Welcome to the first video of week eight. Congratulations on getting nearly to the end of the course. In this last week, I will discuss two much debated topics, namely, nature and environmental issues, and wellbeing and poverty. So if you are concerned with global warming or increasing inequality in the world, this week will provide you with the skills and tools to understand the economic drivers of these problems. So let's get started with the first theme, nature. I will introduce the topic first, and then present the social economics perspective, which is also known as ecological economics. Over time, economic behavior, in particular, production and consumption, has had major impacts on nature. We can measure these impacts in two ways, material use and damage. The use of the materials that nature provides has increased eightfold since 1900, not just to population growth, but also due to an increase in consumption per person. As a consequence, material use has increased per capita from five to ten tons per year. Look at the diagram. It shows years on the horizontal axis and gigatons on the vertical axis. As the diagram clearly shows, the use of the four major materials have increased enormously, construction materials 34 x, mineral ores 27 x, fossil energy 12 x, and biomass 4 x, all since the year 1900. We have only one planet, and most of these resources are non-renewable. This means that future generations have less and less materials available for their economies to use. The second way in which we can measure the damage done to nature is by its affect on temperature, the sea level, and carbon emissions. The UN Intergovernmental Panel on Climate Change has calculated that global temperature has risen by 0.85 degrees Celsius since 1880. This is bringing us in the danger zone, because they've also calculated that the maximum that we can afford to prevent irreversible climate change is two degrees Celsius. The sea level has risen, since 1900, 1.5 centimeters, and the pace of the rise is increasing. Carbon emissions have increased by 25% as compared to the level before 1960. The social economics of nature is also known as ecological economics. It focuses on limits to growth and of green well-being measures. These measures are alternatives to GDP, which does not take the value of nature into account. Let me start with explaining what ecological economics is. It starts from the idea that the economy is an open system embedded in the closed system of our biosphere. Remember from week one, in which social economics was explained as an open system theory, which was visualized in week six in a diagram for the macroeconomic flow. Ecological economics is the study of the interdependence and coevolution of the economy and natural ecosystems over time and space. Let me explain this a bit further. An open system leaks energy, such as heat and power, and this is called the entropy law. The economy needs nature as a source of energy. In other words, our economy cannot exist without the continuous supply of energy by nature, such as fuel and sunlight. If our economy were a closed system, energy would never get lost. We could eternally use the same labor power, fossil energy, buildings, and machines forever. On Earth, the entropy law cannot be escaped. We always have to put new energy though work, repairs of machines, and solar energy for crops to grow. It even seems a bit scary if that suddenly is no longer the case, as if you would not need to pull the cord of a cuckoo clock every morning in order to keep it ticking, but only once in a lifetime. And the bird would still come out every hour for the rest of your life. Given the limitations of nature to provide the economy with endless energy and materials, we need to consider limits to economic growth. In ecological economics, limits to growth come in three flavors, steady-state economy, green growth, and qualitative growth. Steady-state economy is an economy that aims to maintain a stable level of resource consumption and a stable population level. It means zero GDP growth. But it conflicts with the human right to a family life, and the bodily integrity of women to make their own fertility decisions. Should we all embrace China's one-child policy or have forced sterilizations of certain groups of people? And do they make moral sense? Green growth is economic growth with a decreasing environmental impact. How can this be done? Well, let's use the IPAT equation. I stands for environmental impact, P for population size, A for affluence, that is, consumption per person, and T for technology. Hence, I = PAT. A and T together determine the intensity of environmental impact, resource use and waste. Green growth means that a change in I, environmental impact, should be less than the change in GDP. Hence, P, population size, can still grow as long as AT grows less or is stable. A more radical form of green growth is that I should be negative. This means that with population growth, AT should decline more then P increases. This requires lots of green technology to make consumption less material-intensive and less wasteful. Unfortunately, there is no country that reduces AT more than P, even when population growth is zero, as in various European countries. Finally, the last flavor of limits to growth is qualitative growth. This reverts to the quality of life instead of the quantity of goods, shifting some material consumption to non-material consumption. This means enjoying more leisure time and social life, or meditation, for example, and engagement with nature not for use, but to enjoy. Green wellbeing measures our alternative to GDP, which takes nature into account. I will present two of such measures that are being used in ecological economics, first, the ecological footprint. This is the difference between the use of resources and their available capacity. So it's an index for how much nature we have, how much we use, and who uses what. The more material goods we consume, the bigger the footprint. The unit of measurement is global hectares, a world average of resource use. The index includes six types of biocapacity, crop land, grazing, forests, fishing grounds, carbon, and build-up land. For developing countries, the difference between the use of resources and their available capacity is zero. But for developed countries, the use is, on average, six global hectares, while their capacity is only three global hectares. So the difference is negative, of the size of three hectares. This clearly illustrates the exploitation of the planet by developed countries. Another green wellbeing measure is the Happy Planet Index. This index combines ecological footprint data with two socioeconomic measures of wellbeing, namely, life expectancy and life satisfaction. The Happy Planet Index measures how many long and happy lives countries produce per unit of environmental input. It is, therefore, a richer green wellbeing measure than the footprint alone. But a choice of the two socioeconomic wellbeing indicators in the index for happiness is, of course, rather arbitrary. The country with the lowest ecological footprint in the world is the West African country Gabon, mainly due to its huge rain forest and poverty. On average, Gabon does not contribute to the damage of nature. The highest ecological footprint is found in the United Arab Emirates due to the opposite conditions, a very fragile natural environment, and high consumption levels, and high pollution levels. For the Happy Planet Index, the top score is for Costa Rica, which combined nature conservation with effective poverty reduction. Whilst the country at the bottom of the index is Bahrain, where both the ecological footprint is worrisome and social economic wellbeing is limited to a small group of people. This video has introduced you to the economics of nature, and has provided you with the basics of ecological economics as the socioeconomic theory of nature. It has prepared the ground for the next video on the institutional economics of nature. That looks at institutions which shape our economic behavior in relation to the natural environment. See you later.
