BIOECONOMICS
BI1201 Introduction to Life Sciences and Technology School of Life Sciences and Technology
March, 2015
Contents
Background &
Definition
Bioeconomics vs. Conventional
Economics
Scope
Processes in Bioeconomy
Trend in Biobased Economy
Green Economy
Background
Biobased economy emerged as result of four main phenomena
Internationalization &
globalization
Debut of biotechnology in global market
Advances in biology (especially molecular biology) signal the prospect
of a new generation of products and services
Environmental catastrophe (global warming, climate
change, etc.)
Bioeconomy emerged as a transition to a post-petroleum society
Definition
Economy
How to fulfill people’s needs &
wants.
- On anykind of resources utilization.
- It can be from perpetual, non-renewable and
renewable resources.
Bioeconomy
How to fulfill people’s needs &
wants on bioresources.
In other word, it’s to use bioresources, convert them into goods & services to fulfill people’s needs & wants.
LANDCSAPE/ECOSYSTEM WILDLIFE BIORESOURCES
DOMESTICATED BIORESOURCES BIOPRODUCTS
OBJECTS OF BIOECONOMY
Scope & Process in Bioeconomy
PRODUCTION
DISTRIBUTION
CONSUMPTION
Bioresources
& Energy
Solar Energy
ConsumerFirms
Supply
Demand
Input
Output
Waste
(Energy &
Materials)
ECONOMY ECOSYSTEM
Recycle/Recovery
Concepts in Bioeconomy Process
• Collecting & processing
bioresources & manufacturing them into bioproducts.
Production
• Transporting bioresources or
bioproducts from manufactures to consumers.
Distribution
• Purchasing & using the
bioresources/bioproducts.
Consumption
Concepts in Bioeconomy Process
• Supply is a stock of a resource from which a person or place can be provided with the necessary amount of that resource.
• Demand is market request on bioresources/bioproducts.
• Supply and demand is the amount of a commodity,
bioproduct, or service available and the desire of buyers for it, considered as factors regulating its price.
Supply
&
Demand
• Bioeconomy process is a system, so it has stock & flow.
• Example of stock: bioresources reserve in ecosystem.
• Example on flow: distribution of goods & services.
Stock &
Flow
The Demand Function
An equation representing the demand curve Q
xd= f(P
x, P
Y, M, H,)
– Q
xd= quantity demand of good X.
– P
x= price of good X.
– P
Y= price of a substitute good Y.
– M = income.
– H = any other variable affecting demand
The Supply Function
An equation representing the supply curve:
Q
xS= f(P
x, P
R,W, H,)
– Q
xS= quantity supplied of good X.
– P
x= price of good X.
– P
R= price of a related good
– W = price of inputs (e.g., wages)
– H = other variable affecting supply
Simple Supply and Demand Curve
The Equilibrium of Supply and Demand
Equilibrium price
Demand Supply
$2.00
6 8 10
0
Equilibrium
Equilibrium quantity
Quantity of Ice- Cream Cones Price of Ice-
Cream Cone
4 2
1 3 5 7 9 11
Trend in Biobased Economy
For biobased economy emerged mostly caused by advancing biotechnology, people often confuse to think that bioeconomy is all about industrial biotechnology.
Yet, as the environmental catastrophe increases the awareness of human being on environmental issues, there are another paradigms in biobased economy which are being trend nowaday. The environmental and ecological economics. They are part of the green economy.
BIOTECHNOLOGY BASED ECONOMICS
ENVIRONMENTAL ECONOMICS
ECOLOGICAL ECONOMICS
Paradigms in Green Economy
Environmental Economics
It uses neoclassical economics mainstream methodology to investigate the connections between the socio-economic system and the environment.
Ecological Economics
It uses the holistic approach in ecological, economical and
social methodology to
investigate the connections between the socio-economic system and the environment.
Issues on Green Economy:
Ecosystem Services Tragedy of the Commons
Externalities
Valuation on Bioresources
Green Production & Consumption Ecological Footprint
Bioresources for Goods & Services
GOODS
Tangible items purchased to fulfill needs & wants
SERVICES
Intangible tasks performed in exchange of something of value, such as money
As bioresources are contained in environment or ecosystem, then emerged a specific term of Ecosystem Services
Ecosystem services are benefits for human being from processes or structure within ecosystems that give raise to a
range of goods and services
the nonmaterial benefits people obtain from ecosystems through spiritual enrichment, cognitive development, reflection,
recreation, and aesthetic experiences
the products obtained from ecosystems
the benefits obtained from the regulation of ecosystem
processes
Services needed for the production of all other
ecosystem services
GOODS
SERVICES
SERVICES
Tragedy of the Commons
“Held in common” means the resource is owned by no one or owned by a group, a.k.a. all have access to the resources.
Common Resources
1. Air! No one owns the air-avail to all 2. Water in oceans & rivers is avail to all.
3. Fish of the sea avail to all.
Note: First codified by Romans in 535 AD.
+ +
+ +
+ +
- +
+
Tragedy of the Commons
Tragedy of the commons is a dilemma arising from the situation in which
multiple individuals, acting independently
and rationally consulting
their own self-interest,
will ultimately deplete a
shared limited resource
even when it is clear that
it is not in anyone's long-
term interest for this to
happen.
Externalities
• When one person’s
actions imposes a cost or benefit on the well- being of a bystander.
• It can be positive (e.g.:
research) or negative (e.g.: pollution).
• Externalities cause markets to allocate
resources inefficiently and usually result in market failure.
Negative externality of water pollution
Positive externality of research
Environmental Externalities
• Environmental
externalities mostly
happened caused by the negative externalities in production.
• Because of the
externality, the cost to society is larger than the cost to producers.
• The market overproduces and charges a price that is too low.
S = MPC to Firm
D = MB to Society
PR IC E
QUANTITY MSC
MC is the private cost to the firm.
Marginal social cost (MSC) is cost to society = MC + externality
Valuation on Bioresources
Market failures by externalities & tragedy of the commons are examples on how important is to value the
bioresources & environment as whole.
Environmental valuation is measurement of both the value of environmental resources (including bioresources) and the value of changes in the level of environmental quality.
This is essential information when comparing the benefits of environmental policy against the costs of obtaining
those benefits.
Mindset in Valuation
Value of ecosystem services
Decision-Making
Ecosystems
Ecosystem services
Ecological production function
Economic valuation methods
Human actions Information &
Incentives
Valuation Methods
Revealed Preferences
Preferences
Stated Preferences
Market-Based Surrogate Markets Non-Market Based
Factor of Production
Producer/
Consumer Surplus
Defensive Expenditures
Hedonic Pricing
Travel Cost
Contingent Valuation
Choices Experiment
Green Production & Consumption
Ecological Footprint
Area of land required to provide all needs and to absorb all the waste generated from activities of a
population (Wackernagel and Rees, 1995).
Components
1. Growing Crops 2. Grazing Animals 3. Harvesting
Timber
4. Catching Fish
5. Accommodating Infrastructure
6. Absorbing Carbon
Dioxide Emissions
National Footprints
• In U.S. each person uses about 9.7 ha/person
• Worldwide average = 2 hectares/person
• Therefore if everybody were to adopt the U.S.
consumptive style, we would need 5 planets.
Mid-test!!!
• The mid-test will be held at Friday, March 20
th, 2015
• Test Rooms:
– Engineering Class in 9020 (odd student number) and 9021 (even student number)
– Science Class in 9232
• Materials
– Introduction till Biomanagement – Documentary Film: 11th Hour
