Environmental Economics Notes for
ECS2606. Notes are based off the
eighth and seventh edition of
Environmental Economics: An
Introduction by Barry C. Field and
Martha K. Field
The chapters of the book correspond
to those in the ECS2606 Study Guide
Environmental
Economics
Summary Notes
, CHAPTER 2
THE ECONOMY AND THE
ENVIRONMENT
,The Environment and the Economy
o Economy – collection of technological, legal and social arrangements where individuals in society
seek to increase material and spiritual well-being.
o Two elementary economic functions pursued by society:
Production:
Activities that determine quantities of goods and services produced and technological
and managerial means where production carried out.
Distribution:
Way goods and services divided up or distributed among individuals and groups that
make up society.
Consumption – final utilization of goods and services.
o Residuals – production and consumption activities produce leftover waste products which find way
back into natural world.
o Residuals may lead to pollution or degradation of natural environment.
o Natural Resource Economics:
Study of nature in role as provider of raw materials.
Link marked (a) represents raw materials flowing into production and consumption.
o Environmental Economics:
Study of residuals flow and its resultant impacts in natural world.
Link labelled (b) shows impact of economic activity on quality of natural environment.
Types of Environmental Economics
Environmental Economics
o Sub-field of neoclassical economics.
o Neoclassical economics framework:
Attempts to assess everything in monetary terms, increased output and better income
distribution, using tools such as supply and demand.
Natural entity does not have intrinsic value = not valuable in own right, rather value of
natural entity measured in terms of what it can contribute to economy.
Degrading environment can be replaced by man-made capital = total value of capital.
, Ecological Economics
o Views economy as subsystem of larger environment.
o Environment has intrinsic value.
o Larger economy can compensate for loss of environment by increasing man-made capital.
o Efficiency considerations in economy = not all-important.
o Supply and demand and other neoclassical tools = not adequate in study of relationship between
environment and economy.
o Interdisciplinary focus, which uses tools from economics, ecology and sociology, necessary to
ensure that economy not creating unfavourable environment.
Natural Resource Economics
o Large part of total economic activity relies on extraction and utilization of natural resources.
o Application of economic principles to study of these activities.
o Mineral economics
What is appropriate rate at which to extract ore from mine?
How do exploration and addition to reserves to respond to mineral prices?
o Forest economics
What is appropriate rate at which to harvest timber?
How do government policies affect harvest rates pursued by timber companies?
o Marine economics
What kinds of rules need to be established for managing fisheries?
How do different harvest rates affect stocks and fish?
o Land economics
How do people in private sector make decisions about use of land?
How do laws of property rights and public land-use regulations affect way space devoted to
different uses?
o Energy economics
What are appropriate rates for extracting underground petroleum deposits?
How sensitive is energy from renewable sources to change energy prices?
o Water economics
How do different water laws affect way water utilized by different people?
What kinds of regulations should govern reallocation of water from agriculture to urban
areas?
ECS2606. Notes are based off the
eighth and seventh edition of
Environmental Economics: An
Introduction by Barry C. Field and
Martha K. Field
The chapters of the book correspond
to those in the ECS2606 Study Guide
Environmental
Economics
Summary Notes
, CHAPTER 2
THE ECONOMY AND THE
ENVIRONMENT
,The Environment and the Economy
o Economy – collection of technological, legal and social arrangements where individuals in society
seek to increase material and spiritual well-being.
o Two elementary economic functions pursued by society:
Production:
Activities that determine quantities of goods and services produced and technological
and managerial means where production carried out.
Distribution:
Way goods and services divided up or distributed among individuals and groups that
make up society.
Consumption – final utilization of goods and services.
o Residuals – production and consumption activities produce leftover waste products which find way
back into natural world.
o Residuals may lead to pollution or degradation of natural environment.
o Natural Resource Economics:
Study of nature in role as provider of raw materials.
Link marked (a) represents raw materials flowing into production and consumption.
o Environmental Economics:
Study of residuals flow and its resultant impacts in natural world.
Link labelled (b) shows impact of economic activity on quality of natural environment.
Types of Environmental Economics
Environmental Economics
o Sub-field of neoclassical economics.
o Neoclassical economics framework:
Attempts to assess everything in monetary terms, increased output and better income
distribution, using tools such as supply and demand.
Natural entity does not have intrinsic value = not valuable in own right, rather value of
natural entity measured in terms of what it can contribute to economy.
Degrading environment can be replaced by man-made capital = total value of capital.
, Ecological Economics
o Views economy as subsystem of larger environment.
o Environment has intrinsic value.
o Larger economy can compensate for loss of environment by increasing man-made capital.
o Efficiency considerations in economy = not all-important.
o Supply and demand and other neoclassical tools = not adequate in study of relationship between
environment and economy.
o Interdisciplinary focus, which uses tools from economics, ecology and sociology, necessary to
ensure that economy not creating unfavourable environment.
Natural Resource Economics
o Large part of total economic activity relies on extraction and utilization of natural resources.
o Application of economic principles to study of these activities.
o Mineral economics
What is appropriate rate at which to extract ore from mine?
How do exploration and addition to reserves to respond to mineral prices?
o Forest economics
What is appropriate rate at which to harvest timber?
How do government policies affect harvest rates pursued by timber companies?
o Marine economics
What kinds of rules need to be established for managing fisheries?
How do different harvest rates affect stocks and fish?
o Land economics
How do people in private sector make decisions about use of land?
How do laws of property rights and public land-use regulations affect way space devoted to
different uses?
o Energy economics
What are appropriate rates for extracting underground petroleum deposits?
How sensitive is energy from renewable sources to change energy prices?
o Water economics
How do different water laws affect way water utilized by different people?
What kinds of regulations should govern reallocation of water from agriculture to urban
areas?
