REM 100 Final post midterm material
"We often say the institutions are the rules of the game and organizations are the players in these institutions" (Young)
"We often say the institutions are the rules of the game and organizations are the players in these institutions" (Young)
Key characteristic of Institutions
- Can be formal/ be imposed (law or marriage) established and enforced through official channels like govt or church. - Written (Canada's constitution)
access
excluding 'others' from using the resource
Components of economic system
organizations: buyers, business, producers, sellers, customers institutions: rules that determine how these players interact
depletability
refers to someone's use of good or service is affecting someone else's ability to use the same good or service.
condition of free market
■ Market prices reflect full costs of production and consumption (cannot be any freebies or unaccounted costs)
development objectives of HDI
○ Long and healthy life ○ Being knowledgeable (education) ○ Having a decent standard of living
Depression
● Prolonged downturn in econ activity that last 2 years or longer
Rio declaration
● Rules and principles on how to implement ○ 27 principles defining responsibilities of states
Human Development Index (HDI)
● Used by UN development program ● To rank countries into 4 tiers of human development ● Emphasizes that people and their capabilities should be the ultimate criteria for assessing the development of a country. ● Created by pakistani economist in 1990 ● Shift focus on development economics from national income accounting to people centered policy.
global commons
● depletable and non excludable natural resources and vital ecosystem resources that belong to all humanity rather than to any one country
UN Conference on human env (Stockholm 1972)
- UN's first major conference on international environmental problems - chaired by Maurice strong - "Only One Planet: the care and maintenance of a small planet" by ward and dubos served as background for conference -ecology and economist perspective -produced Stockholm declaration -established UN environmental program (UNEP)
Characteristics of Institutions
- set of expectations and norms that pattern behavior - structure social order - not universal laws given by nature but instead created by functional societies
Key Characteristics of Institutions
-Are not static, they change often: -Marriage has been changed to include same-sex marriages -Smoking in restaurants and bars used to be acceptable and now restricted
Supplier
Given the market price for tomatoes, how many tomatoes am I willingly to produce?
excludability
How easy it is to prevent who have not paid for a good or a service from access to it (consider excludable if it is easy to do)
Benefit of free market
In principle, markets provide us with extraordinarily efficient mechanisms for allocating society's limited production capacity - in stock of productive resources, including labor, capital, technology, and natural resources- to their most highly valued uses.
Earth summit Rio 1992
Landmark conference for international initiatives for env protection and sustainability. Three major agreements were adopted: - agenda 21 - Declaration (revised stockholm dec) - statement of forest principles Two treaties signed: - Convention on biological diversity (CBD) - UN framework convention of climate change (UNFCCC)
limitations of HDI
Provides only limited perspective on human welfare ( does not highlight other important issues, such as inequality, poverty, human security and safety, empowerment) Does not include environmental components of sustainability at all.
Limitations of GPI
Requires detailed accounting systems Implementation is not straight forward Everything has to be expressed in $ values.
Public/state owned property
a. Owned by gov or gov corp on behalf of citizens; usually in the 'public interest' b. Access is by permission (rules and regulations) c. May be sold or rented to contribute to revenue d. May be given away, sometimes with subsidies e. May include commercial and non commercial properties. f. Ex. roads and parks g. Government ownership can be controversial because of wide scale views of populations
Institution
accepted rules, norms, and strategies adopted by individuals operating within or across organizational settings
Organization
an organized body/entiity of people with a particular purpose
Components of GDP
consumption + investment + govt spending + net exports
Key Characteristic of Institution
Are often contested and challenged: - Exxon challenged fines during Valdez oil spill
Examples of Institution
Canada's constitution Federalism legislative process rights and responsibilities
DSP of Western society
Democracy, acceptance of regulated capitalism, individualism, economic growth, the notion of progress, faith in science and tech, domination towards environment.
