Environmental Economics

Environmental Economics

In the traditional economic model, externalities and

ecosystem services are not factored into the equation.

 Sustainability Implicitly Includes Economy

      Natural Capital: natural resources and ecosystem services.

                  Without natural capital there is no life and therefore no economic activity.

                  Examples of Natural Capital:

  • Water and Nutrient Cycling
  • Atmospheric and Ecological Stability
  • Pollination and Biodiversity
  • Topsoil and Biological Productivity, Assimilation
  • Detoxification of Society’s Wastes.


traditional economic view

In a paradigm where environment and economy are seen as interrelated parts of a greater ECOSYSTEM

products in the market will attain a more realistic value


traditional economic view2 

 Regions that protect their environments retain and increase their true wealth through quality of life, and their virtual wealth through maintenance of resources.


 Environmental Economists:

Economies receive inputs from the environment. process them for use and discharge the wastes back into the environment, but do not have appropriate mechanisms for assigning value to these processes.

Traditional economic models ignore the environment.

    Environmental economists accept that human economies exist within,
             and depend on, the environment.
    Unsustainable economies have high population growth and inefficient resource use

Call to reform the current system and modify neoclassical economics to increase efficiency

Economic and Ecological Lesson

S-curve = homeostasis or “continuation” replaces “growth”  in the equation

 s curve


Ecological Lesson:

   -Growth of a society has conventionally been seen as the common indicator of success of a society

   -Until the population’s growth depreciates the carrying capacity of the supporting environment

Economic Lesson:

  -Unlimited societal growth and consumption will not carry the people through the industrial era into the technological era without accommodating for system inputs and exports (resources and waste)



       The economy can be driven by maintaining and improving existing infrastructure

       Exporting efficient and useful technologies to developing countries

       Studies show that beyond a certain line of wealth acquisition, money doesn’t = joy

       Quality of life will continue to rise, along with technology

       Reducing consumption and waste saves money.



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