Health and Wealth Around the World Day 3. Douglas J Young Professor of Economics Emeritus MSU

Transcription

1 Health and Wealth Around the World Day 3 Douglas J Young Professor of Economics Emeritus MSU

2 Day 3 1. Feedback 2. Development and the Environment 3. And of course, Hans Rosling

3 1. Feedback GDP as an Indicator of Human Welfare Tells a lot But is not complete: Health, Freedom, Social Structure, etc How DOES one Add Measures of Health, Education, etc. together?

4 UN Human Development Index HDI as a holistic measure of living levels = 1/3*[Log (GDP/capita at PPP) - Log(100)]/ [Log(40,000) Log(100)] + 1/3*Life Expectancy Index + 1/3*(2/3*Adult Literacy+1/3*Enrollment Index) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-4

5 Results Components of HDI are highly correlated with each other Best Single Measure of Development is Income per Person? But Sterile Debate: We can look at more than one Indicator Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-5

6 Development and the Environment 1. Developing Country Perspective 2. Income and the Environment 3. Property Rights and Effective Government 4. Are We Running out of Resources? 5. Global Warming

7 Developing County Perspective Gapminder.org/Videos Hans Rosling and the Magic Washing Machine

8

9 Botswana Bore Hole

10 A Man and His Latrine

11 Poor Sanitation Linked to Malnutrition in India New research on malnutrition, which leads to childhood stunting, suggests that a root cause may be an abundance of human waste polluting soil and water, rather than a scarcity of food. Hannah Fairfield quoted by The New York Times, July 13, 2014

12 If you don t take your malaria pills and don t sleep with your bednet

13

14 2. Income and the Environment Some of the Worst Environmental Problems are Ameliorated by Income: e.g. Access to Clean Water, Latrines Bednets, Clean(er) Fuels But Some Environmental Problems are Worsened: Pollution from Largescale Industry, Autos, etc

15 Environmental Kuznets Curve As Income per person increases, Pollution First Increases, but Eventually Decreases Basic Idea: As Income Increases beyond a certain level, so does People s Willingness to Pay for Environmental Quality Examples: US, Europe (over time and v. India, China, Egypt, Mexico) Copyright 2009 Pearson Addison-Wesley. All rights reserved

16 Kuznets Curve - 2 Evidence across Countries and Over Time: Yes for Particulates, SO 2, N 2 O; but No for CO 2 (so far) Not by Income Growth Alone Free Press Private Ownership of Industry Well-functioning regulatory and judicial systems that are responsive to the citizens (ie Good government) Copyright 2009 Pearson Addison-Wesley. All rights reserved

17 3. Property Rights and Effective Government Common Property Resources are Susceptible to Overuse, particularly if Government is Weak, Corrupt, and/or Extractive

18 Common Property Resources Not Owned Privately Often, owned by Government Sometimes not owned at all Examples: Wildlife, Forests, Common Grazing Lands, Groundwater, Whales, Salmon

19

20

21 Why? Deforestation Fuel for cooking Land cleared for agriculture Lumber production Results: Increased erosion and flooding Loss of biodiversity, Reduced CO 2 absorption Copyright 2009 Pearson Addison-Wesley. All rights reserved

22

23

24 UN Food and Agricultural Org (FAO) Rate of Deforestation is Declining but Remains High Losses Largest in Africa and S. America Tree Planting is Reducing Net Loss Copyright 2009 Pearson Addison-Wesley. All rights reserved

25 4. Are We Running out of Resources? There not making any more of that stuff! Economics: As Reserves Decline, Prices Rise => Incentives for Conservation Incentives for Development of Alternatives

26 Running out of Oil? Year Proven Reserves (Billion bls.) Consumption (Billion bls./yr) Years Remaining Reserves/ Consump tion Year Oil Runs Out US Energy Information Administration

27 Running out of Oil? Year Proven Reserves (Billion bls.) Consumpti on (Billion bls./yr) Years Remaini ng Reserves/ Consump tion Year Oil Runs Out , US Energy Information Administration

28 Crude Oil Prices

29

30 Running out of (Natural) Gas? Year Proven Reserves (Trillion s cubic feet) Consumpti on (Trillions cubic feet/year) Years Remaini ng Reserves/ Consump tion Year Oil Runs Out , , US Energy Information Administration

