Community Development Economics

1
Community Development Economics

• Prelude to CDAE 102

2
Investing in sustainable community development

• Capital investment
• What is capital?
• Produced means of production?
• Stock or fund that yields a flow of goods and
  services into the future.

3
Healthy communities are built on at least 4 types
of capital

• Built capital
• Infrastructure, businesses, etc.
• Traditional subject matter of economics
• Stock-flow and fund service
• Natural capital
• Ecosystem goods and services, including waste
  absorption capacity
• Stock-flow and fund-service

4
Healthy communities are built on at least 4 types
of capital

• Human capital
• Education and employment
• Always fund-service
• Social capital
• Trust, network of social relationships, norms and
  rules
• My definition would include social justice
• Always fund-service
• Political capital

5
The special relationship between built and
natural capitals

• Laws of thermodynamics
• Investment in built capital generally requires
  disinvestment in natural capital
• Depletion of raw materials
• Resource depletion and loss of ecosystem services
• Waste emissions and loss of ecosystem services

6
Investing in the 4 capitals

• Built
• Human made artifacts, traditional economics
• Humans as individuals
• Natural
• Passive
• Active

7
Investing in the 4 capitals

• Human
• Also traditional economics
• We are never more than one generation away from
  the deepest ignorance
• Social
• Humans as social animals
• Requires time with other members of the community

8
How do we decide which capital to invest in?

• What is are the desired ends?
• The law of diminishing marginal returns
• Equimarginal principle of optimization
• Which capital offers the highest returns at the
  margin?

9
What are the desirable ends?

• Sustainable increases in human happiness,
  satisfaction, quality of life
• Ecological sustainability
• Social justice
• Efficient allocation

10
What makes people happy?(from empirical
research, not assumptions)

• Money (but not very, and only relative wealth
  once basic needs are met)
• Desiring less
• The aspiration gap
• Friends
• Marriage
• Religion
• Helping others

11
What makes people unhappy?

• Pursuit of material gainyoung adults who focus
  on money, image and fame tend to be more
  depressed, have less enthusiasm for life and
  suffer more physical symptoms such as headaches
  and sore throats than others.
• Comparing yourself with others
• Status is a never-ending tread-mill

12
What do empirical studies suggest we should
invest in?

• We cant survive without natural capital
• Natural capital has become the limiting factor in
  economic growth
• We have an ethical obligation to future
  generations
• We have enough built capital and no longer enough
  natural capital

13
What do empirical studies suggest we should
invest in?

• What makes us happy?
• Social capital and human capital
• What makes us unhappy?
• Pursuit of material wealth
• Inequality
• Whats more sustainable?
• Sustainability is not a sacrifice. The pursuit of
  endless economic growth sacrifices happiness

14
So how do we deal with poverty?

• Dont we need to grow our way out of poverty?
• Weve been saying this for 200 years. The
  economy has increased in size 9X per capita in
  the last 100 years.
• If 90 of the increased wealth goes to the top
  10, and less than 1 goes to the bottom 20, how
  many more times must the economy double in size
  to end poverty?

15
The need for distribution

• Status is a treadmill that goes nowhere
• Excess wealth undermines democracy
• Why care about a sustainable future if we dont
  care about the well-being of poor people today?
• Why should poor people care about the future?

16
Exam

• About ¼ will be based on first ½ of semester
• Mostly short answer problem solving, there may be
  some multiple choice
• No definitions synthesis and applications
• You can bring one page with hand-written notes
• Practice exam will be ready today in two parts.
• Review session

17
Review session

• Monday, December 13? 9AM?
• Sunday, December 12?