are included
Globalization
• Increased unification of the world’s
economic systems through open,
unrestricted trade.
• Allows for more people to have access to
cheap goods and services, resulting in
increased standard of living.
– Does increased standard of living always equal
increased quality of life?
• Lacks real accounting.
Public Goods, Commons, and
Externalities
• Taxes
– Serve the greater population with services to
improve quality of life
• Subsidies
– Government financial assistance to a business or
economic sector
• Taxes versus subsidies
Gross Domestic Product (GDP)
• Total amount of money moved during a
nation’s production in a given year
(economic growth)
– Fails to measure quality of life and general well-being
– Only measure of prosperity
• Net wealth according to modern economics
– Personal property
– Monetary savings
– Capital wealth from investments
High Costs of Current Standard
of Living
• Economy undermines community.
• Monopolies emerge.
• The PP-CC game − Profits are privatized
and costs (losses) are communalized.
(continued)
High Costs of Current Standard
of Living (continued)
• The time frame problem
– Need to stop looking at short-term gain and start
looking at long-term benefit.
• Quad stack model
• The commons
– Common resources belong to everyone.
– Overuse by one group results in the tragedy of the
commons.
Consumer Society
• Buy now, pay later.
– Allowed Americans to reach a high standard of living
– Supported by credit cards
• Average U.S. citizen spends $8,000 more than they earn
annually.
• In 2010, U.S. credit card debt was about $1.95 trillion.
Living More Sustainably
• Avoid debt.
– Leaves you less stressed
– Time to focus on quality of life issues
• Use quad stack thinking to attain a
sustainable economy.
– Emphasizes all aspects of living, not just the
monetary component
Human Beings as Social Creatures
• Current economic ideas value the individual
and not the community.
• Need to recognize that humans are social
creatures and economics is meant to serve
that social need.
– Once recognized we can develop a new economic
paradigm.
Ecological Economics
• Current economics fails to consider
ecological constraints.
• Ecological economics states that human
systems include natural systems.
– Natural systems operate in self-renewable cycles to
give a steady-state system.
New Consumerism
• Reassess what people need to consume to
create a healthy and natural ecosystem.
• Criteria for luxuries and comforts need to be
reexamined to be sure all people are
included.
• An increased number of communities are
developing new measures of economic
success.
New Measure of Prosperity
• Index of Sustainable Economic Welfare
(ISEW)
• Genuine Progress Indicator (GPI)
– Both include quad stack thinking.
ISEW
• Includes costs for environmental services
• Defined by the following formula:
ISEW = personal consumption spending (public
non-defensive expenditures – private defensive
expenditures) + capital formation (services from
domestic labor – costs of environmental
degradation – depreciation of natural capital)
GPI
• Measures when economic activity is a
benefit to society or when it is
negative.
– Ten indices include the positives of value of
household and volunteer work and subtracted costs
from factors such as crime and pollution.
Feed-In Tariffs and LETS
• Feed-in tariffs
– Built-in incentives to use and produce renewable
energy.
• LETS
– Communities print their own money.
– Monies are spent within the community.
– Promotes local economic growth and community
development.
Creating Change
• Cooperative movement
– Shared membership-owned enterprises
– Example: Toad Lane coop
• Relocalization
– Building resilient communities with a localized
economy
(continued)
Creating Change (continued)
• Need to improve the quality of life in
developing countries
• Human population factor
– Impact on the environment (I) = P × A × T
• P = population
• A = affluence
• T = technology
Creating Change (continued)
Demographic transition: Relationship of the birth and death rates
into technological advancement over time.
(continued)
Creating Change (continued)
Esperanza
• What factors, other than simply knowing it
was the right thing to do, needed to be
present in order to attain the sustainable
way of life that Espe lives? Which of these
factors, if any, do you see in place today?
• Describe a day in the life of someone (5
years old, 17 years old, and 45 years old)
living in 2099.