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ECONOMICS AND THE ENVIRONMENT

This text explores the intersection of economics and the environment, focusing on how to determine the "right" amounts of pollution, rainforest, and marine life for sustainable resource allocation. It discusses key concepts such as allocative efficiency, social goals in resource use, and the importance of cost-effectiveness and sustainability. The piece highlights the need for a delicate balance between economic growth, equity, and environmental protection, while applying these principles to practical scenarios like resource management and energy efficiency.

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ECONOMICS AND THE ENVIRONMENT

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  1. ECONOMICS AND THE ENVIRONMENT HOW CLEAN IS CLEAN ENOUGH? WHAT IS THE RIGHT AMOUNT OF POLLUTION? WHAT IS THE RIGHT AMOUNT OF RAINFOREST? WHAT IS THE RIGHT AMOUNT OF WHALES?

  2. ECONOMIC CONCEPTS • SOCIAL GOALS • ALLOCATION OF RESOURCES • ALLOCATIVE EFFICIENCY • COST EFFECTIVENESS • NET VALUE

  3. OBJECTIVES • IDENTIFY ALTERNANTIVE SOCIAL GOALS IN EVALUATING RESOURCE USE • DEFINE ALLOCATIVE EFFICIENCY • EXPLAIN HOW THE “RIGHT” AMOUNT OF A PRODUCT TO PRODUCE IS FOUND, ASSUMING THE SOCIAL GOAL OF ALLOCATIVE EFFICIENCY • APPLY THE ALLOCATIVE EFFICIENCY CRITERION TO THE PRODUCT, ENVIRONMENTAL QUALITY

  4. WHAT ARE THE BROAD SOCIAL GOALS THAT WE MIGHT CONSIDER AS WE DECIDE HOW NATURAL RESOURCES SHOULD BE USED? • ECONOMIC GROWTH • FULL EMPLOYMENT • EQUITY • ENVIRONMENTAL PROTECTION • INCOME GENERATION • COST-EFFECTIVENESS • SUSTAINABILITY • ALLOCATIVE EFFICIENCY • ENERGY EFFICIENCY

  5. EFFICIENCY: WHAT DOES IT MEAN? SUPPOSE THERE ARE TWO KINDS OF DRILL BITS THAT MAY BE USED TO DRILL FOR OIL…ONE MADE OF A SPECIAL STEEL ALLOY, THE OTHER OF DIAMONDS. THE HARDNESS OF THE DIAMONDS ALLOWS THE DIAMOND DRILL TO CUT THROUGH 10,000 FEET OF ROCK BEFORE IT HAS TO BE REPLACED. THE STEEL BIT MUST BE REPLACED EVERY 2000 FEET. THE DIAMOND BIT COSTS $2000 WHILE THE STEEL BIT SELLS FOR $300. WHICH DRILL BIT IS MORE EFFICIENT? AS WITH EVERYTHING IN ECONOMICS: IT DEPENDS!!!

  6. ACTIVITY ONE ANSWERS • 1, 4, 3 • $540, $440, $360, $420 • 3 (produces 200 units for the least cost) • Energy efficiency- getting the most miles per gallon • Cost efficiency-producing the greatest yield with fixed inputs • Allocative efficiency-getting the most value from resources

  7. How far down the curve should society choose to go if its goal is allocative efficiency?

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