1. The Microeconomics of Environmental Economics
The traditional approach to the analysis of natural resource and wastes flows uses the same kind of economic valuation applied to factors of production, goods and services. An economists put a price on each natural resource and environmental impact to the economy including an estimated price for inputs not usually included in market transactions like clean air and water. The damage caused by pollution and waste disposal can also be computed through economic techniques.
It deals with the application of neoclassical theory in the allocation of non renewable resources over time which has repercussions to renewable resources. Another basic concept in Microeconomics is the analyses of common property resource such as fishery stocks. Public goods is also central to the study of microeconomics such as the wildlife parks.
The theory of externalities is also a core concept in analyzing the cost and benefits of economic activities.
Standard environmental economics analysis relies largely on microeconomic theory.
a. measuring of external costs and benefits. This include estimating money value for damage costs by pollution. This can be internalized through, a pollution tax.
b. Valuing resources and the environment as assets, whether privately owned or public This involves the decision between using a resource now or conserving it for future use or the so called intertemporal resource allocation. Using the discount rate approach, present and future benefits and costs is balanced.
c. Devising appropriate property rights. Assigning rules for use of common property resource and for provision of public goods. A wildlife park may be referred to as private or public good depending on who has the capability to manage it.
d. Balancing economic costs and benefits through some form of cost-benefit analysis. This is balancing between non-market values and market values.
Microeconomics is quite limited in analyzing the relationship between economic system and the environment.
2. Factors that led to the rise of environmental economics.
The evolution of the study of environmental economics points towards the environmental dilemma faced by society today both in the local and global context.
Environmental Economics deals with the application of core economic theories to the study of the environment. In the70’s it is called Resource Economics dealing mainly with agricultural, fishery/marine resource, mineral, and forestry.
The worsening condition of the planet earth, gave rise to a new paradigm of environmental economics. In the West, environmental economics is confined to the basic application of microeconomic principles in computing the cost of environmental hazards. This kind of valuation is not applicable and found to be inadequate in explaining the relationship between economic system and the ecological system. In the realm of Macroeconomics, the same valuation applied to factors of production is also applied to natural resources. It is simply a matter of cost benefit analysis of resources
The new matrix of conduct of global business and trade points towards sustainable development. Thus the adoption of new paradigm of progress in the 21st century.
With the onset of green productivity and development, products that do not cater to demand for “green products’ will perish. The so-called Green House Theory was adopted as well as the Ozone Depletion theory. In 1992, the World Summit on Environment and Development was held at Rio de Janiero. It was then that the United Nations talked about the UN Commission on Sustainable Development dealing with a regulated approach to waste handling.
The so-called ESD triangle is equivalent to the CNE equation wherein there is the three elements of Culture, Nature and Economy.
The Economics of Ecological Anthropology also rests on the principle of growth equity perspective. It contends that in order that maximum welfare in society will be achieved, there should be a sharing of wealth. The question of sustainability rests also on the question of equity. Since wealth is a flow, it should be shared and not to be hoarded by only a few. If only a few will benefit from the wealth/capital, only a few will survive. On the issue of dualism of urban spiral or urban congestion, the inequitable distribution of land or the privatization of land will not be health for the overall economic system.
According to studies, the ecological dilemma faced by humanity today if not given due consideration will cause the earth to perish. The fast change in temperature today will lead to planetary disturbances that is predicted to cause planetary scale disturbances. Thus the study of environmental economics today, is not anymore on the realm of science and technology but on the realm of ethics and morals
With the advent of Marxism and Capitalism human greed was not corrected leading to the destruction of natural capital. Economic globalization believed that mobilization of capital will lead to a better distribution of wealth in the world. Studies are still being done on the effect of economic integration on the condition of the world economy.
3. Environmental Macroeconomics, studies economic system in the realm of industry and national economic system. It emphasizes the relationship between economic production and the major natural cycles of the planet. While Microeconomics deals with individual resource and environmental issues, Macroeconomics deals with the interrelationship between economic growth and ecosystems.
The traditional approach to studying macroeconmics deals with the assigning of costs to resources. Herman and Daly and John Cobb formulated an index of Sustainable Economic Welfare (ISEW) for the United States. The method involves the adjustments for natural resource depletion and inequality of income distribution.
The concept of weak sustainability and strong sustainability is also a notable effort in shifting the paradigm in environmental resource accounting. It assumes that different kinds of capital are substitutable.
Sustainability implies meeting the needs of today without compromising the ability of future generations to meet their requirement.
The concept of strong sustainability posits that some natural capital substitutability is not acceptable. It considers the concept of critical natural capital (Kn*) , this has to be preserved and destruction could not be compensated by substitution by other capital. Strong sustainability also considers that if a specific resource is depleted, it must be replaced with a natural capital that have the same function.
The United Nations has also developed the Human Development Index, a more broader measurement of development than GNP/GDP. The HDI combines equity and basic needs measure in assessing economic growth. It includes an adjusted measure of real capita GDP in relation to index of life expectancy and access to education.
4. The Economics of Ecological Anthropology
The economics of ecological anthropology deals with the study of economic system and the relation the human person to its ecological system.
The Economics of Ecological Anthropology tackles the issue of sustainability with two methods of study. The phenomenological approach and the mathematical approach.
