CLASS  4:  ECONOMIC  ASPECT  OF  SUSTAINABLE  DEVELOPMENT  AND  SUFFICIENT  ECONOMY  PRINCIPLE

TU103:  Life  and  SustainabilityNuttavikhom  PhanthuwongpakdeeYanin ChivakidakarnHuyakorn

GENERAL  PERSPECTIVES  ON  SOLUTION  TO  SUSTAINABILITY  

Do  you  think  these  solutions,  namely  education  and  awareness  raising  are  effective  for  solving  the  unsustainability  and  achieving  sustainability?

Education Awareness  Raising

Major  problem  of  only  using  education  and  awareness  raising  • People  with  awareness  tend  to  be  taken  advantages  of  by  those  ignorant  people.

• The  ignorant  gets  all  the  benefit.

GENERAL  PERSPECTIVES  ON  SOLUTION  TO  SUSTAINABILITY  

ECONOMIC  PERSPECTIVES  ON  SOLUTIONS  TO  SUSTAINABILITY  

Action  choices

Sustainable  Action

Unsustainable  Action

Increasing  BenefitReducing  Cost

Reducing  BenefitIncreasing  Cost

POLLUTER  PAY  PRINCIPLE:  PPP

Polluters  pollute  and  cause  negative  externalities  for  society  and  the  environment.  The  polluters  must  pay  for  the  compensation  for  those  affected  and  recovery  of  the  damages.

Cost increases à Produce less à Pollute less

Examples  • Emission  Fee  :  • The  more  you  emit  pollution,  the  more  you  pay.  

• Cap-­and-­Trade  /  Tradable  Emission  Credit:  • The  government  caps  the  maximum  quantity  of  pollution  that  the  whole  industry  can  emit.  • That  maximum  quantity  is  divided  into  quotas/credits  and  distributed  to  firms  in  the  industry.  • The  firms  can  emit  only  within  the  quota.  • The  quota  is  tradable.  The  firms  that  need  to  pollute  more  need  to  buy  more  quota.  

POLLUTER  PAY  PRINCIPLE:  PPP

POLLUTER  PAY  PRINCIPLE:  PPPOil  spill  – Samet Island,  Rayong Province

Lower  Klity Creek  – Kanchanaburi Province

The Map  Ta  Phut Industrial  Estate

PAYMENT FOR ECOSYSTEM SERVICE: PES

Major Principles

• Participatory approach

• People in the area that benefit from ecosystem service should pay those who take care of the ecosystem.

• The ecosystem caretakers have more incentives to take care of the ecosystem.

Ecosystem ServiceIs

direct and indirect benefits from ecosystem contributing to human

well-being.

CASE  STUDIES:   MAE  SA  RIVER  BASIN,  CHIANG  MAI

Upstream

Downstream

Source:  Andreas Neef and Chapika Sangkapitux(2013),  Payments  for  Environmental  Services  in  Thailand:AReview  of  Discourses  and  Practices

WITHOUT  PES

Without  PES,  upstream  people  would  be  using  water  for  their  monocrop  farming,  polluting  it  with  pesticides  and  fertilizers.  

Water  shortageWater  contamination

Downstream  people  became  a  victim  of  the  behavior  of  upstream  people,  experiencing  water  shortage  and  water  pollution

Conflicts  between  upstream  and  downstream  people

WITH  PES

Upstream  people  become  service  providers,  taking  care  of  the  water  source  forest  ecosystem.  However,  they  would  have  opportunity  cost  from  not  doing  the  mono-­cropping  practices

Clean  water  can  flow  down  to  downstream

Downstream  people  are  beneficiaries.   Money  is  paid  back  to  the  

upstream  people  to  off-­set  the  upstream  people’s  opportunity  cost.

ROLES  OF  CONSUMERS,  COMMUNITIES,  PRIVATE  SECTOR  AND  THE  GOVERNMENT

Consumers Communities Private  Sector The  Government

CONSUMER  CHOICE

ConsumersMarket  of  

Goods  and  ServicesProducers

Consumers  can  influence  producers  by  their  choices.  Every  choice  the  consumers  make  will  send  signal  to  producers  about  the  product  and  production  methods  that  the  consumers  prefer.  

CONSUMER  CHOICE:  LABELS

•Labels  help  consumers  know  the  quality  and  production  methods.  It  reduces  information  cost  of  the  consumers.  

• Labels  are  usually  issue-­specific.• Organic  products• Eco-­friendly• Social  issues• Energy  efficiency  • Etc.

