The document discusses the need for a transition to a more sustainable economy that limits resource depletion and environmental degradation while still allowing for economic prosperity and job growth. It outlines some key features a new sustainable economy may have, such as fewer durable goods, more services, shorter work weeks, and policies that encourage renewable energy, energy efficiency, and investments in human and natural capital over energy-intensive manufacturing. Macroeconomic solutions proposed include incorporating sustainability into indices of national income, investing in public goods, and equalizing income.

3. Allocate resources based on market price S D Q P P* Q*

5. Theory of Rational Markets

9. Classic Diagram From Macroeconomics Firms Households $ Goods and Services Labor $ Ecosystem

10. Classic Diagram From Macroeconomics Firms Households $ Goods and Services Labor $ Environment Ecosystem

11. Classic Diagram From Macroeconomics Firms Households $ Goods and Services Labor $ Ecosystem

12. Diagram from Ecological Economics Ecosystem matter energy matter energy recycling heat Economy

13. Thermodynamics - It’s the Law 1st Law In any closed system matter and energy can be neither created nor destroyed. Matter and energy can be interchanged. You can’t make something from nothing.

14. Thermodynamics - It’s the Law 1st Law In any closed system matter and energy can be neither created nor destroyed. Matter and energy can be interchanged. You can’t make something from nothing. 2nd Law Energy and matter move towards a less ordered state. Transformations lead to increased entropy. Entropy increases in an isolated system. Recycling uses energy.

15. “ Production” is an illusion. Throughput

16. “ Production” is an illusion. Resource Degradation/ Pollution Throughput Resource Depletion

17. “ Production” is an illusion. Resource Degradation/ Pollution Throughput The faster the throughput, the faster the depletion and degradation and the more “lost opportunity.” Resource Depletion

19. Can't man-made capital make up for natural capital? The value delivered by the biosphere is estimated to be in the range of US$33 trillion per year (1997 dollars). Global economy delivers US$18 trillion per year. -The value of the world’s ecosystem services and natural capital NATURE , VOL 387 , 15 MAY 1997

22. Is there is an optimal size for our economy Benefits and costs Size of the economy Marginal benefits Marginal costs

26. Scale of Economy Also Relevant to Social Systems Church Nature Family Friends Market - buying and selling

27. " Getting and spending, we lay waste our powers."

28. Ultimate Ends What ends do we desire? What resources do we need to attain these ends? What ends get priority?

31. Human Capital Economic Production Process Goods and Services Evolving Cultural Norms and Policy Well Being ( Individual and Community) Consumption (based on changing, adapting preferences) Education, training, research. Building Investment (decisions about, taxes community spending, education, science and technology policy, etc., based on complex property rights regimes) Individual Public GDP Wastes Common Ecological services/ amenities having, being - having, - being negative impacts on all forms of capital being, doing, relating Restoration, Conservation Natural Capital Manufactured Capital having positive impacts on human capital capacity doing, relating Complex property rights regimes Solar Energy Social Capital Limited Substitutability Between Capital Forms Model of the Ecological Economic System Waste heat Institutional rules, norms, etc. Materially closed earth system From: Costanza, R., J. C. Cumberland, H. E. Daly, R. Goodland, and R. Norgaard. 1997. An Introduction to Ecological Economics. St. Lucie Press, Boca Raton, 275 pp.

32. Question: Can we have a vibrant economy (e.g. high employment levels) while limiting the extraction of scarce resources and the degradation of natural capital? YES!

37. What Would New Economy Look Like? Fewer, more durable goods More services Living Smaller Shorter work weeks

40. Micro-Level Solutions Ethical Profits Reduce throughput Reorient products/ services Encourage fair regulation Develop disruptive technologies

41. Encourage fair regulation Pre-1960s, Pollution denial 1970s and ‘80s End-of-pipe regulation Late ‘80s and ‘90s Pollution prevention and stewardship Clean Tech, Eco-effectiveness, Cost savings, Opportunity

42. Comprehensive Efficiency Identity Reduce throughput MMK services gained NK services sacrificed MMK services gained MMK stock = MMK stock throughput throughput NK stock NK stock NK services sacrificed X X X MMK = Man-made capital stock (e.g. equipment, goods) NK = Natural capital stock (e.g. soil, minerals, living organisms)

43. Comprehensive Efficiency Identity Reduce throughput MMK services gained NK services sacrificed MMK services gained MMK stock = MMK stock throughput throughput NK stock NK stock NK services sacrificed X X X Service Efficiency How well are man made resources meeting what they are designed for? How well are we allocating resources? MMK = Man-made capital stock (e.g. equipment, goods) NK = Natural capital stock (e.g. soil, minerals, living organisms)

44. Comprehensive Efficiency Identity Reduce throughput MMK services gained MMK stock = MMK stock throughput throughput NK stock NK stock NK services sacrificed X X X Maintenance Efficiency or Durability How much man-made stock are we getting for a given level of throughput? Are things well-made and durable? MMK services gained NK services sacrificed

45. Comprehensive Efficiency Identity Reduce throughput MMK services gained MMK stock = MMK stock throughput throughput NK stock NK stock NK services sacrificed X X X Production Efficiency Are we getting a high level of throughput for the amount of NK stock available? MMK services gained NK services sacrificed

46. Comprehensive Efficiency Identity Reduce throughput MMK services gained MMK stock = MMK stock throughput throughput NK stock NK stock NK services sacrificed X X X Ecosystem Efficiency Amount of NK stock we can get for NK services sacrificed. MMK services gained NK services sacrificed

47. Reorient products/ services Sustainable Value Pollution Prevention Pros: Cost and risk reduction Product Stewardship Pros: Reputation and legitimacy, future cost savings Clean Technology Pro: Innovation and repositioning Base of the Pyramid Pros: Growth and future value

48. Different strategies for different markets (from Capitalism at the Crossroads, S. Hart) Developed Markets: reducing corporate footprint Emerging Markets: avoiding collision between economic growth and resource depletion and degradation Traditional/Survival Markets: understanding needs, developing native capacities

50. What Do You Want the New Economy to Look Like?