Circular Economy

This NBER Working Paper analysis critically examines the integration of the circular economy (CE) concept within economic research, as discussed in the document "The Circular Economy." The document argues that the circular economy has largely been explored outside traditional economic frameworks, focusing primarily on engineering, architecture, and non-economic social sciences. For instance, in engineering, the circular economy has been applied in designing products that can be easily disassembled and recycled.

Architecture has been used to create buildings that minimize energy consumption and waste production. It has been studied in the context of sustainable development and social equity in non-economic social sciences. It highlights a significant gap in economic research concerning how CE principles interplay with market failures, distributional equity, and policy efficacy. The paper asserts that economists have only tangentially touched upon the components of CE—like resource extraction and waste management—without fully integrating these elements into a cohesive economic model that addresses market failures comprehensively.

The paper reviews how current economic policies might?be realigned?to support CE principles, emphasizing the need for policies that balance economic efficiency, equity, and environmental protection. However, this realignment has its challenges. For instance, transitioning to a circular economy may require significant upfront investments in new technologies and infrastructure, which could strain public budgets. It also advocates for an economic perspective that does not merely apply existing theories but rethinks economic incentives and structures to foster a more sustainable and equitable use of resources.

Through a detailed literature review and conceptual analysis, the interdisciplinary nature of CE can enrich economic models by incorporating a broader understanding of resources as both economic inputs and outputs with significant environmental and social implications. It urgently calls for a paradigm shift in economic thinking from a linear to a circular approach, where waste reduction and resource efficiency are not peripheral concerns but central to economic planning and policy-making.

Questions:

1) How did the initial economic theories regarding resource extraction and waste management fail to predict or address the complexities of modern environmental challenges that CE seeks to mitigate? ??

2) How can current economic policies be recalibrated to better support circular economy practices without compromising economic growth and social equity? ??

3) What are the potential long-term impacts of fully integrating circular economy principles into mainstream economic models and policies? ??

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Fullerton, D. (2024). The Circular Economy.?NBER Working Paper No. 32419. Retrieved from https://lnkd.in/d83pived.

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