Essay Sample about the Role of Economics in Sustainability Development

Published: 2022-05-09
Essay Sample about the Role of Economics in Sustainability Development
Type of paper:  Essay
Categories:  Economics
Pages: 7
Wordcount: 1814 words
16 min read


This summary features a few important points on contemporary growth assessment with respect to the way the goals of sustainable development are being formulated and sustainability strategies are concerned with. The critics of economic growth that was not checked have once again emerged, however, some concepts have received political and public attention in the twenty-first century. These concepts include; solidarity economy retarded growth. The growth strategy in the twenty-first century can be classified into three major themes which include growth as an institution, growth as a phenomenon and lastly as an ideology. These themes provide varied points of view about the role played by economic growth in the policies to do with sustainable development (Tapio). There has been an urge for the economy to grow, the growing concern of the environmental influence has resulted in a technique of sustainable development based on the individuals understanding this term seems to be a paradox. Development simply implies a change while sustainability represents performance. No matter the consistency of this term in the economic thinking, it implies the choice of terms that increase objectives subject to its limitations (Adelman).the idea of sustainable development has various drawbacks associated with it, for instance, according to Batty 2001, a sustainable development and all its associated movements present a challenge and a chance to the field of agriculture together with resource economics. Various economists have come up with moderns of economics that incorporate sustainability. This essay is going to present an agenda of research and foundations of various concepts in the field of sustainable development. To achieve economic growth, there are challenges that oppose it in the environment, this calls for the introduction of standards that it implies. The economic research on sustainable development calls for the implementation of biophysical trends into economic standards together with multidisciplinary interaction on the result of enlargement of bio-economy which forms the largest part of the change.

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Risk Aversion

Investors who are risk averse will always run away from risks since they dislike them. These investors will, therefore, keep away from investments such as high-risk stocks. They always yearn to stay safe thus make investments such as dividend growth stocks, bonds, savings accounts as well as certificates of deposit.

Risk-averse strategies

For us to get a better understanding of risk aversion, we will need to first understand the following strategies as discussed below.

Saving Accounts: A stable return with almost no chances of risk investment could be realized when money is deposited in the savings account that yields more profit in a credit union or a bank. As mentioned earlier, investors who are risk averse get assured by insurance companies bearing in their minds that the government agencies ensure their money that is held in a saving account partially. When keeping money in a saving account, the ultimate goal at the end of the term would be the return realized in the end. Most of the accounts which are high yielding give fewer returns as compare to other saving investments.

Bonds: other investors who are risk averse would like to invest their money in corporate bonds. These bonds will always pay the investors a stable dividend. The corporate bonds are issued by companies which are established. There are other bonds which are issued by the local governments or state, these bonds are known as the municipal bonds. This class of bonds is preferred by the risk-averse investors because they have a more stable financial ability as opposed to corporate bonds. This does not mean that the corporate bonds are not saved, they are still saver because, in case of the insolvency of the issuing company, the investors will still earn their first payment of surplus money upon the company's creditors. The advantage of the municipal bonds is that they are exempted from state and federal taxes making them superior.

Certificate of Deposit: The return that is realized from this class of saving strategy is slightly more than that of the savings account. When investors make their investments here, they don't need an immediate access to their money. To get higher interest rates here, investors are therefore required to lock their money for long periods of time. In case an investor would like to exit before maturity, he or she would be charged a withdrawal fee.

Dividend Growth Stocks: This category is more appealing to those risk-averse investors since losses are offset by the predictable dividend payments in case of stock's price fall. Those companies whose dividend increase every year have their stokes purchased for capital indebtedness thus they don't exhibit constant volatility, however, in defensive sectors, stocks exhibit a continuous growth of dividend since these companies can steadily make money in the environments that are most economical. In this case, an investor has an option of reinvesting dividends to buy more shares.

Hyperbolic discounting

This is an economy which denotes the affinity for investors to progressively select a prize that is smaller sooner above another one that is higher sooner as the interruption takes place faster compared to later with time.