Threshold theory
Every society goes through a period where economic growth brings improved quality of life but only works up until a certain point. Until threshold point and then after more econ growth leads to decrease in quality of life due to social and environmental costs associated w/ that growth. (chilean economist)
Key Characteristic of Institutions
Formal/Informal: ○ Constitution, laws and rules that govern politics, governments, finance and society more broadly ○ Written rules and agreements that govern contractual relations and corporate governance (people and companies sign to establish how to interact with each other) ○ Unwritten codes of conduct, norms of behavior and beliefs. (socially well known)
Dominant Environmental Philosophy
Majority domination some stewardship conservation in national parks very little deep ecology care ethics rooted in INDG people drowned by Western world
Key characteristic of institutions
Structure policies and influence behavior (set rules to game): ○ Constitutional Order -> democratic system-> parliamentary system-> Federal system ( key players and power they have) ○ Federal Government- granted authority to enact governmental laws ○ National Environmental Laws & policies ○ Carbon tax aims to create necessary incentives for companies and people to move away from fossil fuels
Dominant Social Paradigm
The most widely held set of beliefs, values and ideals that guide thinking about society, governance, and the role of individuals
Preverse subsidies
a subsidy with a net effect reduces public welfare (often unintended environmental impact) ● Agriculture: yield based, subsidies that encourage overproduction by farmers, which can lead to severe environmental degradation ● Fisheries: promote the expansion of fishing fleets -> speed up resource depletion In both cases the intent to protect jobs and create new ones results in env degradation which destroys foundations of jobs in long term
open access (no property rights-regulated)
a. Generally not owned by anybody. Goods a value where access cannot be controlled. Either impossible or impractical to control b. May be owned by the state but ownership is difficult to enforce c. Access is free to all (key point) no one can be excluded d. Resource is not managed by an owner e. "Right of capture" applies. First person who claims resource owns it f. North pole (russia made claim with flag on pole), fish stocks
Community owned property
a. Owned by a group of people whose membership is defined (cooperative, community) b. The members control access and rules for use by communal decision c. Shared incentive for proper mgmt d. Non members must respect the rights of members e. Typically form around common objectives around resource or service and have shared interest in taking care of resources to ensure long term value to members. f. Ex. communal pastures forests, cooperative (car co-op) People own something jointly for benefit of members
Private property
a. Owned by individuals or corporations b. Includes land, objects, etc. c. Established and controlled by cultural and legal systems d. Access is by permission e. Others must respect owner's rights f. Strong incentive to manage properly in a sustainable way
Common heritage of humanity
a. Principle of international law that applies to certain global common and elements of benefit to the all of humanity ( natural, cultural heritage) that... b. Should be held in trust for future generations c. Should not be unilateral exploited by individual states or corps or other entities d. Should rather be exploited under some sort of international arrangement or regime for the benefit of mankind as a whole e. All nations must manage resources on behalf of all f. All nations must actively share with each other the benefits g. Ex. international waters, international airspace, culturally importance artifacts (pyramids) No single country should have jurisdiction
Subsidy
form of financial aid or support to business (or individuals), usually by gov, to increase public welfare/promote a public good. -To combat market failure
non-excludable
goods and services for which it is difficult to prevent people from using them (many natural resource (fish), radio stations, wikipedia (in many cases impossible)
exlcudable
goods and services for which one can at low cost prevent those who have not paid for the good from consuming it (all consumer goods, postal services, public transport)
Consumption
household expenditure on final goals and services (food, rent, cars, gasoline, medical expenses) things we as individuals buy for daily lives
consumption
limit withdrawal of resource units at sustainable rate
Paradigm shift
manifests as the society changes its institutions. As society changes its values its institutions will lose support. Occurs when society changes institutions.
public good
non excludable and non depletable nobody can be excluded from use but my use of goods and services are not affecting your use of them either (cannot be sold to individuals
Examples of organization
parliament of Canada People: Senate, House of Commons, members of parliament, supporting staff. Purpose: govern Canada by making laws, setting tases, and authorizing spending Crown, executive branch, judicial system.
three pillars of sustainability
social, environmental, economic
Free rider problem
someone who benefits from a good or service without paying for it. ● Because one cannot be excluded, there is little incentive for an individual (or country) to supply or protect a public good.