CONSUMER  CHOICE:  SHOP  LOCAL  PRODUCTS§ Local  food  systems  and  shorter  food  supply  chains  are  to  be  encouraged

§ Less  transportation  cost  and  less  burning  of  fossil  fuels

§ Traceability  of  product  is  key  to  ensuring  they  are  upholding  their  own  supplier  guidelines,  and  not  engaging  with  producers  who  violate  the  basic  human  rights  of  their  workers

§ Allowing  farmers  to  capture  a  higher  percentage  of  the  farm-­value  share

CONSUMER  CHOICE

ROLES  OF  COMMUNITIES:  NATURAL  RESOURCE  MANAGEMENT

Good  Examples:•  The  resistance  to  the  construction  of  Mae  Wong  Dam

•  The  resistance  to  the  construction  of  coal  power  plant  in  Krabi

ROLES  OF  COMMUNITIES:  NATURAL  RESOURCE  MANAGEMENT

TYPOLOGY  OF  GOODS  AND  SERVICES

§ A  good  is excludable if  people  (ordinarily,  people  who  have  not  paid  for  it)  can  be  prevented  from  using  it.§ A  good  is rival,  or subtractable if  one  person's  consumption  of  a  good  necessarily  diminishes  another  person's  consumption  of  it.

Excludability Non-­Excludability(or  difficult  to  exclude)

Rivalry(Subtractability)

Private  Goods:• A  good,  or  a  tangible  item  that  can  be  purchased  and  traded  within  a  market.

• One  cannot  eat  a  hamburger  that  is  being  eaten  by  someone  else.

Common-­pool resources• Impossible  or  infeasible  to  exclude  others  from  appropriating  the  good.

• One  individual's  use  of  the  resource  reduces  the  level  of  the  resource  available  for  other  users.

Non-­rivalry(Non-­subtractability)

Club  goods  (Toll  goods)• Certain  people  can  be  excluded  from  the  consumption  of  a  good.  

• one  person's  consumption  of  it  does  not  diminish  another  person's.

Public  goods• Individuals  cannot  be  effectively  excluded  from.  

• The  use of  good by  one  individual  does  not  reduce  availability  to  others.

ROLE  OF  COMMUNITY  IN  NATURAL  RESOURCE  MANAGEMENT

Common-­Pool  

Resources

Subtractability

Difficulty  of  Exclusion

Overexploitation  Problem

Free-­rider  Problem

+

Tragedy  of  the  Commons

=

TRAGEDY  OF  THE  COMMONS§ An  economic  issue  where  individuals  tend  to  exploit  shared  resources  so  the  demand  greatly  outweighs  supply,  and  the  resource  becomes  depleted.

§Work  of  Hardin,  G.  J.  (1968).  The  Tragedy  of  the  Commons.  Science  (Vol.  162).

ROLE  OF  PRIVATE  SECTOR

Private  Sector

3R/5R

Upcycling

CSR  à Sustainable  Brand

Innovation

PRODUCTS  THAT  CAN  BE  REMANUFACTUREDProduct  that  can  be  remanufactured  are  those  industrial  products  produced  by  manufacturing  process  such  as  automobile  parts,  electronics  appliances,  tractors,  medical  devices.

UPCYCLING• Upcycling  is  the  process  that  transforms  unwanted  material  or  debris  from  expired  products  into  new  products  that  are  eco-­friendly  with  higher  quality  and  value.  

• Worn  Again,  a  private  company,  is  an  example  of  upcycling.  It  uses  unwanted  material  to  produce  products  in  fashion  industry.

CORPORATE  SOCIAL  RESPONSIBILITY  (CSR)“A  business  approach  that  contributes  to  sustainable  development  by  delivering  economic,  social  and  environmental  benefits  for  all  stakeholders.”  (Financial  Times).

Why  companies  have  to  do  CSR?  

-­ Consumers’  satisfaction

-­ Employees’  satisfaction

-­ Positive  corporate  images

-­ New  business  opportunity  

-­ Cost  reduction

TYPES  OF  CSREnvironment§ Activities  on  environmental  conservation  or  rehabilitation,  e.g.  mangrove  reforestation

Community  Development§ Working  with  community  or  other  organizations  to  improve  the  villagers’  livelihood

Social  Marketing§ Producing  advertisement  that  addresses  social  problems  or  raises  public  awareness

Human  Resource§ Projects  that  improve  wellbeing  of  its  employees

Charity§ Donating  money  to  partner  non-­profit  or  non-­governmental  organization

CSR  CRITIQUE:  GREEN  WASH  

CSR  CRITIQUE:  SOME  CSR  DESTROY  LOCAL  ECONOMY

FROM  CSR  TO  SUSTAINABLE  BRAND

Normal  Brand-­ Differentiation  from  your  competitors

-­ Driven  by  market-­ Focus  on  consumers-­ Focus  on  ads-­ Focus  on  Brand  Loyalty

Sustainable  Brand-­ Contribute  to  sustainability  of  the  world,  society  and  consumers.

