Markets and Economics Growth - Essay Example

?Session 5 - Markets & economics growth: the ‘holy grail’. From the session I learned about the different economic growth models and how the human economy is ‘bounded’ by a non-growing and finite ecological sphere. Now I can conclude that nature cannot be exploited without limits and there are definite limits to conservation of energy through technological means so precautions should be taken in order to avoid transgressing these natural limits. Now, I have a clear idea that all the entities in the biosphere are mutually interdependent and natural resources are finite and scarce in absolute terms. From the lecture, I found ecological community has a natural tendency to progress from simple and unstable relationship to more stable, diverse and complex community. And the human economy is a subsystem of this biosphere. From the session I came to know that according to the neo-classical concept, the market system is considered to be the preferred institution for allocating scarce resources. The market system accomplishes this wonderful feat using prices as a means of gauging resource scarcity. In sharp contrast to the Malthusians, neoclassicists believe that economic growth, through increases in per capita income and improvements in technology, provides solutions for both environmental and population problems. In other words, the solution to environmental and population problems is more, not less, economic growth. It was quiet evident to me that according to Malthusian doctrine of resource scarcity and economic growth, technology is not the ultimate escape from the problem of resource scarcity from which I agree to some extent but it doesn’t means that we should stop economic growth. Human beings have a natural propensity for self-destruction while critics consider that the Malthusian predictions of economic collapse are unwarranted and moreover not helpful politically. In the neoclassical economics I came to know that resources are generally considered to be fungible. On that point I agree to the criticism that the link between the flow of matter–energy in the economic system and the natural environment is very much ignored. From my point of view, economic growth and technological advances should be viewed not as problems in themselves – the way Malthusians tend to view them, but as cures for stresses involving population, resources, pollution, and other environmental damages which were rectified to some extent in ecological economics. According to ecological economics, systems are complex, adaptive, living systems that need to be studied as integrated, co-evolving systems in order to be adequately understood (Costanza et al. 1993). Here, the human economy is viewed as a subsystem of the natural ecosystem. The nature of the exchanges of matter and energy between the ecosystem and economic subsystem is the primary focus of ecological economics (Ayres 1978; Pearce 1987). Except for information, the natural ecosystem is the ultimate source of all material inputs for the economic subsystem. In this sense, then, nature can rightly be regarded as the ultimate source of wealth. In Sustainable development economics we studied three different conceptions of sustainability, namely Hartwick–Solow sustainability, ecological economics sustainability and the safe minimum standards (SMS) sustainability. Ecological economics presumes that the sustainability of ecological systems is a prerequisite to sustainable human economic development, and it views human and natural capital as complements. Market failures can happen when the benefits of natural or social capital depletion are privatized and the costs are often externalized. When natural capital is undervalued by society since we are not fully aware of the real cost of the depletion of natural capital then also market failures happen. Information asymmetry can also result in market failure when the link between cause and effect is obscured, making it difficult to make informed choices. From the session I agree to the view of Boulding (1966) “The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock, including the state of the human bodies and minds included in the system”. Work cited Sustainable Development. http://en.wikipedia.org/wiki/Sustainable_development Cohen, B. & Winn, M. I. 2007. Market imperfections, opportunity and sustainable entrepreneurship. Journal of Business Venturing, 22(1): 29-49. Hussen, A. (2004). Principles of Environmental Economics 2nd ed. Abingdon: Routledge. Chapters 1 & 2, and pp. 201-288 (chapters 10-13). Costanza, R., Wainger, L. and Folke, C. (1993) ‘Modeling Complex Ecological Economic Systems: Toward an Evolutionary, Dynamic Understanding of People and Nature’, BioScience 43, 8: 545–53. Ayres, R. U. (1978) ‘Application of Physical Principles to Economics’, in R. U. Ayres (ed.) Resources, Environment, and Economics: Applications of the Materials/Energy Balance Principle, New York: John Wiley Pearce, D. W. (1987) ‘Foundation of Ecological Economics’, Ecological Modelling 38: 9–18. Boulding, K. E. (1966) ‘The Economics of the Coming Spaceship Earth’, in H. Jarrett (ed.) Environmental Quality in a Growing Economy, Washington, DC: Johns Hopkins University Press. Session 7 - Managing