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1、Chapter 22 Development,Poverty and the Environment The remaining chapters in this book examine the issues of sustainability and global economic systems.As you are likely teaching environmental studies students,the topics within the subfield of ecological economics can be also covered along with thes
2、e chapters.Chapter 22 considers the global economic system.Economic growth is defined and the relationship between growth and development in the industrialized countries is explored.Since the most severe pollution problems tend to be experienced by the less developed and/or most impoverished countri
3、es,raising living standards through economic development is often touted as a solution.Differing views on development are explored.1.Define economic growth.2.Define economic development.3.Examine the growth-development relationship.4.Present the standard/traditional measures of growth and wealth suc
4、h as Gross Domestic Product.Discuss pros and cons of using the standard measures.5.Present and discuss alternative measures.6.Discuss poverty.I.The Growth Process A.Economic growth occurs in two main ways.The production function,which expresses the mathematical relationship between inputs and output
5、s,can be used to examine these concepts.1.Growth can occur through increases in inputs.a.Inputs can grow via economies of scale.b.Inputs can also grow due to the law of diminishing returns.c.If an increase in all inputs leads to the same percentage increase in output,then the process exhibits consta
6、nt returns to scale.2.Growth can also occur through increases in the productivity of inputs due to technological progress.Chapter 22 Development,Poverty and the Environment 135 B.Reduced growth occurs in two main ways:1.Reduced growth can occur if there are reduced input flows.a.Labor is an input.Po
7、pulation growth has slowed in many countries,causing growth in the labor force to slow or stop.Most studies,however,have found capital and labor to be strong substitutes.b.Energy costs are rising.Reduced use of more expensive inputs can slow growth.c.Limitations on capitals substitutability for othe
8、r factors or on the productivity of investment can hinder growth.The degree of substitutability between capital and resources is not clear.d.Capital and energy as complements may be replaced with a capital-energy substitution.Energy-saving equipment is one example.e.Reductions in the future producti
9、vity of capital can also slow growth.As more capital is committed to combating pollution,fewer goods are produced.Environmental quality is enhanced,but environmental quality is not included in traditional measures of growth.f.New-source bias also diminishes the incentive to invest in new capital.The
10、 regulatory process focuses on new sources,which diminishes the relative profitability of new investments.2.Reduced growth can also occur with limits on technological progress.a.Limits on technological progress can be a result of institutional limits.b.Limits on technological progress can also occur
11、 with decreasing commitments to research sectors.C.Example 22.1 suggests that resource-abundant countries may be less likely to experience rapid development(the“Natural Resources Curse”).D.Environmental policies impose large costs on industry,but the impact on the rate of inflation has been small.Th
12、is is because pollution control expenditures typically make up a small portion of industry costs.E.Employment gains at pollution control equipment manufacturing firms typically more than offsets employment losses in those firms that must purchase and install the equipment.F.A recent study on the eff
13、ects of environmental regulation on employment was done on the regulation of air pollution in manufacturing plants in the Los Angeles region.Results show that increases in air quality regulation involving large cost increases from 19791991 resulted in very small(but statistically insignificant)incre
14、ases in employment.This case is discussed in Example 22.2.This same debate was highlighted in Chapter 21 also.G.Price increases for energy can be a source of“growth drag.”Rising energy prices during 19731974 led to lower levels of investment and decreased productivity.Jorgenson(1981)and Uri and Hass
15、anein(1982)found that from 19731976,productivity growth resulting from technological progress declined as energy prices rose.H.As long as new,less energy intensive capital can be purchased,productivity rates will be restored.I.Ex ante substitution refers to the time period prior to investment.Ex-pos
16、t refers to the time period after the equipment is installed.Limited ex-post substitution possibilities have been blamed for slow productivity growth after the rise in energy prices in the 1970s.Ex-ante substitution possibilities determine future economic growth in the long run.J.Some studies have s
17、uggested that switching to either high-energy efficient technology or to renewable energy sources will not only reduce pollution,but will result in increased incomes and increased employment.136 Tietenberg/Lewis Environmental and Natural Resource Economics,Eighth Edition II.Outlook for the Near Futu
