CDAE 061 Week 2 notes
CDAE 061 Week 2 notes CDAE 061
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This 4 page Class Notes was uploaded by HD on Tuesday September 13, 2016. The Class Notes belongs to CDAE 061 at University of Vermont taught by Joshua Farley in Fall 2016. Since its upload, it has received 24 views.
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Date Created: 09/13/16
9/6/16 Thinking Like an Economist o Opportunity costs Micro level = the best alternative you sacrifice when doing something else Allocating resources Allocating income Spend $ on beer and pizza you give it up and it therefore cannot be spent on books Allocating time If you weren’t doing what you were doing, what would you be doing? Macro level = what we give up in ecological opportunities when the economy grows o Marginal analysis Rate of change Change in one additional unit “change in margin” Diamond water paradox Why do diamonds cost more than water? o Use value = total value of all units consumed o Exchange value = marginal value (last unit) Basic rules of econ Optimum occurs when: marginal benefit = marginal cost I’ll keep buying things as long as the benefit is bigger than the $ it costs o Non-marginal impacts Thresholds Small change in action has huge outcome Irreversible change = climate change Positive feedback loops Iclicker: What investments should we prioritize at the margin to achieve our desirable ends? o A: invest in natural capital, human capital, social capital, all innerlocking Cost benefit principle o If the benefits > cost, do it, BUT can all cost be measured by the same units? What units do we use? Do we put a $ value on everything? How do we do cost benefit in the future? Is this how people actually behave? Bill Gates and the $100 bill on the street—he would still pick it up Decision pitfalls o Proportional vs. absolute costs o Ignoring opportunity costs o Failure to ignore sunk costs o Failure to understand the average marginal distinction o Ignoring social costs and benefits Why Ecological Economics? Co-evolutionary economics o Hunter gatherer economics Accumulation = death (you can’t travel with all your things) o Economics of early agricultural societies Holocene and agriculture, stable climate, etc. o Industrial market economics Use of nonrenewable resources (fossil fuels) Commodification of land and labor o Macroeconomics Unemployment stimulates the economy Response to the great depression o Financial capitalism Speculation and redistribution o Ecological economics Driven by growing scarcity of natural capital Growing size of human impact 9/8/16 Iclicker: What is an example of sustainable development (not growth)? -from empty world to full world What distinguishes ecological economics from conventional (neoclassical) economics? o Pre analytic vision o Ecological economy is a complex evolving system Feedback loops Highly non-linear change Emergent phenomena Surprise Chaotic behavior Uncertainty and ignorance (in technology and ecology) o The ever growing circular economy Exponential economic growth o The economic system is simple Human behavior is simple (says economists), they always want more (selfish) Market system is simple We can model the system mathematically and show it moves toward optimal equilibrium Perfect knowledge and risk dominate uncertainty and ignorance o Physics ostEcology 1 law of Thermodynamics you can’t make something from nothing, can’t make nothing from something Natural resources are essential to economic production Opportunity cost of economic growth is degradation of ecosystems 2 ndlaw of Thermodynamics entropy increases in the universe = all work requires energy One way flow from natural resources human made economic services waste Increase in disorder and uselessness Like a digestive system, not a circulatory system “throughputs” not “inputs” = things don’t disappear Waste emissions further reduce the flow of goods and services from nature o Laws of ecology Conversion of ecosystem structure into economic products degrades and destroys ecosystems Example: biodiversity Waste emissions degrade/destroy ecosystems o Laws of economics Diminishing marginal returns, opportunity costs and uneconomic growth Sustainable growth is an oxymoron Ever continuing growth in material consumption is an impossible goal Economic development is possible but not continuous economic growth o Uneconomic growth = o Sustainable scale = as economy grows, scale increases We care about this because we care about future generations Scale = size of economic system relative to the ecosystem that contains and sustains it
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