 |  Environmental Science: A Global Concern, 7/e William P. Cunningham,
University of Minnesota
Mary Ann Cunningham,
Vassar College
Barbara Woodworth Saigo,
St. Cloud State University
Ecological Economics
BE ALERT FOR: Models
Models, simplifications of natural processes, have become important tools in science to expand our understandings. Mathematical or computer models let us pose what if questions that help us better understand outcomes without the risks of playing out a hypothesis in the real world. The greatest value of models is not so much that they get the explanation right as that they focus discussion, stimulate good questions, and generally refine our thinking about a question.
A central question before us is, How many people and how much economic development can we have before creating irreversible environmental disaster? The team of scientists at MIT described in the text modeled this question to help find answers. Their initial model used a number of Malthusian assumptions and suggested that if then-current trends continued, and even if we discovered lots more resources, we faced a disastrous rise in pollution and a significant population dieback before the end of this century.
The model did what all good models do—it stimulated considerable discussion and drew out specific questions and criticisms. The model has been revised and now provides insights into ways of avoiding eco-disaster. As you learned earlier, science finds answers to questions by developing and then evaluating hypotheses. That is what the MIT group’s modeling exercises were all about. Have they found exactly the right answer? Probably not. But they clearly are helping us find it.
BE ALERT FOR: Intangible Resources
As you have read, not all resources are physical things. Intangible resources such as beauty, serenity, open space, and the psychological value of wilderness are important to many people. A shortcoming of standard tools of economic analysis is that they typically fail to adequately incorporate these resources into the decision-making process.
Here is the problem: Market forces in economics act based on a comparison of the costs of an action or project with the value of its benefits; this is called cost/benefit analysis. But such analysis depends on being able to assign clear dollar value to things. Since dollar values can be assigned only with great difficulty to intangible resources, such resources are often inadequately accounted for in making economic decisions.
Critics argue that this locking-out of intangibles in economic decisions leads to socially and environmentally irresponsible decisions, and regulation or adjustment of market forces is required.
BE ALERT FOR: Hidden Costs
The price we pay for a product or service does not always reflect the true cost of its creation. The expenses actually paid by the user of a service or resource are called internal costs. Costs created by the product that are paid by others are called external costs.
Take the cost of operating a car, for example. The prices we pay for gas, oil, and repairs are all part of the internal cost of using a car. But in addition to consuming gas and oil, a car also produces air pollutants linked to disease. The doctor bills and the cost of drugs to treat respiratory ailments are examples of external costs of car operation. The result is that the user of the car underestimates the true cost of operation and, therefore is unable to make valid economic decisions about its use.
The matter of hidden costs is very important because our economic decisions, with their potential for significant environmental impact, are driven by cost comparisons.
These hidden external costs often have the effect of skewing economic decisions toward more environmentally damaging behavior. For that reason, there is now an effort to internalize as many external costs as possible.
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2003 McGraw-Hill Higher Education