BroaDer Circular Flow MoDel
Economics 12 Pennington Fall 2011
Biosphere Outputs: Wastes and pollution(to sinks)
Businesses/ Firms Lan
r, C a
$ (Wages, Rent, Consumers Interest, and Profits)
d, l a
Economic Resource Market ity
a d, l
e ntr dE
Input: Natural Resources and environmental services (Sources) Waste Heat
Sustainability â€œliving our lives in such a way that we are not undermining the ability of the future generations to lead their lives, to sustain their needsâ€?. ~The Brundtland Commission, convened by the United Nations Why Include the Ecosystem?
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 flow and can measure carrying capacity as well as deliver the basic concept. Including the ecosystem also allows more valued to be placed on Sustainability.
Sources and Sinks Explained 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
Failure of the Traditional Model
The standard model is inaccurate because it suggests that the real flow (resources and goods and services) and the counter monetary flow allow the cycle to be self perpetuating and not need other inputs, which this is incorrect because the cycle needs energy inputs and waste/pollution flow 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.