Chapter 4. Chapter 4: Environmental Economics and Consumption

How does environmentally based economics differ...

Interactive Study Guide

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Guiding Question 4.5

How does environmentally based economics differ from mainstream economics, and how might ideas from environmental economics help industry and consumers make better choices?

Why You Should Care

It’s time to buy a new computer, but you want to buy one from a company that’s trying to make more sustainable products. So what would you need to make the most sustainable choice? How much it costs to make the product? Sure. But what if there was a way to estimate the external costs of producing the computer?

Environmental economics attempts to include external costs into the true cost. Many of the external costs are very hard to put a number value to, so some environmental economists argue that making less waste overall definitely decreases external costs. Today, companies are beginning to adopt sustainability practices for a variety of reasons: increasing costs of disposing of wastes, demand from consumers and shareholders for more sustainable products, and predicted future costs of scarcer non-renewable energy and materials.

Question Test Your Vocabulary

Choose the correct term for each of the following definitions:

Term	Definition
R3ytZaxrTZd2Jro5lECcgrvVjvG67KzRWQMxkiBTRW4JQQn+erBXNHtSye0TWBLQhaOgpSJmtl1wKehtUD1VD2cMHFyzcAIDiX7Gag1b8xVuUY8GCsV8DdBvwrCyXSyVHDViSZLgCaDVE7r3RvIvA2+ggIQ=	To give more weight to short-term benefits and costs than to long-term ones.
lWTfb3BEeQWOdEw011LgaR7hgMnVszDcbylik0U6TpHXmmMVfkIPAbJFDnEWI5IzNxeEdB3pvAc88JJlCZNv6yqRXjun/UnqoDy0GdZBwWeuvpwm2t8bKhruap1hjzEPzCPbkClF/pYcelnPcHQegbGPtBs=	Economic and social development that meets present needs without preventing future generations from meeting their needs.
5bcg3fsnFAI1nu+XmSV2et85N6J/98H5bYYN6NJlvtRxkswsqAi+jA/5c7f9dls5gUb/rr4whcqgmXnLtgGq8mfLlekhzCoQlXaSQ4ex6GQkTHLFHy8qq+JPRRLeVeEGstoLJMCjQyUslNvjMJ1bKS4zt14=	New theories of economics that consider the long-term impact of our choices on people and the environment.
A6OKIu8k+TqxUtat4unaOpLwvdecNi5E9aBRmHvNY0H3ouBYStlEG1aL3VCQng/SNqCgqvqkY0Tfg+gh6Ol6Qz5TCWprL7AAFs/Ie0/bKovCwaSIm4JVFpuHWO0x8X+KYZJw+1MCJwLqefkLLVrjrGJVro4=	Management of a resource that considers the impact of its use at every stage of the process.
62y00twHN7OPt5pjIog1GSZB6ZNnFPTghiZfDd9Z9LJeKcgOtQuicP61T2quB0C4A2RlfbQMPfGL8UtflwIz7QuRiNXVhpsoGolXVKA8Pve1APl4GM2zpUK58SJIOnoYy0JPlIEj7PIqFkHTEr13PHwVQQg=	A production system in which the product is folded back into the resource stream when consumers are finished with it or is disposed of in such a way that nature can decompose it.

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Question Sequence

Question 4.1

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Consumers are part of the lifecycle because they return the product at the end of its usefulness to be recycled into the next generation of products.

Question 4.2

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Closed-loop production decreases material costs (if they are recycled) or decrease waste costs (if the materials are composted).

Question 4.3

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By discounting future values at the expense of making a profit today, sustainability practices that rely on future savings will never be able to compete economically.

Question 4.4

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Discounted future values only examine internal costs and exclude external (and therefore true) costs because they are not paid by the manufacturer at the time of production.

Question Sequence

Question 4.5 Test Your Vocabulary

Choose the correct term for each of the following definitions:

Term	Definition
QWRVdzgegiM9IwLupeoOx3dxflD8F5zEQtMAiLS+6h7dscYIURK/ilcYlUR7WvO38yOwtg==	Doing business in a way that is good for people and the environment.
mbWHAjlT1qFCm9oETNzpGi+U0KpaMh7Vrz9LmvXqKTriGn8Wg6yjCv4jYcEazs/w2IB0jQ==	A business model whose focus is on leasing and caring for a product in the customer's possession rather than on selling the product itself (selling the service that the product provides).
zbkuTuK3nUVCPwF0W/hpNzC86LD0rX85SAs+eednikncLNY1QG70RZ5049NoXCGveNC/MQ==	Providing information about how a product is made and where it comes from. Allows consumers to make more sustainable choices and support sustainable products and the businesses that produce them.

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999

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Question 4.6

tPS2K+Jzoowc6AzloytBhOs0GNub+FBWf0oQAlUQ3IB8ufnu9f0Oq3gauIB810UHksI/wDpVlRpaSMhH/8Wm95YujrBKMbNmSYMJ4nnCsRRhCBeVtwR/n/Hib7pIaxPh7tN9/wxfPKqqw1E4rzI60TvC5O/q5+yNK4eLAHHgkQZx0K955lC7yJT3KcAdEDvJaTTxDgup/PjRqZbmFsCrJQBU5MTZkSZgCeewvSpw9r8JUGP2d5zoMdxeI+TnicMcYPhcy0eYyDWcJKCDpH2dOcscwSPWFGV3AJQBO6+hVVRsopnK20+mSUSHdAZYWE2nvyoqfWhrRb6L+iUv

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999

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Question 4.7

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Question 4.8

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999

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Question 4.9

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999

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Question 4.10

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While it would reward the more sustainable producers, by identifying less sustainable producers, there would be perceived negative associations with those products and brands. Companies that made those products would claim they were being penalized in the public’s mind.

Question

Short-Answer Questions

Smartphones are the fastest growing segment of the cell-phone market (more than 600 million were sold globally in 2011, and that number is expected to double in 2012). Smartphones require more electronics and more sophisticated batteries than simpler cell phones. Most cell-phone providers have recycling or disposal programs when consumers upgrade to a new phone. Most of these programs are not reviewed by outside agencies, so the fate of the cell phone is unknown.

Imagine if there were a proposal to create an ecolabel for smartphones (and all new cell phones) that gave details about the origin and ultimate destination of parts. You could see if the phone would be disassembled for parts in new phones, if the phone was produced in a low- or no-waste factory, and the ultimate fate of the phone when you recycled it.

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1) If the prices are similar, surveys have shown than the majority of consumers would buy the more sustainably produced good. This only worked if the consumer was familiar with the ecolabeling program and felt comfortable with their endorsement.

2) It would be hard to discover if the company were not living up to its advertising. Ecolabeling is very helpful here since the labeling organization audits companies to make sure that they are actually carrying out what they claim to be doing. Also, as is the norm with many businesses, small changes occur over a period of years, so most companies won’t change quickly.

3) Sustainability works only when the company is open about its practices—videos and presentations of results, ongoing audits by outside organizations, and a responsiveness to consumer questions. To be sure, consumers would really need to spend time researching all of these things themselves.

4) Typical consumer surveys say that 10% is about the most people will pay for sustainability.