Impact of Oil Spill in Gulf of Mexico on Economic and Social Well-being

This economic assignment discusses the impact of oil spill in Gulf of Mexico on economic and social well-being. It also evaluates the impact on ecology and how it can be measured through Happy Planet Index.

Running head: ECONOMIC ASSIGNMENT
Economic Assignment
Name of the Student
Name of the University
Course ID

1ECONOMIC ASSIGNMENT
Table of Contents
Workshop Question 1.................................................................................................................2
Thesis statement.....................................................................................................................2
Discussion..............................................................................................................................2
Workshop Question 2.................................................................................................................3
Thesis statement.....................................................................................................................3
Discussion..............................................................................................................................3
Workshop Question 3.................................................................................................................4
Thesis statement.....................................................................................................................4
Discussion..............................................................................................................................4
References..................................................................................................................................6

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Workshop Question 1
Thesis statement
“Impact of oil spill in the Gulf of Mexico can be measured on economic and social
well-being can be measured through Happy Planet Index”
Discussion
The Deepwater Horizon oil spill in the Gulf of Mexico is considered as an industrial
disaster which began on 20th April 2010. This is known as the largest marine water oil spill in
petroleum industry’s history. The oil spill is estimated to be 8 percent to 31 percent larger in
its volume compared to previously largest oil spill occurred in the Gulf of Mexico. On that
day, a high pressured methane gas from a well was expanded into drilling riser and rose into
the rig where it got ignited and exploded (Liu et al. 2016).
The oil explosion in the Gulf of Mexico impacted economic and social well-being by
adversely affecting the ecological balance. The fish and turtles living the marine water along
with the nearby grassland affected from the oil spills. The concern was related to how deep
the effect of oil glut on ecology. Many of the sea turtles died. The oil stuck in feather of the
birds reduced the capacity to thermo-regulate (youtube.com 2019). Maintenance of a healthy
wild life is not only important for their own sake but is also important for satisfaction of
human life. The impact of economic and social well-being due to the Gulf of Mexico
therefore can be evaluated in terms of Happy Planet Index. The index relates ecological
efficiency with the human well-being (neweconomics.org 2019). The particular index is
computed as a product of life satisfaction as estimated by gathering responses to international
surveys and life expectancy and then divide it by ecological footprint. Nations are in well-
positioned in terms of economic and social well-being when they can achieve higher

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satisfaction and better quality of health while having lighter impact on environmental
resources.
The people’s life in the coastal region depends on the ecology in terms of commercial
fishing, food and tourism. Following the incidence of oil spill in the region the wetland,
fisheries and associated services useful for ensuring human satisfaction were affected. The
impact on people’s well-being therefore can be best measured with Happy Planet Index.
Workshop Question 2
Thesis statement
“Keynesian policy responses can address the current problem in Australian
economy.”
Discussion
From the article it has been found that small businesses in Australian economy are
struggling to their debt burden following the economic downturn. There are thousands of
businesses that are getting a knock from the debt collectors. The retail business sector is
facing dramatic turmoil. Due to the economic downturn, items such as jewellery, perfume
and entertainment are suffering a declining demand (Taylor 2019). The retail sector thus is
experiencing an economic strain. The downturn in retail sector has further been caused due to
low wages and decline in job security. The problems that Australian economy are currently
facing include an increase in debt collection, increasing threat to jobs and worsening retail
condition.
The ongoing problems in the Australian economy can be addressed following
principles of Keynesian economics. The Keynes’ theory is primarily based on aggregate
spending in the economy and its likely impact on inflation and output. In order to address

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current economic downturn in Australia Keynes’ response is to boost aggregate demand.
Keynes’ recommended use of fiscal and monetary policy to increase aggregate demand.
Australian government should undertake expansionary policies to address current economic
downturn (Keynes 2018). The expansionary fiscal policy includes either increasing
government spending or lowering tax rate. Both the policies help to increase disposable
income and boost demand in the economy. In case of expansionary monetary policy, central
bank needs to lower the cash rate. As interest rate falls, there is an increase in investment
which stimulates aggregate demand as well.
As aggregate demand increases, production activities in the economy increases as
well. With expansion of production, there is an increase in labor demand. As demand for
labor increases unemployment automatically decreases. The increase in labor demand also
increase market clearing wage. The anticipated or unanticipated changes in the aggregate
demand has real term effect on output and employment (Tily 2016). With increase in
employment, demand in the retail sector increase helping the business to escape the debt
condition.
Workshop Question 3
Thesis statement
“Free Trade Does Not Protect Infant Economies”
Discussion
Free trade refers to the economic practice of liberalizing market from intervention of
government. Under free trade policy, countries are allowed to exchange goods and services
without any barriers such as tariffs, quotas and others. Free trade by eliminating barriers to
trade gives countries access to international market.

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Free trade is considered to be beneficial for all the participating nation. The direction
of trade is determined from the respective comparative advantages of a nation. A country
enjoys comparative advantage in a good when the country is able to produce the good at a
relatively lower opportunity cost compared to other nation. Free trade thus increases
efficiency in allocation of resources (Viner 2016). As resources are better utilized, poor
countries enjoy access to a larger amount of goods and services improving the quality of life.
There is however another side of the story. Poor countries face various difficulties in
the face of open competition with rich nation. Free trade more often seems to be not fair
trade. The adaption of free trade policy results in unequal business environment. Once a poor
nation signs free trade agreement, private sector of the countries is exposed to the
competition with private sector equally. The industries in poor countries are relatively weaker
compared to industries in advanced countries (Zhou et al. 2019). Free trade eliminating all
the protection from domestic economy exposes it to the foreign competitors.
The employment sector of poor nations likely to suffer adversely as the nation opens
to international market. The skilled workers of poor nation move to advanced countries to
enjoy a higher wage. Therefore, only cheap and unskilled labors are left for domestic market.
This again hampers quality of goods. The poor countries thus lag behind rich nation in the
open competition due to free trade.

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References
Keynes, J.M., 2018. The general theory of employment, interest, and money. Springer.
Liu, Z., Liu, J., Gardner, W.S., Shank, G.C. and Ostrom, N.E., 2016. The impact of
Deepwater Horizon oil spill on petroleum hydrocarbons in surface waters of the northern
Gulf of Mexico. Deep Sea Research Part II: Topical Studies in Oceanography, 129, pp.292-
300.
neweconomics.org 2019. The Happy Planet Index. [online] New Economics Foundation.
Available at: https://neweconomics.org/2006/07/happy-planet-index [Accessed 18 Jul. 2019].
Taylor, D. 2019. Retail conditions 'as bad as the GFC' driving small businesses to the wall.
[online] ABC News. Available at: https://www.abc.net.au/news/2019-06-19/australian-small-
businesses-struggling-amid-economic-downturn/11224246 [Accessed 18 Jul. 2019].
Tily, G., 2016. Keynes's General Theory, the Rate of Interest and Keynesian'Economics.
Springer.
Viner, J., 2016. Studies in the theory of international trade. Routledge.
youtube.com 2019. Gulf Oil Spill Effects On Wildlife. [online] YouTube. Available at:
http://www.youtube.com/watch?v=8Uax5FRWnvs [Accessed 18 Jul. 2019].
Zhou, L., Biswas, B., Fawson, C. and Saunders, P.J., 2019. Empirical Investigation of the
Impact of Multilateral Trade on Income Convergence Across Countries. The Journal of
Business Inquiry, 18(2), pp.68-81.