Applications of Hyperbolic

The discounting of exact standup to the precise well-being of the investors, hyperbolic discounting has subsequently been linked to the problems of the routine together with the self-control. I will use an example of overweight people to convey out this clearly. The people may understand that they require improving their health through an additional workout and a healthier diet. For the sake of the imminent, they promise to sacrifice all short-term decoys at the cost of the improved long-term plunders of enhanced health. Seemingly, they desire this since they practice a small discount degree of all plunders in the aloof imminent. Though, subsequently their following mealtime, they are not in a position to resist fight having the chocolate slab for pudding. They emphasize on the immediate preference that the chocolate cake slab can deliver and seriously discount the imminent plunders of improved health. They may once again aim to trail the diet in the near future after consumption of the cake. They have confidence in that next time they will need to, and be capable to, crack down the slab. Though these people actually need to pursue the routine that is essential for improved health, the instantaneous recompense from the short-term eccentricities sinks out the profoundly discounted forthcoming benefits of healthier ingestion. Their predilection for healthy simple consumption does not grip up in the moment of the heat. To help infer for drug habits, the same explanations have been put in use in postponement, and other associated difficulties of the determination. Hyperbolic discounting is also escorted by important concerns for how people select involvements over time. Given an immovable pool of incomes such as time and money, people might want to select an order of involvements to exploit their general pleasure. Inappropriately, hyperbolic discounting kinds this difficult. Individuals flop to take benefit of liked choices that become chiefly enjoyable only when infrequently practiced. For instance, the psychologist known as Richard Herrnstein suggests that person's pick substitutes above time such that the typical preference is the identical crosswise every substitute this is a process called melioration. In this case, people overemphasize on how much preference an element affords at the present rate of consumption. They should also put into consideration the possible preference that could be got by waiting to ingest an element. A steak feast might be particularly pleasant when consumed once a week or a month, yet develops to nothing superior when consumed every other day. In disparity, pizza influence endures abstemiously pleasant notwithstanding of the rate at which it is consumed. By meliorating amid the 2 choices, persons tend to fail to exploit their satisfaction. They choose their one of the greatest economists called David Laibson has not been let out. He also uses hyperbolic discounting to give reasons as to why people concurrently have huge debts on their credit cards which attract high-interest rates and the pre-retirement capital increasing at a lesser rate of interest. As foretold by the hyperbolic discounting function above, the plunders delivered by purchasing something nowadays frequently overshadow the discounted discontentment of forthcoming disbursements. This results in a substantial credit card obligation. Though, when discerning around their superannuation investments in the distant future, individuals use an ample lesser reduction rate for late loots. This kind it extra good-looking to capitalize on replacements which provide an advanced predictable yield in the end. Consistency with hyperbolic discounting, individual's speculation conduct displays endurance in the end and intolerance in the start of the investment. Individuals take to build up substantial credit card debts whereas likewise carefully gathering affluence in their homes and superannuation plans. The standard monetary interpretation of exponential discounting cannot simply give a justification for these own tradable choices by means of a sole persistent discount rate. Specific and Background alterations. The degree to which persons display hyperbolic discounting for forthcoming plunders rest on a number of influences. Some individuals demonstrate extra hyperbolic discounting as compared to others transversely greatest optimal circumstances. Persons also have a habit of showing not as much of hyperbolic discounting with the time of life, more satisfactory communal judgments, and extra hedonic somewhat serviceable involvements. In the same way, persons catch waiting for a superior recompense to be extra problematic once an instant prize is actually close to them, amenably observable, or incompletely identified, for example, noise and the aroma. Transversely these varied circumstances, the occurrences associated with hyperbolic discounting do not vanish, but instead, they just influence the behavior further or minus.

Mental accounting

In behavioral economy, mental accounting is the tendency of investors to put their money into distinct accounts founded on a diversity of particular standards, such as the foundation of the money and determined for each of the accounts. Notwithstanding the fact that numerous people make use of mental accounting, they might not be in a position to discover how irrational this mark of thinking actually is.

The prospect theory

Prospect theory is also a interactive economic philosophy. It defines a state whereby people choose between probabilistic theories and alternatives that involve risk but whose probabilities of outcome are unknown. The theory states that people make decisions based on the potential value of loses and gains other than the final outcome. It tends to demonstrate that people think in terms of expected utility. This theory was developed after a framing risky choices to show that people are loss averse. This means that people don't like losses more than equivalent gains. Individuals are willing to take risks to avoid loses.

In the traditional era, it was alleged the clear result of the profit and fatalities tangled with the type of choice are put together to extend a general assessment of whether a key is wanted or not. Academics tend to use the term utility to define enjoyment and struggle that we favor cases that exploit our usefulness.

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