17TH
MILLER/SPOOLMAN
LIVING IN THE ENVIRONMENT
Chapter 23
Economics, Environment,
and Sustainability

Economic Systems Are Supported by Three
Types of Resources
• Economic systems are supported by
• Natural capital
• Human capital, human resources
• Manufactured capital, manufactured resources

Market Economic Systems Depend on
Interactions between Buyers and Sellers (1)
• True free market system
• No company or group controls prices of a good or service
• Market prices include all direct and indirect costs (full-cost
pricing)
• Consumers have full information about beneficial and
harmful environmental effects of goods and services
• Real world
• Tax breaks
• Subsidies
• Trade barriers
• Withholding of negative information

Economic Growth and Economic
Development
• Economic growth
• Increased capacity to supply goods and services
• Requires increased production and consumption
• Requires more consumers
• Economic development
• Improvement of living standards
• Environmentally sustainable economic
development

Gross World Product, 1970-2008
Figure 1, Supplement 9

Governments Intervene to Help Correct
Market Failures
• Public services
• Environmental protection
• National security
• Police and fire protection
• Safe food and water
• Provided by government because private companies
can’t or won’t

Economists Disagree over Natural Capital,
Sustainable Economic Growth (1)
• High-throughput economies
• Resources flow through and end up in planetary sinks
where pollutant can be at harmful levels

What Is the Purpose of a Business?
• Make a profit for its owners and investors
• Sustainability is about staying in business
• Another definition – “Making a quality product and
earn a profit without harming the environment.”

Protecting Natural Capital
• Estimating the values of the earth’s natural capital
• Estimate nonuse values
• Existence value
• Aesthetic value
• Bequest value, option value-willingness of people to pay to
protect natural capital

Most Things Cost a Lot More
Than We Might Think
• Market price, direct price
• Indirect, external, or hidden costs not included in
direct price
• Direct and indirect costs of a car
• Should indirect costs be part of the price of goods?
• Economists differ in their opinions

We Can Include Harmful Environmental Costs in
the Prices of Goods, Services
• Environmentally honest market system
• Why isn’t full-cost pricing more widely used?
1. Many businesses would have to raise prices and
would go out of business
2. Difficult to estimate environmental and health costs
3. Businesses have strong influence on government –
preferential regulations, tax breaks, subsidies

Label Environmentally Beneficial Goods
and Services
• Product eco-labeling
• Certification programs
• Greenwashing-making people believe that harmful
products are green, clean, and environmentally
friendly – clean coal

Reward Environmentally Sustainable
Businesses
• Phase out environmentally harmful subsidies and tax
breaks
• Phase in environmentally beneficial subsidies and tax
breaks for pollution prevention
• Political difficulties

Tax Pollution and Wastes Instead of Wages
and Profits
• Green taxes, ecotaxes
• So that harmful products and services are at true cost
• Steps for successful implementation of green taxes
• Costa Rica put a 3.5% tax on the direct cost of fossil
fuels , which went toward forest protection and
replanting efforts

Environmental Laws and Regulations Can
Discourage or Encourage Innovation
• Environmental regulation
• Command and control approach
• Incentive-based environmental regulations
• Innovation-friendly regulations

We Can Use the Marketplace to Reduce
Pollution and Resource Waste
• Incentive-based regulation example
• Tradable pollution or resource-use permits
• Cap-and-trade approach used to reduce SO2

Reduce Pollution and Resource Waste by
Selling Services Instead of Things
• 1980s: Braungart and Stahl
• New economic model
• Service-flow economy, eco-lease (rent) services
• Xerox
• Carrier in Europe-lease high quality heaters and AC
units instead of selling
• Ray Anderson: lease carpets in the future

The Gap between the Rich and the
Poor Is Getting Wider
• Poverty
• 1.4 billion people live on less than $1.25 per day
• Trickle-down effect-money the rich spend ends up
with the poor
• Flooding up-what happens much more oftem, money
the poor spend ends up with the rich
• Wealth gap-growing-500 richest earn more than the
416 million poorest

Poor Family Members Struggling
to Live in Mumbai, India
Fig. 23-10, p. 627

We Can Reduce Poverty (1)
• South Korea and Singapore reduced poverty by
• Education
• Hard work
• Discipline
• Attracted investment capital

We Can Reduce Poverty (2)
• Important measures
• Combat malnutrition and infectious diseases
• Universal primary school education
• Stabilize population growth
• Reduce total and per-capita ecological footprints
• Large investments in small-scale infrastructure

Achieve the World’s Millennium
Development Goals
• 2000: Millennium Development Goals
• Sharply reduce hunger and poverty
• Improve health care
• Empower women
• Environmental sustainability by 2015
• Developed countries: spend 0.7% of national budget
toward these goals
• How is it working?
• Not really, very few counties are doing what they
agreed to do

What Should Our Priorities Be?
Fig. 23-12, p. 629

We Are Living Unsustainably
• Depleting natural capital
• Environmental alarm bells going off
• Matter recycling and reuse economies
• Mimic nature
• Recycling and reusing

Use Lessons from Nature to Shift to More
Sustainable Economies
• Best long-term solution is a shift to
• Low-throughput low-waste, economy

Make Money and Create Jobs by Shifting to
an Eco-Economy
• Hawken, Brown, and other environmental business
leaders
• Transition to environmentally sustainable economies
• Some companies will disappear
• New jobs will be created
• Economic succession
• Green jobs

Solutions: Principles for Shifting to a More
Environmentally Sustainable Economy
Fig. 23-14, p. 631

Solutions: Environmentally Sustainable
Development
Fig. 23-15, p. 632

Green Careers
Fig. 23-16, p. 633

Green Career: Installing Solar Cells
Fig. 23-17, p. 633