Externality
the cost or benefit of the production consumption of a good or service that is experienced by people other than the producers and consumers. ■ Third party affected by transaction without being directly involved
condition of free market
■ All economic agents behave rationally (focus on own interests and maximize own satisfaction); producers maximize profits and consumers maximize their satisfaction or utility
Role of price in free market
■ Communicates info about scarcity of a good
UNFCCC (United Nations Framework Convention on Climate Change)
■ Foundation for global response for climate change ● Framework for negotiating specific treaties (called protocols) that may set binding limits ● But the UNFCCC is the only international climate policy venue with board legitimacy because all of the world's countries have signed it.
Buyer
■ Given the market price for tomatoes how many am I willing to buy? ● If cheap you buy more and vice versa
Role of price in free market
■ Incentivizes behavior that tends to make the most of productive use of the available scarce resources
condition of free market
■ Inputs being supplied and goods being produced are individually owned and divisible. Good can be divided into sellable chunks and someone is there to sell them
Condition of Free market
■ Large number of buyers and sellers (competitive) no monopolies or price fixing
condition of free market
■ Perfect information about current and future prices, products available, etc. ensure everyone can make fully informed decisions on how much they want to sell or buy
Convention on biological diversity (CBD)
■ Preserve biodiversity, prime sustainable use of biosphere, and fair and equitable sharing of benefits form genetic resources
negative externality
■ Relates to negative impacts of production or consumption ■ The third party has no choice ■ There is no compensation paid to the third party who endure the negative impacts ■ Ex. impacts of pollution, deforestation, pesticide use that everyone has to endure even if not being involved in economic activities that cause issues.
Supply curve
■ Relationship between product price and quantity of producer that a seller/producer is willing and able to supply ■ Supplier preferences
Equilibrium price
■ Suppliers are producing exactly as much as is demanded by the buyers ■ Buyers buy it at the price that makes it worthwhile for supplier ○ In the free market the actual; price of a good is at the intersection of supply and demand curve. ○ Equilibrium price is attractor ○ Regardless of sale price you start it will always end up at equilibrium ○ Both supplier and buyers are happy and little wasted ○ Resources are allocated efficiently (biggest social welfare at lower cost)
Agenda 21
○ A voluntary global plan of action to promote SD Commission on Sustainable Development (CSD) ○ Presents ambitious objectives for SD in a range of different dimensions such as social and econ., conservation and mgmt of natural resources, and strengthening resources of underrepresented groups.
Free Market economy
○ An economic system for goods and service are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy - Govt = no say on prices - entails private ownership and highly competitive markets - transactions between buyers and sellers is driven by supply and demand without govt intervention
UNEP
○ Coordinates env activities of UN ○ Aims in creation of guidelines and treaties on international and env issues ○ Assists developing countries in implementing environmentally sound policies and practices.
