Green Economics: Links between Environment and Economy

By Dransfield, Rob | Teaching Business & Economics, Summer 1998 | Go to article overview

Green Economics: Links between Environment and Economy


Dransfield, Rob, Teaching Business & Economics


There are a number of reasons why we need to move beyond treating environmental economics as a discrete subsection of economics.

environmental concern has risen in the agenda of national, international and global issues from being a minor concern to one that frequently takes centre stage.

Study and writing about the environment has developed.

Most students have a keen understanding of the importance of the environment as a key variable in economic decision making. They want analysis which gives a fair weighting to environmental imperatives.

A more effective integration of economics and environmental thinking can be achieved in a number of ways. On the one hand we can examine how the environment alters the way we shape a number of our commonly used economic tools e.g. the production possibility frontier and the circular flow model. We can go further than this by incorporating more of the highly readable contributions of eminent environmental economists such as Pearce (1989) into our teaching and textbooks. This also involves introducing students to a range of new concepts and ideas which would then become part of a newer 'greener' economics. In recent times there have been a number of attempts to develop new models of the market to 'solve' environmental problems. Modern day Ricardians propose an optimistic scenario in which the market creates the solutions e.g. through `ecological tax reforms'. However, it seems clear that the 'greening' of economics will need to go beyond consideration of this to include examining other perspectives. After all, while there are some thinkers who see `green thinking' as being ultimately a 'conservative' view of the world (take for example the notion of conservation) others see it as providing a radical alternative to the conventional wisdom.

THE TRAGEDY OF THE COMMONS

The tension between economic growth and environmental sustainability lies at the problem of the over use and lack of foresight that frequently applies to our use of scarce resources.

The classic representation of this problem was set out in an article by Hardin and Baden (1977). They used the example of a piece of common land for which villagers have common property rights. The land is able to provide for the needs of herdsmen who graze their animals. However, there comes a point at which eventually there are too many people using the land - and everyone suffers. One more person uses the land - and beyond this point the land can provide for no-one. This is a situation which we are increasingly becoming familiar with in modern society - for example, in the depletion of fish stocks in common fishing grounds. Recently we have seen a number of international conferences focused on a key issue of the tragedy of the commons in relation to global warming. The argument here is that as more and more people want to enjoy the sort of products enjoyed in the richer parts of the world, which are based on high energy consumption patterns, then increasingly this will limit the ability of everyone to benefit from the modern industrial economy.

RE-APPRAISING SIMPLE ECONOMIC THEORY

In the last years of the twentieth century we have come increasingly to recognise the impact of 'shocks' in forcing us to re-think our theories of the world. In particular we have recently been faced with a number of environmental shocks' which increasingly demand our attention. For example, in October 1997, there was widespread publicity of `the haze' in South East Asia. This was a murky blanket of polluted air which spread from fires in Indonesia resulting from shortterm land clearance measures. These combined with a noxious cocktail of pollutants from industry and automobiles brought huge swathes of Malaysian industry to a standstill as the government forced plants to shut down. Closer to home in October 1997, the French government was forced to put into effect a piece of legislation taking half of the motor vehicles in Paris off the roads because of pollution. …

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