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• Market approach
• External costs violate utility, rights, and justice; therefore, they should be
internalized.
Ecological Ethics
• Anthropocentric View: Concern for environment based on how it
affects interests of humans.
• Netlogo
• Private Cost: The cost an individual or company mus tpay out of its
own pocket to engage in a particular economic activity.
• Social Cost: The private internal costs plus the external costs of
engaging in a particular economic activity.
Markets and Pollution
• Total costs of making a product include a seller’s internal private costs
and the external costs of pollution paid by society.
• A supply curve based on all costs of making a product lies higher than
one based only on sellers’ internal private costs.
• The higher supply curve crosses the demand curve at a lower quantity
and a higher price than the lower supply curve.
• When sellers’ costs include only private costs, too much is produced
and price is too low.
• This lower utility, violates rights, and justice
Why it is not a just society?
• What if the public doesn’t understand the costs & benefits adequately and
media biases their opinion? What should the government do in such a
case?
When Utilitarianism fails
• When costs and benefits are not measurable, utilitarian approach fails.
• Suppose that all future generations (potentially infinite) have equal right to
world’s supply of oil. Should we try to divide oil equally among them?
• If we equally divide oil among them, our share would be a few quarts at
the most.
• Second, if they do have rights, we might be led to the absurd conclusion
that we must sacrifice (even our entire civilization) for their sake.
• We can say that someone has a certain right only if we know that he
or she has a certain interest which that right protects.
• But we don’t know the interests of future generations.
• Science might come up with technologies for creating new products
from other raw materials in abundance (minerals in seawater) or they
might find potentially unlimited energy sources such as nuclear
fusion.
Justice to Future Generations
• Rawls: Leave the world no worse than we found it.
• Care Ethic: Leave our children a world no worse than we received.
• Attfield: Leave the world as productive as we found it.
• Unlikely to happen in a competitive market. Why?
• Businesses try to consume resources quickly before competitors.
• Businesses have short time horizons.
• Future is difficult for businesses to predict.
• Businesses tend to ignore externalities.
Sustainability
• The capacity something has to continue to function into the future.
• Environmental sustainability: The capacity of the natural environment
to continue to meet the needs of present generations without
compromising the ability of future generations to meet their needs
from that environment.
• Three (interdependent) pillars of sustainability
• Our economic activities
• Our social activities
• Our environmental activities
Environmental sustainability
• Requires
• Renewable resources should not be depleted at a rate that is greater than
their rate of replacement
• The emission rate of pollution should not exceed the capacity of environment
to cleanse and assimilate that pollution
• Non-renewable resources should be depleted at a rate no greater than the
creation of renewable alternatives.
• Technology Pessimists: Science will not find substitutes for all
renewable resources. So we must conserve.
• Technology Optimists: Science will find substitutes so sustainability
requires neiter conservation nor reducing consumption.
Social Audit
• A report of the social costs and benefits of the firm’s activities.