Environmental economics
○ Is a subfield of economics that is concerned with environmental issues. Concerned with components of the economy that directly interface with the environment and where environmental challenges occur. ■ Market failures ■ Measures of prosperity/development ■ Ecosystem services ■ Economic approaches to sustainability
Surplus
○ Producing a lot of tomatoes but consumers are only willing to buy very few at a high price ○ Price of good that is overabundant goes down and suppliers adjust practices and produce fewer tomatoes at lower prices ○ Lower price results in buyers willing to buy more tomatoes ○ This will continue until it reaches equilibrium - when the initial price is greater than the equilibrium price
Tests of ownership
○ Property has value (implies scarcity) ○ Property is definable controllable ○ Others can be excluded from its use or enjoyment
statement of forest principles
○ Set of principles underpinning sustainable mgmt of forests
Economics
○ Social science that seeks to describe the factors which determine the production, distribution, and consumption of goods and services ○ How these factors interact with each other and how we can influence them to produce better results
Rights of ownership
○ To use or enjoy the property (access & withdraw) ○ To control who else may or may not use the property (exclusion) ○ To regulate use patterns (mgmt) ○ To sell, rent or dispose of the property to another (alienation) ○ Ex: owning a house
Invisible hand
○ individuals' efforts to pursue their own interest may (magically) result in benefit for society better than if you explicitly planned for it. ○ This only works when all conditions are fulfilled. ○ Dealing with natural resources often means all conditions are not fulfilled causing env problems
public bad
○ negative good or service that must be consumed by everyone and from which no one can be excluded ■ Sleep deprivation from noise ■ Second hand smoking ■ Increase pool of antibiotic bacteria ● People experiencing effects did not benefit from initial interaction. ■ Many negative externalities lead to damage across borders (transboundary)
non-depletable
● (non-rival): a good or service is said to be non-depletable if one person's consumption does not affect the supply available for other individuals. ( movie, mail)
Stockholm declaration
● 26 guiding principles for how humanity should interact with environment ● Statement 1 human rights area above anything else ● Statements 2-7 highlight importance of protecting env in its many forms and promote more careful use of natural resources (curbing pollution) reflects anthropocentric views ● 8-15 relationship between development and protection of env (highlight meaningful development is needed in developing world) ● 16-17 individual countries need complete sovereignty over policies and development strategies (relates back to first statement on human rights on the point to be aiming for equitable and just future for everyone) ● 18-20 role of science, tech, and edu in combating env degradation and creating better future ● 21-26 how different countries should interact with each other and that while each country controls its own development they cannot harm others. Meaningful progress depends on cooperation at international level.
Postive externality
● A pos extern is a benefit that an activity imposed on unrelated third party ○ Ex. beekeeper who keeps bees for their honey ■ Pollination of surrounding crops ○ Construction of an airport ■ Benefits local business ○ Maintenance of attractive house ■ Increase property values for neighbors Third party that profits from externalities doesn't pay for benefit activities that produce this are typically underfunded and under provided
GDP contributors that doesn't increase welfare
● Clean up of natural disasters ○ All recovery efforts ● Pollution Clean up ○ Production of pollutants and subsequent clean up ● Crime ○ Security services, locks, surveillance ● War ○ All war expenses ● Disease ○ Medical expenses ○ Doesn't seem right because the med system is not about creating new welfare but rather re establish welfare of the sick it therefore seems wrong that med expenses are a positive contributor to national measure of welfare.
tiers of HDI
● Life expectancy at birth ● Mean of years of schooling for adults aged 25 years ( how much education people actually get) ○ Expected years of schooling of children entering age of schooling ( how much school is offered) ● Gross national income per capita at purchasing power parity (avg income is adjusted to what things octs in country so you can make comparisons between country ( size of national economy but not the same at GDP)
Challenges of Pigouvian tax
● Not effective at addressing transboundary externalities as the people that are experiencing negative effects don't get the money. ● How do you monetize damages to ecosystems and ecosystem services, reducing opportunities for future generations? ● No clear and objective answer to this challenge which can lead Pigouvian taxes to become a political issue based on opinions only
GNH (gross national happiness)
● Primary idea is that everyone aspires for happiness. And a country's development should be measured in its citizens' happiness. Flourishing economy gives gov funds to implement a working health and educational system as well as certain living standards. Steady income, community, healthy relationships, traditions. ● Development with values
Demand curve
● Relationship between product price and amount consumers are willing and able to purchase at that given price ● Informed consumer preference
Our common future 1987
● Report released by Brundtland Commission in 1987 ● Provided first definition for term sustainable development ● The Commission did not invent term sustainability but first to examine term in context of global env impacts of human activities. ○ Widely used definition but because vague it is heavily criticized ○ Vagueness by design= in order to get something passed at the UN you need all countries to endorse it but because values and needs differ it needs to be malleable so all countries can interpret and get behind the concept. ● Emphasizes 'Needs'
Genuine Progress indicator (GPI)
● a fuller account of a nation's welfare by not only looking at econ indicators but also Integrating environmental and social aspects ● grounded in three pillars of sustainability ( social, environmental, economic) ● Distinguish between factors (human activities) that contribute to human wellbeing overall health and factors that contract from it. - uses 26 indicators in 3 domains of sustainability. - most comprehensive econ perspective on national welfare - looks at both spending and withdrawing of env savings - looks at both contributors and contractors organized in 3 pillars of sustainability
investment
● business and private investments on final goods (machinery, new house
Private good
● depletable and excludable goods and services, single use that are restricted to payers (most of goods and services we interact with everyday)
Market failure
● describes the situation when the market does not allocate scarce resources efficiently to generate the greatest societal welfare.
