GEF

Unit 7  |  The Economics of Sustainability 147 choose to move money from slow-growing to fast-growing investments. This tendency makes economic growth nec- essary for economic wellbeing, regardless of its impact on ecological or social health. Usually, economic growth is measured by gross domestic product (GDP) . GDP is a broad measure of a country’s overall economic activity. According to World Economics, Ltd., between 1965 and 2015, the global economy grew by an average of 3.8%. Much of this growth has been driven by the development and increased use of technology. For example, the Green Revolution in agriculture in the developing world doubled crop yields in just a few decades. Energy efficiency has also significantly increased. TheWorld Watch Institute estimates that world production in the year 2000 required only 20 percent as much energy per unit of production as in 1800. Although economic growth provides many benefits, it also presents many challenges to sustainability, including increased resource depletion, pollution, and inequality. 7.2  Market Failures and Externalities In the classical model of economics, goods and services are produced and consumed within a free and competitive system. According to classical economics, a firm competes with many other firms to acquire resources and to produce goods at the lowest possible cost. This theoretical ideal is disrupted when market failures occur. Market failures occur when economic markets produce negative results for society or the environment. A monopoly is one type of market failure. This occurs when a company controls the market with little or no competition. In modern society, oil companies function as near monopolies, since only a handful of these companies are large enough to compete globally. Without government regulation, monopolies typically limit supply to keep prices and profits higher than in ECONOMIC GROWTH Increase in economic activity, normally measured by the rate of goods and services provided, investment, and government spending. GROSS DOMESTIC PRODUCT (GDP) The monetary value of all the finished goods and services produced within a country’s borders in a specific time period. GREEN REVOLUTION A series of technological developments in agriculture, such as high-yield crops, irrigation, and increased pes- ticide and fertilizer use, which are credited with increasing agricultural production in developing countries. ENERGY EFFICIENCY Using less energy to achieve the same level of goods or services. MARKET FAILURE In economics, a situation where free markets fail to allocate resources efficiently, producing a negative result for society, such as resource depletion or pollution. MONOPOLY An economic situation where there is a single provider of a good or service.