A Neoclassical Perspective on Population and Environment Using Price Theory to Avoid Resource Depletion

1. A Neoclassical Perspective on Population and EnvironmentUsing Price Theory to Avoid Resource Depletion Tamara Jacobi

2. A Hypothetical Situation Put yourself in this situation . . . Firewood behind your house Needed for cooking, heating Entire community depends on the same firewood source Population of community growing Firewood becoming increasingly more scarce Theories of Outcome: The Vicious Cycle More kids to help collect ?? increased resource scarcity Resource depletion drives population growth Tragedy of the Commons A race to secure scarce resources

3. The Reality Neoclassical theorists acknowledge that population growth accelerates resource depletion As population grows, demand for resources increases

4. However, Neoclassical theorists believe that market systems can be used to avoid the �vicious cycle� and tragedies of the commons Simple price theory can be used to reduce population pressures on the environment.

5. Solving the firewood situation(small scale market mechanisms) A simple allocation of property rights Private ownership increases respect for resources Price on firewood Firewood no longer a free good Privatized forest, charge a fee per stick of firewood Rural credit systems (micro-credit financing) Allows for creation of new businesses that might introduce substitutes to firewood Alternative cooking methods, more efficient housing insulation etc.

6. The Power of Subsidization Neoclassicals favor subsidization to deal with environmental issues Highly support subsidization of education Positive externalities of education Increased awareness of resource depletion Reduced population growth (lower fertility) Acquisition of new skills Emphasize the widespread urban bias of subsidization, promote re-direction of subsidies to rural projects

7. Global Scale Neoclassical Theories Call for Revisions of GDP Current GDP calculations fail to truly reflect standards of living because the state of natural resources is not considered Generally support International Trade and Globalization Improved standards of living will increase demand for environmental quality Increased diffusion of information through global markets will help countries to address environmental challenges Some controversy around drawbacks of globalization (ex. underdevelopment trends towards resource exploitation, exporting pollution, etc.)

8. Technology? Correct pricing of resources at all levels (community scale to global scale) will drive technological innovation. higher price of resources increases the demand for substitutes Neoclassical theorists are both technological optimists and skeptics Some hesitant to rely on technology, others embrace technology as the solution to environmental issues

9. TAKE AWAY MESSAGEfor the Neoclassical Perspective on Environment Population growth may increase pressure on the environment . . . However, market systems can be used to reduce these population pressures A growing global population doesn�t have to mean environmental ruin.