Environmental Economics

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“The world demand for commodities have increased considerably over the last 10 years, owing to the entering of China to the global capitalist economy, and the rapid growth exhibited by this country since then. This has brought about large increases in world prices of natural resources, such as food, energy and minerals”.

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In Bolivia, agricultural land generates on average three times as much GDP per hectare as standing forest (1), which is one of the reasons why the Bolivian government largely ignores the quarter million hectares of illegal deforestation that occurs every year.

However, forests provide many valuable functions that are not currently included in GDP (e.g. habitat for thousands of plant and animal species; carbon storage to protect against climate change; water capture, storage and cleansing for a cleaner and more stable water flow; recreational and aesthetic values; etc.). As long as all these benefits are not taken into account, natural forests stand little chance against other land uses.

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By: Lykke E. Andersen*

“Why is it that a child’s death amounts to a tragedy, but the death of millions is merely a statistic?” Patrick McDonald.

Human beings depend heavily on ecosystem services for their survival and well-being. Basic needs like drinking water, fresh air, food and construction materials are to a large extent provided to us by nature, as are more luxury services like spectacular views for expensive homes and eco-tourism activities.

However, many of the problems that ail humanity also come from nature and might be thought of as ecosystem disservices: Approximately 2 billion people are infected with the hepatitis B virus, making it the most common infectious disease in the world today. Close to a billion persons are infected with tuberculosis, which causes nearly 2 million deaths every year. Several hundred million people suffer from malaria and almost a million children die from it every year. About 50 million cases of dengue fever appear each year, and countless millions suffer horribly from other infectious and parasitic diseases, such as African trypanosomiasis (“sleeping sickness”), cryptosporidiosis, leishmaniasis, onchocerciasis (“river blindness”) and schistosomiasis.

In addition, the crops and livestock on which we depend for food are frequently assaulted by insects, fungi, viruses, weeds, bacteria and predators. Rainfall, which is great in the right amounts at the right time, can also cause huge disasters, if it arrives in the wrong amounts or at the wrong time.

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Bolivia’s current development model relies heavily on non-renewable natural resource extraction (especially natural gas and minerals) and the mining of nutrients from newly deforested soils for agriculture. This kind of activities clearly cannot be sustained forever. However, if the depleted natural capital is converted into other types of productive capital, it is still possible to leave future generations better off, in the sense of having more productive capacity. The maintenance of total productive capacity is the minimum requirement for weak sustainability.

Is Bolivia converting its natural capital into other types of productive capital? Or is it merely consuming its natural capital, leaving future generations with fewer options?

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Green National Accounting (1) corrects one of the flaws in conventional national accounting, which is ignoring the important role of nature as a source of inputs into production processes.

In some sectors these environmental inputs are very important (e.g. forestry, farming and fishing), while in other sectors they play a minimal role (e.g. banking, commerce and education). In each sector they interact with the two other conventional production factors, labor and capital, to produce the total GDP for the sector, but the proportions are different for each sector (see Figure 1 for the sectors with a significant environmental component):

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Climate change, water shortages, rising global pollution levels and food insecurity have made environmental sustainability the most pressing concern of our time. Improvements in production systems and agriculture, and advances in clean technology, will certainly help, but as the global population becomes more conscious of the issues facing us as a human race, we begin to ask ourselves what it is that we can do to help preserve our planet for centuries to come. More than in anything else, the answer to that lies in the diet choices we make.

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“The brain end the eye may have a contractual relationship in which the brain has agreed to
believe what the eye sees, but in return the eye has agreed to look for what the brain wants.”
Daniel Gilbert, Professor of Psychology at Harvard University

 Which would you prefer: 1) Winning 100 million dollars in the lottery, or 2) Becoming a paraplegic, impotent and confined to a wheelchair for the rest of your life?

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