CDAE 237: CDAE 237: Economics of SustainabilityEconomics of Sustainability

Course IntroductionCourse Introduction

Joshua FarleyJoshua Farley

Assoc. Prof, CDAEAssoc. Prof, CDAE

205 B Morrill Hall205 B Morrill Hall

Quotable Quotes from famous Quotable Quotes from famous economistseconomists

• “Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.” Kenneth Boulding

• “Economics makes a wonderful servant but a terrible master ”-- Joan Robinson

• “You must learn economics to keep from being snowed by economists” --Joan Robinson

• "But nobody can become a great economist who is only an economist-- and I am even tempted to add that an economist who is only an economist is likely to become a nuisance if not a positive danger." F.A. Hayek

Quotable Quotes from Nobel Quotable Quotes from Nobel LaureatesLaureates

• ". . . economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems"Milton Friedman

• “[Economics as taught] in America's graduate schools... bears testimony to a triumph of ideology over science.” Joseph Stiglitz

• “We live in an uncertain and ever-changing world that is continually evolving in new and novel ways. Standard theories are of little help in this context. Attempting to understand economic, political and social change requires a fundamental recasting of the way we think” Douglass North

One more Nobel Laureate, One more Nobel Laureate, plus a valid critique...plus a valid critique...

• “There is no reason we can’t have a perfectly healthy economy with virtually no resources whatsoever” Robert Solow

• “neo-classical economics is a form of brain damage” -- Hazel Henderson

Course OverviewCourse Overview

ContentContent

• We pick up where CDAE 61 leaves off

• Intermediate level, problem based

• The allocation of available resources among alternative desirable ends, primarily at macro level

ContentContent

• Transdisciplinary

• Economic system is part, not whole

• Core issues:– Ecological sustainability– Just distribution– Efficient allocation

Course GoalCourse Goal

• Explore the three basic questions that arise from the definition of economics, particularly as they apply to essential resources with no substitutes:– What are the desirable ends towards which society

should allocate its scarce resources?– What are these scarce resources, and what are their

characteristics relevant to allocation?  – Based on the nature of the scarce resources and

human nature and institutions, what allocative mechanisms are best for achieving these desired ends?

• All economics courses should focus on these questions, or they are not courses in economics by definition

Course ObjectivesCourse Objectives• Apply the theories of ecological economics and market failure

to some of the most pressing problems society currently faces: global climate change, peak oil, biodiversity loss, natural resource depletion, and the degradation of ecosystem services.

• Review empirical studies of human behavior/psychology in order to:– Better assess the desirable ends for economic activity;

– Examine the role of rationality and emotionality in the economic decision process;

– Scientifically test the neoclassical assumptions underlying human behavior to better understand the potential role of competition and cooperation, selfishness and altruism in economic systems.

Course ObjectivesCourse Objectives• Critique conventional theories of macroeconomics from

empirical validity of underlying assumptions to desirability of theoretical outcomes.– Assess the effectiveness of GNP and its alternatives as measures of

economic welfare.

– Analyze the current monetary system, identify its strengths and weaknesses, investigate more sustainable, just and efficient alternatives.

– Analyze the current distribution of wealth and income and its role in quality of life and economic efficiency. Examine mechanisms for creating a more desirable distribution.

– Review monetary and fiscal policy, and apply it to ecological economic goals.

Course ObjectivesCourse Objectives• Critique conventional theories of international economics from

empirical validity of underlying assumptions to desirability of theoretical outcomes.– Critically analyze theories of international trade and build superior

alternatives.

– Critically review theories and outcomes of globalization, and build a theory of internationalization as an alternative.

– Analyze international fiscal crises.

Course ObjectivesCourse Objectives• Evaluate and Design policy tools based on ecological

economic principles– Investigate basic policy principles

– Evaluate existing policies addressing sustainable scale, just distribution, and economic efficiency.

– Design new policies for solving specific scale, distribution, and efficiency problems

• Develop professional research and communication skills and actively contribute to creating a more sustainable planet by working on applied projects

Teaching PhilosophyTeaching Philosophy• My goal is not to teach you facts, but to teach you

how to think: analysis, synthesis and communication

• I don't know all the answers, and no professor does (nor does the boss in any job you'll ever have)– In an evolving system, knowledge must also

evolve. Much of what I teach is wrong now, or will be in the future.

• You are not here to absorb and regurgitate, but rather to cogitate and contribute

Course StructureCourse Structure

• Follows layout of Daly and Farley textbook from Ch. 11 on

• Problem based projects will follow structure laid out in Farley, Erickson and Daly workbook

• Integration of seminar and lecture formats– Lectures are meant to stimulate discussion

• October events– Beyond Capitalism– Environmental valuation– Planet in 2050

Instructional ApproachInstructional Approach

• Hybrid with problem based learning– Not all material will relate to project problems

• Discussion and original thinking more important than memorization– Come to class prepared: review “think about

it” and “big ideas” sections• I hope to promote systems thinking:

Synthesis/integration more important than analysis.

• Learning pyramid philosophy

Teaching PhilosophyTeaching Philosophy

Administrative StuffAdministrative Stuff

Course ResourcesCourse Resources

• Blackboard will be used to:– Post the syllabus and important announcements– Post required and recommended readings – Post and receive assignments– Facilitate discussions between students– Communicate with all of you – Receive feedback on the course– Keep track of grades??

