broader ecological flow model updated

Product Market

Economic Resource

Market

$ (Revenues)

$ (Wages, Rent, Interest,

and Pro�ts)$

$Goods and Services Goods and Services

Land, labor, Capital, and Entrepreneurial ability

Land, labor, Capital, and Entrepreneurial ability

Biosphere

Outputs: Wastes and pollution(to sinks)

Input: Natural Resources and environmental services (Sources)

Solar Energy

BroaDer Circular Flow MoDelHarris

Why Include the Ecosystem? Sources and Sinks Explained Failure of the Traditional Model

Economics 12Pennington

Fall 2011

Households/ Consumers

Businesses/Firms

“living our lives in such a way that we are not undermining the ability of the future generations to lead their lives, to sustain their needs”. ~The Brundtland Commission, convened by the United Nations

Sustainability

The standard model is inaccurate because it suggests that the real �ow (resources and goods and services) and the counter monetary �ow allow the cycle to be self perpetuat-ing and not need other inputs, which this is incorrect because the cycle needs energy inputs and waste/pollution �ow out the system. In our current economic system the limits that our natural environment has are completely ignored; the system assumes that they are limitless as a resource and limitless in its capacity to absorb our waste.

The inclusion of the ecosystem allows use to see the economy as part of a larger structure. Environmental economists taking a holistic approach by including the economic cycle with the environmental cycles like the carbon, nitrogen, water and life, and sources/sink cycle. This holistic approach focuses more on total energy �ow and can measure carrying capacity as well as deliver the basic concept. Including the ecosystem also allows more valued to be placed on Sustainability.

A source is the place or compartment from which a substance comes while a sink is the place or process that takes the substance out of circulation. For example, young growing forests are a carbon sink, while the burning of fossil fuels is a carbon source. ~Australian Academy of Science

Waste Heat