ECON 155 Lecture Notes - Lecture 24: Coal Pollution Mitigation, Social Welfare Function
Pollution in the City April ,
• Sustainability
o Jiag ad Zheg’s odel is preised o a tradeoff etee eooi groth ad pollutio
▪ Economic growth: measured in capital stocks
o No place in the model does it account for citizen or the public; it is the state and the consumer
• Goods production
o There is a positive correlation between goods production/economic growth and pollution
o To optimize utility, municipalities along the YRD need to coordinate their efforts to make change
• Strategic interaction
o Coordination is lacking because strategic coordination among municipalities is lacking because each
municipality is rewarded for growth, not for pollution abatement and aggregate utility
• Foreign trade
o If China were a closed market, then sustainability would be far easier to attain
o The local market would have to then live with the consequences of their decisions
o Economic growth rests on a highly articulated consumer base which China is now only beginning to realize
o The consumer base rests on the abstract character of labor, time, and value = capitalism
o This consumption, in theory, is infinitely expandable – how far should I expand my consumer base?
o Contractions arise when economies fail to expand, meaning that each country must expand indefinitely
o China is in the unenviable position of relying upon foreign trade (exports) to fuel economic growth
o You only adopt technology under the circumstance when the adoption of technology is cheaper than labor
• Findings
o Only a coordinated federal plan for pollution mitigation will satisfy the condition of sustainability
o Only a globally coordinated plan will bring growth into line with sustainability carbon targets
• The problem
o Possible solution to YRD coordination problem:
▪ Shift incentive structure to favor pollution mitigation more than it does at present
▪ Shift towards domestic consumption in order to gain more control over growth/pollution trade-off
• Then shifts carbon to other countries outside of China
o Beijing has also proven marginally more responsive and flexible in pollution mitigation than either
Washington
▪ Beijing is not bought by the highest bidder, like the US is
▪ Want to be more like Germany by moving industries to the top of the income hierarchy (ie:
pharmaceuticals, chemicals)
▪ If you have an effective centralized government, then something else is compromised (the citizen)
▪ The citizen can still have some voice in the decisions and play some role
o Beijing is still able to muster significant centralized control over the economy at the expense of market
efficiencies when it wants to
o There might be a positive correlation between democracy and inflected pollution mitigation
▪ Where education is highly differentiated, state actors step into the breach
o In China, the education function is high but the social welfare function is modest to low
▪ The democratic function is negligible
▪ Loal ad regioal deisios are ietiized etrally, so e do’t ko ho either osuers or
citizens would vote
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