Energy and the Environment From this session I learned how important it is to maintain our climate since climate is changing at an alarming rate due to increased CO2 levels in the atmosphere which can drastically affect our economic growth in future. As a result of it, business commitment to tackle climate change is growing in the UK also. The climate change levy (Customs and Excise 2001) is a major new policy initiative, which will apply to energy used in industry, commerce and the public sector, with offsetting cuts in employer’s National Insurance Contributions and additional support for energy efficiency schemes and renewable sources is a great approach to handle this problem. Also, I found that, the Climate Change Act 2008 has created a new approach in managing and responding to climate change in the UK. At the heart of the Act is a legally binding target to reduce the UK’s greenhouse gas emissions to at least 60 per cent below 1990 levels by 2050. According to the 2007 White Paper: “Meeting the Energy Challenge” UK will maintain reliable energy supplies; and promote competitive markets to help raise the rate of sustainable economic growth and to improve productivity. From the lecture it was evident to me that government policies are focused on tackling climate change through reduction in CO2 emission and ensuring secure, clean and affordable alternative energy resources. From the session I came to know that how establishing an international framework for stabilization of atmospheric greenhouse gas concentrations, the Climate Change Bill and stronger European Union Emissions Trading Scheme can help in achieving the issues of climate change. Besides it I understood the importance of shifting the dependence from non-renewable to renewable energy resources which can help in tackling the problem of fuel scarcity and can effect overall economic growth. For these purposes, the Government is providing more support for low carbon technologies as well as on collaboration in the areas of research, development, demonstration and deployment of alternative energy resources like carbon sequestration, nuclear energy, etc. which from my point of view is a good step. I also learned that for the purpose of energy conservation in business, the Government has initiated many programmes like Carbon Reduction Commitment, smart metering, Energy Performance Certificates for business premises and Display Energy Certificates for public sector organisations. Works Cited Energy policy of the United Kingdom - http://en.wikipedia.org/wiki/Energy_policy_of_the_United_Kingdom. IEA (International Energy Agency), 2000, Energy Policies of IEA Countries – 2000 Review, ISBN 92-64-17187-8. DETR, 2000, UK Department of the Environment, Transport and the Regions, The UK Climate Change Programme, http://www.defra.gov.uk/environment/climatechange/cm4913/index.htm. DETR, 2000, UK Department of the Environment, Transport and the Regions, A Greenhouse Gas Emissions Trading Scheme for the United Kingdom, http://www.defra.gov.uk/environment/consult/ggetrade/index.htm. HM Government DTI Energy White Paper: Meeting the Energy Challenge Report May 2007 http://www.dti.gov.uk/energy/review/page31995.html Session 8 - Gaia and Deep Ecology. From the session, I realized how we treat our mother Earth, which is considered nothing more than a ball of rock floating in space, whose substance is there for humans to plunder at will, whose rivers, valleys, mountains, prairies, ice-caps, and deserts, are resources convertible into cash. But when I understood the Gaia hypothesis developed by British scientist James Lovelock according to which the Earth is a single self-sustaining and self-regulating system, the largest superorganism in the solar system, then only I realized the importance of the earth. In Gaia, everything on Earth, both living and non-living, is an integral part of a self-regulating system. So I concluded that Gaia is an emergent quality of all these interconnected entities functioning together.  The real-life examples of Gaian self-regulation are the way carbon dioxide concentrations in our atmosphere are regulated, and at the way clouds are formed. In this session I also learned about the central idea of Deep Ecology that we are part of the earth, rather than apart and separate from it. Two key ideas have emerged out of scientific thinking that supports this view. The first idea comes from Systems Theory and the second idea is The Gaia Hypothesis. Systems Theory sees our world in terms of 'systems', where each system is a 'whole' that is more than the sum of its parts, but also itself a 'part' of larger systems. The Gaia Hypothesis takes this idea further and applies it to the whole planet. All of life on earth can be seen as whole that is more than the sum of its parts, this whole being like a huge super-lifeform that we call 'Gaia' (after the name for the ancient Greek goddess of the earth). Now, it is clear to me that living systems have a tendency to keep them in balance but also to adapt and evolve over time. Scientists have found that the earth also has these tendencies, with feedback mechanisms to 'keep in balance' the temperature and oxygen levels of the atmosphere, just as our bodies maintain the temperature and oxygen levels in