Sustainable development (Brundtland)
● development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Maximized societal welfare
● maximized when all involved parties focus on maximizing their own benefit (self interest). ○ A wedge exists between what a private person does given the market prices and what society might want him or her to do to maximize welfare in the long term ○ It occurs when the necessary conditions of the free market are not fulfilled.
toll good
● non depletable and excludable goods and services restricted to payers (limited to people who pay for them)
government spending
● on final goods and services (salaries, equipment, weapons) everything govs spend money on
Recession
● temporarily decline in econ activity which usual results from fall in GDP two successive quarters in a row
To own
● to have or hold as one's own; to belong to one, be the proprietor of, possess
net export
● what did people outside the country spend on our final goods and services. Difference between values of goods and services that have been exported and imported. Interested in other countries buying from us and then offsetting that by buying things in other countries since these did not contribute to econ activity in our own country Based on final sales of all goods and services
Pigouvian tax
(Arthur Pigouvian english economist): a tax on any market activity that generates neg extern. The tax is intended to correct an undesirable or inefficient market outcome and does so by adding the societal cost of the negative externalities to the cost of the activity.
Depletable
(or rivalrous) goods or service is said to be depletable if the consumption by one agent means another cannot use it. (candy bar, T-shirt)
limitations of GNH
- - Measure of happiness is extremely subjective and not always reflective of positive policies and conditions (starving person would be extremely happy for 2 loaves of bread, when unemployment is up unemployed people feel happier that less ridicule on unemployed people)
Key characteristic of Institutions
- can be informal/ emerge from society itself - maybe a group of people trying to better define how they interact with each other ( backcountry camping ethics, family chore rules) - not necessarily written down (socially shared) - often more persistent than formal rules because they've brought by communities they've emerged from. - fisherman and sue of fishing grounds - Vancouver banning single-use plastics (culturally)
Brundtland commission 1983
- in response to environmental deterioration continuing - 21 members half from developing nations - chaired by Gro Harlem brundland ● Mission: create a united international community with shared sustainability goals by identifying sustainability problems worldwide, raising awareness about them, and suggesting the implementation of solutions. ● Development common vision for sustainable world and provide guidance to reach the vision
Gross Domestic Product (GDP)
- measure of the size of an economy ( econ activity within a country ) - developed by Simon Kuznets in 1943 around the time the main focus of govs was to grow the economy and create jobs to ensure people had work. - includes all goods and services produced in a country and sold to somebody.
Shortage
- when initial price is less than price equilibrium ○ Buyers unhappy ○ Price is pushed up ○ Quantity demanded decreases ○ Quantity supplied increases ○ Reach equilibrium price
Characteristics of subsidies
-direct (cash grants) -indirect ( tax breaks, low interest loans, rebates) - create incentives to encourage production of desirable goods and services - inverse of taxes which aim to curb prod/consumption of undesirable goods and service by increasing price - hard to get rid of because they create sens of entitlement as well as lobby groups backing them
Market
A medium that allows buyers and sellers of specific good or service to interact in order to facilitate exchange (farmers market, the housing market, stock exchange) - most real market are not completely free