Teaching Environmental Literacy: Across Campus and Across the Curriculum

4 Economics and Sustainability

4 Economics and Sustainability Christine Glaser Economics Economics is perceived by many as being about money, about numbers (like Gross Domestic Product, GDP), and about graphs (such as demand curves). Economists are often seen as being cold and calculating, supporting profits and markets—which are frequently identified as the main culprits in the destruction of the environment. But at its most basic, economics is about values. It is about scarcity of resources, and about ways in which humans deal with that scarcity. Economics, in my view, has a lot to teach about how we interact with the environment, why we are destroying the environment, and what can be done to change that. Instead of idealizing or demonizing the market, a program of teaching environmental literacy will teach students that:§ The human economy is nested within nature’s economy, and economic activity must therefore ultimately be constrained within the biosphere’s finite capacity to regenerate resources and assimilate wastes. 62 ⭈ christine glaser§ Markets do not have a life of their own but are the reflection of the market participants’ values, desires, perceptions, knowledge, and ignorance, all of which can change. Obviously the college experience could play a major role in questioning and shaping the values, desires, and perceptions of students, and in relieving ignorance about the state of our environmental life support systems and the social and economic systems that depend on them.§ People respond to incentives, and therefore markets, and the price signals they send can become a useful tool for changing behavior, if prices reflect environmental and social costs and are allowed to act as incentives for sustainable practices and disincentives for unsustainable ones. In such a market environment, profits cannot be made from destroying life support systems or from increasing social inequity. Large institutions like universities also often set price signals. Consider parking fees, and how they may encourage or discourage driving. Or purchasing practices, and how they may encourage or discourage fair labor.§ Markets do not exist in a political vacuum; they are interwoven with the political realm—the realm of collective action. The college experience could o√er opportunities for students to develop the skills and the knowledge they need to be successful advocates for social equity and for policies designed to achieve a sustainable scale of economic activity within the limits of the biosphere. Environment, Economy and People resources, scarcity, profits, and losses: how markets work Most introductory economics courses start out talking about the scarcity of resources, which may surprise some, since the earth’s limitations don’t seem to get much respect from the economies we are familiar with. Resources are defined as human services of various kinds (labor); services and materials provided by nature, including minerals, water, forests, etc. (land); and produced factors of production, like machines and factory buildings (capital). These resources are seen as limited (scarce), compared to the seemingly unlimited wants of humans. It may sound strange to speak about scarcity in the country of big-box retail and giant malls, where shelves are overflowing and someone is always begging you to buy their stu√. Scarcity as defined by neoclassical economists is not poverty or lack, it is simply the contrast between the available labor, capital, and land resources and seemingly unlimited wants, with no distinction between survival needs and luxurious indulgences. In the neoclassical view, as a consequence of the scarcity of resources, we compete for those resources and for what they are Economics and Sustainability ⭈ 63 capable of producing, and we have developed ways to ration those scarce resources . Rationing means deciding what the limited resources are used for, and by whom. In the market, the questions of what resources will be employed in the production process, what will be produced, and who gets it are settled by who is willing and able to pay, and how much. Neoclassical economists tend not to see resource limits or the complexity of natural systems as an issue of concern, because they assume that humans will always find substitutes and new ways of doing things if they run into limitations. Over the last thirty years, ecological economists have widened the focus from the neoclassical, relative concept of scarcity, to include a much more in-depth and careful analysis of the goods and services natural systems provide to humans, of how economic activity a√ects these systems, and how the impairment...