-­ Ethics  and  Public  mind-­ Brand  empowerment-­ Action  speaks  louder-­ Brand  lover

GOVERNMENT  AND  SUSTAINABILITY• Although  the  government  has  the  authority  and  resources  to  lead  society  to  sustainability,  there  are  many  limitations.

• The  government  can’t  order  things  to  happen.  They  need  a  proper  plan  and  strategy.

• It  can’t  do  several  things  by  itself  because  of  inefficiency  of  bureaucratic  system  and  other  limitations.  Therefore,  they  need  to  have  strategies  to  work  with  different  group  of  people.

• It  cannot  force  people  to  do  things  just  because  the  government  says  so.  They  need  to  use  different  incentives  to  convince  other  actors  to  behave  the  way  they  want.  

• Government  agencies  must  foster  horizontal  and  vertical  Integration  to  promote  Integrated  resource  management  in  Thailand• Promote  more  bottom-­up  policy  formulation  and  more  decentralized  power.• Promote  Future-­oriented  Society  (Forward  thinking  society)

GOVERNMENT  AND  SUSTAINABILITY

THE  KING’S  SPEECH  (UNOFFICIAL  TRANSLATION)

“…Country  economic  development  needs  to  be  done  step-­by-­step.  Starting  with  making  sure  that  majority  of  the  population  have  access  to  food  and  other  necessities,  using  methods  and  equipment  that  are  economical  but  right  by  academic  principle.  

Once  this  goal  is  achieved,  we  then  aim  for  higher  economic  status  and  prosperity…

The  King’s  speech  given  in  the  graduation  ceremony  of  

Kasetsart University  (1974)

“…Country’s  development  path  and  people’s  livelihood  have  been  changing  all  along  because  of  the  abnormality  of  global  economic,  social  and  political  situation,  which  is  inevitable.  

This  means  we  need  to  be  careful  and  sustain  ourselves  by  having  frugal  livelihood  for  our  survival  and  progress…”  

The  King’s  new  year  speech  (1980)

“…being  Asian  Tiger  is  not  important.  What  important  is  we  have  sufficient  economy,  which  means  we  can  support  ourselves.  I  also  said  that  sufficiency  does  not  mean  that  every  family  has  to  produce  food  by  themselves,  weaving  clothes  for  themselves,  that  is  too  much.  But  in  a  village  or  a  district  needs  to  be  sufficient  at  some  degree.  Some  products  that  you  can  produce  more  than  what  you  need,  you  can  sell.  But  sell  in  a  nearby  market,  not  wasting  too  much  transportation  cost...”

The  Sufficiency  Economy:The  economy  that  is  self-­reliant,  resilient,  and  

immunized  to  shocks.

THE  KING’S  SPEECH  (UNOFFICIAL  TRANSLATION)

“Sufficiency  economy  as  “Self-­sufficiency”  (at  individual  level)  is  not  what  I  have  in  mind.  What  I  have  in  mind  is  “Self-­Sufficiency  of  Economy”.  

For  instance,  if  a  person  wants  to  watch  TV,  you  should  let  him,  not  limiting  him  from  buying  TV.  He  wants  to  watch  it  for  fun.  … However,  in  a  remote  place  I  visited,  the  village  has  no  electricity,  having  a  TV  to  be  extravagant  is  like  people  with  no  money  cut  a  suit  and  wear  Versace  necktie.  This  is  too  much.  (2001)

Explanation  of  Sufficiency  Economy  Philosophy  given  by  H.M.  King  Bhumibol,  at  Klai Kung  Won  Palace,  on  January  17th 2001

DEFINITIONS  OF  BASIC  CONCEPTS  OF  SEP

Moderation:

A  moderate  mindset  seeks  to  avoid  

extremes–balancing  between  punitive  austerity  

and  unaffordable  extravagance,  between  self-­deprivation  and  over-­indulgence,  and  between  

tradition  and  modernization,  and  between  full  self-­sufficiency  and  dependency

Prudence

Prudence  means  to  be  mindful  of,  prepared  for,  and  conduct  oneself  so  as  to  be  able  to  ward  off  foreseeable  upheavals  or  damage  to  oneself.  

Reasonableness

Reasonableness  has  to  do  with  the  impact  that  decisions  and  actions  have  on  others,  that  is,  how  valid  and  fair  an  action  or  a  process  is,  

or  has  been.