31 5. Global Warming As Greenhouse Gases (CO 2, Methane,?) Accumulate In Atmosphere, Global Average Temperatures Rise Sea Levels Rise Precipitation Increases Some Places And Decreases In Others Storms Increase In Severity; Prolonged Droughts Copyright 2009 Pearson Addison-Wesley. All rights reserved

32 Global Warming - 2 Great Uncertainty About Timing And Magnitude Of Impacts, Particularly In Specific Locations But Likely That Impacts Largest In Poor Countries Lowland Coastal Areas Of Asia (Sea Levels, Storms) Drying In Sub-Saharan Africa Copyright 2009 Pearson Addison-Wesley. All rights reserved

33 Global Warming - 3 Populations in LDCs are most vulnerable because Depend On Subsistence Agriculture and Fishing Poverty Makes It Difficult to Adapt by Changing Locations and Employment Copyright 2009 Pearson Addison-Wesley. All rights reserved

34 Global Warming - 4 Economics of Global Warming Public Bad : Everyone in World Consumes Climate Change, Regardless Of Source Solutions: Prevention Adaptation Copyright 2009 Pearson Addison-Wesley. All rights reserved

35 Global Warming - 5 Prevention: Reduce CO 2 Emissions Economics: Seek Least Costly Methods /natural_resources/the_carbon_productivity_ch allenge Copyright 2009 Pearson Addison-Wesley. All rights reserved

36 Global Warming 5.5 Prevention: Reduce CO 2 Emissions Tax and/or Tradable Emissions Permits => Incentives to Reduce CO 2 Emissions Free Rider Problem: Incentive For Each (Person, Company, Country) To Let Others Bear Costs Of Reducing Emissions => International Cooperation Required (May Be Main Problem) Copyright 2009 Pearson Addison-Wesley. All rights reserved

37 Global Warming - 6 Prevention: Offset CO 2 with SO 2 Emissions? Levitt and Dubner Superfreakonomics Will technology again save humanity, just as it has done since Malthus time? Stay tuned Copyright 2009 Pearson Addison-Wesley. All rights reserved

38 Global Warming - 7 Additional Reading (for those interested) US Congressional Budget Office, Policy Options for Reducing CO 2 Emissions, February, 2008 Nordhaus, William The Challenge of Global Warming: Economic Models and Environmental Policy, Yale University, July, 2007 Copyright 2009 Pearson Addison-Wesley. All rights reserved

39 Summary Bad and/or Declining Environmental Conditions are Associated with Poverty, esp Indoor Air and Water Pollution Deforestation and Soil Erosion Causes: Lack Of Income/Willingness to Pay for Clean Air and Water (People Don t Prefer Dung as Cooking Fuel) Government Failure To Account For Adverse Environmental Impacts Copyright 2009 Pearson Addison-Wesley. All rights reserved

40 Summary - 2 Economic Growth (Poverty Reduction) Is Likely to Lead to Better Not Worse Environmental Conditions for Many Poor People in Developing Countries Copyright 2009 Pearson Addison-Wesley. All rights reserved

41 Summary 2.5 Even If Economic Growth Worsens Some Environmental Conditions, These Costs Must Be Balanced Against The Benefits Of Growth: Reduced Poverty And Infant Mortality Higher Life Expectancy, Etc. Copyright 2009 Pearson Addison-Wesley. All rights reserved

42 Summary - 3 Caveat 1: Government Quality China Is Nearing the Turning Points Of Environmental Kuznets Curves Will A Non-Democratic Government Without A Free Press And Profiting From Ownership Of Many Polluting Industries Begin To Address Environmental Issues? Copyright 2009 Pearson Addison-Wesley. All rights reserved

43 Summary - 4 Caveats: Global Warming How Large Will Impacts Be? Will Nations Succeed In Cooperating, Or Will Free-riding Prevail? What Technological Changes Will Occur? Copyright 2009 Pearson Addison-Wesley. All rights reserved

44 (Good) Government is Crucial for Alleviating Poverty AND Environmental Improvement Education Health Infrastructure Well-functioning Regulatory and Judicial Systems

45 Next Time Rural Poverty Migration to the Cities International Trade