18、re A.Some studies suggest that the impacts on the labor market of declining population growth will be quite large.These impacts could result in a reduction in unemployment rates for young adults.They could also result in upward pressure on wages and aid in gaining greater income equality.B.The econo
19、my is now in the midst of a transformation from an industrial society to an economy based on information.This means the economy is moving from a goods-producing economy to a service-producing economy with an increasing reliance on information processing.C.Employees in the information sector make up
20、the largest category of workers.This suggests that the demand for skilled labor will continue to rise.D.The effects of the move toward an information economy are potentially huge.More workers will work from home which both increase productivity and reduce dependence on energy.Education is growing in
21、 importance to provide skilled labor.Lower costs of gathering information will help inform environmental policy and environmental justice.Better information will also make monitoring and enforcement of environmental policies easier.E.Access to information is not always a good thing.The events of 9/1
22、1 illustrated how access to information can be used to destroy.III.The Growth-Development Relationship This section ponders the questions of whether or not growth serves as a vehicle for development and whether or not growth has made the average person better off.Economic growth,as currently measure
23、d,has some undesirable characteristics.A.A true measure of development focuses on welfare measuresthose which attempt to answer the question of whether or not we are better off.B.However,conventional measures focus on output measures,which tell us how many goods and services have been produced,but d
24、o not tell us how well off we are.C.Gross domestic product(GDP)is the most commonly used measure.GDP is the sum of the outputs of goods and services produced in any year by an economy(or country).Prices weigh the importance of the goods and services in the GDP,and thus,the value added to each sector
25、 is summed.D.Net domestic product(NDP)is gross domestic product minus depreciation of the capital stock.E.Constant-dollar GDP and constant-dollar NDP adjust GDP and NDP for the effect of price rises.However,this correction does not solve all problems as not all components of GDP contribute equally t
26、o welfare.The consumption component is probably the most important.F.Real consumption per capita is real consumption divided by population.This allows us to see the difference between rises in output needed to maintain a standard of living and rises due to more goods and services being consumed by t
27、he average person.This measure is as close as we get to a welfare measure,but is not an ideal one.G.The measures above fail to account for depreciation in“natural capital.”While net domestic product accounts for depreciation in man-made capital,it does not account for depreciation of the natural cap
28、ital stock.Natural capital includes soil,forests,oil and mineral resources,water,wildlife,etc.H.Hicksian income is defined as“the maximum value a man can consume in a week and still be as well off at the end of the week as he was at the beginning.”Chapter 22 Development,Poverty and the Environment 1
29、37 I.While capital stock that wears out is subtracted from GDP to get NDP,depletions in natural capital are incorrectly measured as income.Additionally,while most groups working with endowments would not draw down principle,the same should hold true for our endowment of natural resources,but it does
30、 not.Cutting down trees,for example,will show up in GDP and NDP as an increase if the timber is sold,even if the land is not replanted.Drawing down on oil reserves will also show up as an increase in income.An oil spill that ruins a coast will show up as an increase in income because money will be s
31、pent to clean it up.There are many examples.J.The impacts of an adjustment for natural capital would be the largest for the developing world whose endowment of capital is primarily in the form of natural capital.K.A study completed by the World Resources Institute found that if the GDP figures for I
32、ndonesia were adjusted for the depreciation of natural capital,it grew by only 4%,as compared to over 7%using a conventional unadjusted GDP.L.Given these flaws,a number of industrialized countries have set up a system of adjusted accounts.Whether or not a complete revision of the standard accounts w
33、ill take place is the subject of some controversy.M.Several alternative measures have been proposed.1.Adjusted net savings(formerly,“genuine savings”)is an indicator that attempts to provide an empirical method for judging whether or not we are fulfilling the weak sustainability criterion.Adjusted n