our arteries. I concluded from the lecture that instead of limiting itself to the mitigation of environmental degradation and sustainability in the use of natural resources, deep ecology is self-consciously a radical philosophy that seeks to create profound changes in the way we conceive of and relate to nature. Works Cited Stephan Harding. From Gaia Theory to Deep Ecology http://www.schumachercollege.org.uk/learning-resources/from-gaia-theory-to-deepecology Chris Johnstone. What Is Deep Ecology? http://www.rainforestinfo.org.au/deep-eco/johnston.htm Michael Asher. March 7, 2011. What is Gaia? http://www.deep-ecology.com/what-is-gaia/ Lovelock J (2006). The Revenge of Gaia. Ch 1. The State of the Earth pp1-14. Penguin. Session11: The Environment Agency: Policy, Strategy, & Regulation. From this session I came to know that industrialization has created wealth and provided society with goods and services but at the same time it has a negative impact on the environment. Industries in England and Wales are responsible for a significant proportion of UK emissions of key air pollutants, which has also affected wildlife, agriculture, water as well as the soil. Now it is very clear to me that changes to the climate, increasing global population and concerns over water, energy and food security will definitely intensify the competing demands on land in the future. These environmental concerns paved the way in formulating environmental regulatory laws. From the session I got to know about the interesting fact that, actually the Environment regulation dates back to as old as 13th century but stringent legislations and laws were postulated in 19th century. The world’s first pollution control agency Alkali Inspectorate was created after the Alkali Act 1863. In January 1973 Britain joined the European Union but the laws were highly controversial like Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP). Also some of the laws were directly effective while few were addressed to Member of States for them to develop. After the establishment of United Nation (UN) in 1945 new conventions on conservation of natural resources were prepared but most of the cases in England and Wales were criminal ones and they have to rely on criminal prosecution. This led to the establishment of Environment Agency in 1996. The key objectives was preserving, protecting and improving the quality of the environment; protecting human health; prudent and rational utilisation of natural resources; promoting measures at international level to deal with regional or worldwide environmental problems. Now I have a clear cut idea how the EA works, like the EA focuses its resources on areas which are at highest environmental risks and at the poorest-performing businesses so that they achieve the ecological standards as per the norms.  The Agency issues Environmental Permits to waste management sites and any individuals or companies found to have caused pollution or have infringed their licence conditions can be prosecuted. In serious cases the Environment Agency has the power to revoke the Environmental Permits issued to sites that contravene the conditions of their permits stopping all waste handling activities. Through this session, I learned about the crucial role EA is playing in helping England and Wales meet green house gas emissions targets in ways that minimize other environmental impacts. However, I did not understand why controlling environmental infringements via the law are full of difficulties and there should be a guilt to reduce such cases which was missing and it is really complex to learn initially. But after the lecture, I knew them better than before. From the session I also found that Government uses regulations based on legislation, or taxes. Taxes distort markets and may result in the misallocation of resources on the other hand llegislations can result in long and complex legal disputes. To solve this problem economic approach was adopted and Clean Air Act 1990 came into existence which created a market in the rights to pollute. Green activists bought up emissions allowances and forced the price up. These schemes were very effective in reducing green house gases considerably. Now I understand how important is the EA in conservation and sustainability management and how it uses its influence and provides education in order to change attitudes and behaviour towards the environment which was initially a difficult topic for me to understand. Really it is very difficult to manage sustainability and to solve problems of sustainability. So from my point of view, eco-effectiveness, socio-effectiveness, sufficiency, and eco-equity are the criteria that need to be met if sustainable development is to be reached. Works Cited Environment Agency Waste - http://www.environment-agency.gov.uk/ Creating a better place 2010–2015. Supporting strategies for our corporate strategy -www.environment-agency.gov.uk/corporatestrategy Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act - http://epa.gov/climatechange/endangerment.html DETR, 2000, UK Department of the Environment, Transport and the Regions, A Greenhouse Gas Emissions Trading Scheme for the United Kingdom, http://www.defra.gov.uk/environment/consult/ggetrade/index.htm Read More