• http://bb.uvm.edu/– Log in like you do for e-mail

Course TextsCourse Texts

• Ecological Economics: Principles and Applications, by Herman Daly and Joshua Farley, Island Press, 2004 ABBREVIATED AS DF IN THE TENTATIVE SCHEDULE

• Farley, J., J. Erickson and H. Daly (2005). Ecological Economics: A Workbook for Problem-Based Learning. Island Press: Washington, DC. ABBREVIATED AS FED IN THE TENTATIVE SCHEDULE

Contact InfoContact Info

• Instructor: Joshua Farley205 H Morrill Hall 656-2989

• Subject line for e-mails must begin with CDAE 237

• Office Hrs.: Morrill Hall, T-Th, 10:00-12:00 or by appointment

Course RequirementsCourse Requirements

• Attending lecture is necessary– Participation = 15% of grade

• Readings must be done carefully.• Main grade based on projects• Homework assignments intended to help you

learn material, reflect on material, and contribute to projects

GradingGrading• Class Participation:             15  points

• Group discussions:             10  points each

• Homework assignments:    15 points

• Newspaper articles: 10 points

• Project Steps:                     12   points

• Group Presentations:         10    points

• Final Project:                      30    points

• Peer Evaluations:                 3 pointsTOTAL                             ~105   points

AssignmentsAssignments

• Assignments with no graphs will be due via Blackboard. • Assignments must be handed in on time. If there is a

valid reason you cannot turn an assignment in on time, let me know ahead of time by e-mail.

• There may be a learning curve on Blackboard

Course ProjectsCourse Projects

Contribute to Research on Contribute to Research on Vermont’s Common Assets TrustVermont’s Common Assets Trust• Goal: contribute the background research necessary for

Vermont’s citizens and legislators to make informed decisions about a common asset trust for Vermont

• Objectives:– Identify which resources should be part of the common asset trust

based on the criteria of justice, sustainability and efficiency, and identify mechanisms for integrating those assets into the trust.

– For assets that can be transformed into economic products or left intact to generate ecosystem services, determine how much should be allocated to either use.

– Determine the optimal allocation method (e.g. regulation, cap and auction, rationing, taxation, etc.), including institutional design and management structure, for each asset.

Research and develop a funding mechanism Research and develop a funding mechanism

for salmon restoration in the Puget Soundfor salmon restoration in the Puget Sound. . • Goal: research and design innovative funding mechanisms for salmon

restoration, that account for the numerous ecosystem services that restoration projects would provide. Your target is $300 million (I need to check with Earth Economics to find out the time span involved).

• Objectives:– Conduct a literature review on existing tax districts;

– Conduct a literature review on existing mechanisms for financing watershed management;

– Create a list of planned infrastructure projects, describe the linkages between these projects and the ecosystem services provided by salmon restoration, and if possible estimate the financial impact on the infrastructure projects.

– Brainstorm mechanisms for creating a watershed utility along with other financing mechanisms;

– Submit a complete report on your study to Earth Economics and draft an op-ed piece on your best ideas for Earth Economics to submit to local newspapers.

Ecuador: designing a new economic Ecuador: designing a new economic paradigmparadigm

• Goal: assist Earth Economics in it’s efforts to develop an alternative development model for Ecuador and other countries..

• Objectives:– Conduct a literature review on existing development models, paying

particular attention to their shortcomings, such as failure to achieve their own goals, the shortcomings of these goals, ecological impacts, and so on;

– Work out more specific tasks in collaboration with Earth Economics

– Brainstorm alternative approaches to development;

– Submit a complete report on your study to Earth Economics;

– Perhaps write an op-ed piece on your best ideas and submit it to various newspapers.

Alternatives to off-shore drilling in the USAlternatives to off-shore drilling in the US

• Goal: research alternatives to off-shore drilling, including the potential for increasing oil production from existing megareserves, and write a campaign proposal for implementing the best alternative.

• Suggested objectives:– Research the average price for enhanced oil recovery from existing

reserves;

– Research the energy returns on energy invested for enhanced recovery;

– Estimate the net carbon emissions of off-shore drilling vs. enhanced recovery;

– Determine approximately how much additional oil we could recover using enhanced recovery as compared to off-shore drilling;

– Estimate the impact on energy dependence;

– Research existing subsidies for the oil sector;

– Prepare a campaign proposal for mandating enhanced oil recovery.

Alternatives to off-shore drilling in the USAlternatives to off-shore drilling in the US

• You may be able to negotiate the scope of work with Earth Economics, shifting your focus towards alternative energy. In particular, they might be interested in looking at the returns on research and development in alternative energy, and contrasting the returns of government supported research that would be freely available to anyone anywhere vs. patented research that forces people to pay monopoly prices for the use of the technology. This is something in which I am particularly interested.

Other Earth Economics ProjectsOther Earth Economics Projects

• Go to the Earth Economics Web-site (www.eartheconomics.org) and look at their other projects. If you find one that interests you, I will contact them and set something up.

Class policiesClass policies

• This is an upper level course. I expect you to act accordingly.

What is Sustainability, and do What is Sustainability, and do we want it?we want it?

• Strong sustainability vs. weak sustainability• Ethical issues:

– Technological advance, like human impact on ecosystems, is inherently unpredictable

– Ecological impacts inherently unpredictable, often irreversible.

• Implications of Irreversibility

– How can we develop substitutes if we don’t even know what we are losing?

– What we risk: more sport utility vehicles and second homes, or basic necessities

How much do we want it?How much do we want it?

• Do we want to curb our consumption so the future can have more?

• Would we sacrifice to provide more for those who don’t have today?

– How much of our GNP currently aids developing countries?

• Is the future more important than the present?

• Is sustainability a sacrifice?