The Resource Basis of Production and Consumption: An Economic Analysis

Abstract

Abstract Until recently, discussions in academic development economics did not include discussions about environmental issues. This chapter attempts to discuss emerging issues at the interface of environmental and development concerns. After introducing ecosystem functions and services and examples of environmental resources, the chapter discusses institutional failure and poverty as causes of environmental degradation. Conventional national accounts need to be adjusted using ‘accounting prices’ to reflect changes in the stocks of physical, human, and natural capitals, and their perceived values. The accounting prices for natural resources, which are tradable (or substitutes of tradable goods), can be estimated using a production function approach. The remainder of the chapter is devoted to issues such as the limitations of relying on ‘use values’, market failure arguments, public failure and erosion of local commons, and international failure and the erosion of global commons.