Sustainable development
Lecture 1
Poverty
Absolute poverty: income is not enough to fill the list of basic needs
Relative poverty: compared to medium income
Extreme poverty: 8.44% in 2019 (the highest in sub Saharan Africa)
Widening gap between rich and poor
Improved sanitation: (one that separates human excreta from human contact) that is not shared with
other households
Brazil: high income inequality (higher stan the US and China
Declining Gini coefficient
The 8 richest people own as much wealth as the poorer half of the world’s population
Current global population: 8.02 billion
1800: 1 billion
1970: 4 billion
BAU= business as usual
Kyoto protocol: reduce carbon emissions
The 1% richest peoples is responsible for 15% of the worlds carbon emissions
0-4% of all land mammals are wild animals
Brundtland: defines sustainable development as development that needs the present without
compromising the ability of future generations to meet their own needs.
UN commission
Not a clear definition, more like a mission statement
Three economic ideas
Preferences, constraints and choice
Idea 1: markets need price correction, behaviour depends on prices
If all the prices are solved, people will be rational, no externalities,…
Allocation:
Markets function well if there is no market failure (inefficiency):
• Market power
• Externalities
• Public Goods
• Asymmetric information
• Internalities
𝑫𝑾𝑳: death weight loss
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,Externalities:
=Effects of one economic agent’s behaviour (individual, household, firm,...) on another agent’s
welfare without compensation
Can be positive or negative
A negative externality creates ‘Marginal External Costs’ (MEC) on top of the Marginal Cost (MC) of
the activity
Lead to inefficiency (‘Dead Weight Loss’ - DWL)
Policy?
Negative externality:
• Qprivate Pprivate
• DWL = B
• ‘prices are wrong’
• Policy: Pigovian Taxation (solution)
Black line
• Correct prices
• P* Q*
• Issues?
• Externality to whom?
• For CO2 emissions: what is
‘the right price’? guarantee to avoid
climate change?
Idea 2:
Macroeconomic model contains (man-made/owned) physical (and sometimes human) capital to
produce final goods or services that can be consumed (C and G).
Production leads to income which can be spent on C and G
Issues?
• Other types of capital? (capital with no owner)
• Welfare/well-being depends on other types of goods and services as well?
C+HC => G+S => Y (capital + human capital => goods + services => income)
Leisure (vrije tijdsbestedingen), ecosystem services,… are not a part of the model (they are
not produced by the market but we enjoy them)
We only look at privately owned capital
NC= natural capital
Idea 3:
There is one market equilibrium: X (never 2 or more)
where demand and supply cross
Tendency towards the market equilibrium
But suppose reality looks like this: ‘coordination game’
Investments lead to capital
Capital leads to production (economic activity)
Investment decisions in year t+1 depend on economic activity in year t.
e.g. a firm decides on I based on average I (investment)
Other examples? Prices in the houses market: the prices of today depends on the prices of
yesterday
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,Lecture 2
Introduction: collapse
Polynesians arrived:
Tropical forest (16m trees), birds,...
Agriculture: yams, sweet potatoes, taro
Signs of intensification
Religion, government
Europeans arrived:
They found a collapsed society: no trees, lack of organised society...
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, Symbol of a people travelling for starting a new society
Exploiting resources past the sustainable level... collapse
People make to much use of their resources and it begins to collapse
Rapa nui
collapsed society
Signs of a powerful past
“Petri dish”
Unsustainable behaviour?
o Overhunting
o Deforestation
Other factors?
o Rats eating the seeds/roots of the trees?
o Climate change? Sand storms
Diet: fruit, fish, crops
Trees supply: fruit, harpoons, canoes, move around the statues
Need for trees outpaced forest’s ability to regenerate
‘Slash and burn’ agriculture
Without trees: no canoes, no fishing, erosion of top soil...
Civil war, unrest..
Europeans arrived (slave trade, diseases)
people overuse the resources they have
capital: available service that people can use, it is used in a to extensive way
Trees: the most valuable asset
o Trees provide fruit, harpoons, roofing, canoes for fishing ...
o Move around the statues
Agriculture: Slash and burn => Deforestation
o Jared Diamond: ‘Easter Island is the most extreme example of deforestation in the
pacific’
o No canoes, no fishing, change of diet towards more crops, more deforestation
Even after signs of problems
o Hunting and deforestation continued
o Construction of new Moai statues
Collapse
Research:
o comparative method
o input and output variables
o regression model
Diamond looks into a number of past and present societies to come up with a theory about
why societies fail or succeed
5 factors
o “If anyone tells you there is only one factor, you know immediately this person is an
idiot”
o Five factors that contribute to collapse:
1. environmental problems, human impacts
2. climate change
3. hostile neighbours
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