The phenomenological approach deals on the qualitative side while the CNE equation is one attempt at measuring sustainability using a mathematical equation.
The CNE equation is a balancing of the system of Culture, Nature and Economy. It is basically a ratio between economic system and planet ecology.
There are two periods in the study of economics of ecological anthropology. The period /Regime of Eco-Anthropology and the Regime of Eco-Industrialization. In the first regime, the regime of Eco-Anthropology, there is common dependency ratio of the community to ecology as a source of economics/consumption. On the other hand, the regime of Eco-Industrialization points to the minimum dependence on free goods and maximum dependence to economic goods.
The hypothesis of the CNE model espouses that the utilization of households and communities of free goods in their adjacent environment is the determinant of the balance between the three components, Culture, Nature and Economy.
Cultural capital includes all the assets and possesions making up the community’s social caital like common heritage, bayanihan, etc.
Natural capital includes the resources both renewable and non-renewable taken freely from nature.
Economic Capital includes the items bought from commercial outlets.
The shift from free goods to economic goods implies paradigm of commercialization. With the alteration of the CNE equation, this is where the environmental management of the government must be set in place.
The Modular Integrator is used as a tool to interconnect between the three dimensions, Culture, Nature and Economy. It also indicates whether an economy is in the early stage or advance stage of development.
The changing structure of sustainability is classified into three regimes namely the Regime I (early stage) wherein the traditional culture is still dominant. Regime II ,there is also a contradiction between Popular and Commercial-Dominant Culture and Regime III where there is a heavy dominance of dominant culture with the neglect of the local popular culture.
The Regime of Dominant Culture is characterized by an imbalance between Culture, Nature and Ecology. It also connotes a total disregard of God and a great appetite towards affluence.
There is also confusion in cultural norms and traditions.. Economic system is basically industrial and there is a total shift from non-monetary to monetary culture as well as impersonal relationships. There is an imbalance between Economic Goods and Free Goods the former greater in quantity.
With the worsening condition of our planet earth, a new matrix of conduct of business
is being practices which points towards the principle of Sustainable Development.
We have adopted the PEENRA or the Philippine Economic Environmental Resources Accounting System in the Philippines. There is also a change in the measurement of economic development such as the so-called adjusted Net National Product and adjusted Net Domestic Product. This is measured by subtracting natural resource depletion from GNP or: GNP –Natural resource depletion. Another approach is the Environmetnal Impact Statement devise to regulate and protect the natural resource before any project is taken. However, this two approaches is still wanting in terms of monitoring whether economic dynamics is successful in balancing economic growth, equity and environmental integrity. The CNE equation is an alternative to these two primary approaches.
The CNE equation takes into account the historical perspective in the analysis of development path that the country should take. Unlike the Industrial Society, our society has still to do with a more holistic approach to development. We came from a traditional society going into an industrial society. We can still take into account the sustainability principle in planning. It is unfortunate that the Western society has already reached its industrial stage with no much consideration of their environment and culture. It is evident in the kind of culture that emanates now in the West.
The study of Economics of Ecological Anthropology is very relevant in the present times. It has policy implications that needs to be addressed by those in the government. Like the policy on the investment led economy wherein we rely on foreign investments. However, these investors transfer their earnings to their mother country. It is not injected in the local economy. Aside from that, it gives havoc to the environment resulting to the degradation of our natural resources in the country.
One issue that also be taken consideration is the effect on the culture that is being espoused by foreign investment economy. With the influx of the multinationals, we became dumping ground of their products through massive consumption. They bombard us with so many commercials luring us to buy their products. Buying became impersonal rather than an opportunity for interaction. While before, fishing is a communal activity, it became an industrial endeavor losing the spirit of ”bayanihan” among us as a people.
Globalized Greed being propagated by international business elite circles that cater only to the need of their stockholders.
The poverty being experienced today by the Philippines can be attributed to the wrong priorities in the development perspective of our leaders. This led to the wider gap between the rich and the poor. The case of the Laguna Lake is one classic example of development not conducive to the Filipino. Due to the hazards created by the industries which pollute the Laguna lake, it created to the resource depletion causing hunger and unemployment to a large number of people who are dependent on the lake for economic survival. It is deemed important that development planners should look into the priorities. Although this is already in the realm of Ethics, it is of paramount importance to be taken a serious look if we would still like to alter the kind of development path that we are taking now. Is a foreign led economy the real answer to our development as a nation. Are we not looking into the environmental hazards and cultural degradation caused by this kind of development. We as a people should define our own economic system, a system that is helpful to the Filipino and not to foreigners. While amassing our vast natural resource, at the expense of Philippine society the conditions of poverty in the Philippines becomes worse than before. There is an inverse relationship between GNP growth and poverty.
The problem of prioritization hinges on the level of nationhood that we have as a Filipino. Studies by Ramirez (1995) as cited by Gonzales (2002) stated that the lack of nationhood among Filipinos is rooted on the educational system which propagates the dominant culture.
Gonzales, Ernesto. “The Economics of Ecological Anthropology of Pateros, Metro Manila and Its Implications to Sustainable Development in the Philippines”, Dissertation. Asian Social Institute, Manila, 2002.
Harris, Jonathan. Environmental and Natural Resource Economics: A Contemporary Approach, New York, 2002.