34、et savings are calculated by making four adjustments to the standard national accounting measures.Most calculations suggest that using this indicator shows higher income countries are generally weakly sustainable,but many others are not.2.Wealth Estimates include produced capital,natural capital and
35、 intangible capital.3.The Genuine Progress Indicator(GPI),developed by Redefining Progress focuses on an adjusted measure of consumption(rather than savings)and includes more categories of adjustment.According to this indicator,traditional accounting measures such as GDP grossly overstate economic h
36、ealth and in some cases,well-being has actually declined.4.The Ecological Footprint is a very different type of indicator based on a physical measure rather than an economic measure.The Ecological Footprint attempts to measure the amount of renewable and non-renewable ecologically productive land ar
37、ea that is required to support the resource demands and waste absorption needs of a particular population.According to this indicator,the industrialized nations have been the most unsustainable in terms of consumption.N.Some of the characteristics of the alternative measures rely on prices to weight
38、 their importance,but in many nonmarket circumstances those prices are difficult to measure.IV.Growth and Poverty:The Industrialized Nations This section examines whether the poorest members of a society are affected by growth.Relative income becomes very important.The high growth period for the Uni
39、ted States is used as an example.A.Growth can help the poor in two ways:1.Growth can increase the availability of jobs and/or increase the wages paid.2.Growth can also facilitate income transfers if the amount to be shared is growing.B.Evidence from the United States suggests that periods of economi
40、c growth have reduced the degree of poverty.C.Government transfers have made the most difference.D.Both a rising standard of living and a rise in transfers from the rich to the poor have helped with income inequality in the United States.138 Tietenberg/Lewis Environmental and Natural Resource Econom
41、ics,Eighth Edition V.Poverty in the Less Industrialized Nations This section examines whether the experience from the industrialized world is relevant for the third world.A.The Millennium Declaration was adopted by the United Nations member states in September 2000.This declaration set a number of g
42、oals including reducing the number of people living on less than$1/day;halving the proportion of people who suffer from hunger;and reducing mortality rates.B.The World Bank(2004)reported that the proportion of people living on less than$1/day had dropped by almost half between 1981 and 2001 to 21%.T
43、he goal is 14%by 2015.C.Progress has been made,but it is unevenly distributed throughout the world.D.Traditional economic growth models may be inappropriate for much of the developing world.If the model of development from the industrialized world were adopted the ecological effects could be catastr
44、ophic.As just one example,little adsorptive capacity is left for increased greenhouse gases or for gases that deplete the stratospheric ozone level.E.Countries with labor-surplus economies should initially follow labor-intensive strategies for development.By using the low-skilled labor force,countri
45、es can increase incomes and reduce population growth.F.Barriers to development include:1.rapidly rising populations;2.land ownership that is concentrated among few wealthy land owners and limited access to land;3.limited access to health and education services;4.trade policies that do not favor deve
46、loping countries;5.staggering foreign debts;and 6.natural disasters such as the Asian Tsunami in December 2004.G.Some interesting environmental policies applied in underdeveloped countries are described in Examples 22.3 and 22.4.The former explains the trading of water protection for beehives in Bol
47、ivia.On the other hand,Example 22.4 analyzes the Tropical Forest Conservation Act,whereby developing countries can reduce their debt with the U.S.by supporting conservation activities in their national forests.Students who have not taken a course in macroeconomics will likely be unfamiliar with the
48、system of national accounts.They may be unfamiliar with terms like GDP and NDP and with concepts like“adjusting for inflation.”This section can easily be expanded.Examples should be readily available.For an interesting alternative measure likely to stimulate lively discussion,see the“Genuine Progres
49、s Indicator”that is presented at.This can easily be combined with a discussion of green accounting or greening the GDP.The other alternative measures could be compared and contrasted.and.Chapter 22 Development,Poverty and the Environment 139 Additionally,the 1989 study by World Resources Institute,m
50、entioned on page 539,is available and makes an excellent discussion piece.A greener national account was created for several Indonesian accounts and the differences are striking.This example allows students to actually see the potential differences.China is also currently experimenting with an adjus