British Academy: The UK's National Academy for the Humanities and Social Sciences

Partha Dasgupta: 'The Economics of the Environment'
Copyright © The British Academy, 1996
Printed in Proceedings of the British Academy, Volume 90, pp. 165-221

2. The Neglect of Ecological Economics

Given the importance of the environmental resource-base in our lives, you would think that ecological matters must be a commonplace furniture of economic thinking. But you would be wrong. Not only are environmental resources only perfunctorily referred to in economics textbooks, they are also cheerfully ignored in economists' public pronouncements. Indeed, as a profession, it has been normal practice for economists to regard the environmental resource-base as an indefinitely large and adaptable capital stock. This has enabled them not only to offer macroeconomic advice to political leaders, but also to encourage the lay public to aspire to levels of consumption, that are consistent only with unlimited growth possibilities in material output. Macroeconomic models involving long run production and consumption possibilities typically make no mention of the environmental resource-base; the implicit assumption being that natural resources aren't scarce now, and won't be scarce in the future. It is small wonder that ecological economics remains a fringe activity of what one could call "official" economics. It is an unfortunate state of affairs. [note 8 (go to Notes)]

The lacuna has not been restricted to the study of economics in advanced industrial countries: more than forty years of development thinking in poor countries has also neglected environmental matters. A prime reason, often aired, is that, in earlier days, environmentalists in western industrial countries tended to focus on such problems as local air-pollution (e.g. sulphur emissions) and deterioration of amenities (e.g. national parks, beaches and coast-lines). To the development economist environmental matters, therefore, appeared a trifle precious, not wholly relevant to the urgencies of poor societies. On innumerable occasions I have had this explanation offered to me by social scientists in developing countries. I wouldn't wish to doubt their claim, but the explanation doesn't tell us why, when they studied development problems, these same social scientists ignored their own environmental resource-base, nor why government planning models in poor countries so often have regarded this base to be of infinite size.

The neglect of the environment in development economics is ironic, because people in poor countries are in great part agrarian and pastoral. In 1988, rural people accounted for about 65 per cent of the population of what the World Bank classifies as low-income countries. The proportion of total labour force in agriculture was a bit in excess of this. The share of agriculture in gross domestic product in these countries was 30 per cent. These figures should be contrasted with those from industrial market economies, which are 6 per cent and 2 per cent, respectively, for the latter two indices. Poor countries are in large measure biomass-based subsistence economies, in that the rural poor eke out a living from products obtained directly from their local environment. For example, in their informative study of life in a microwatershed of the Alaknanda river in the central Himalayas in India, the (Indian) Centre for Science and Environment (C.S.E., 1990) reports that, of the total number of hours worked by the villagers sampled, 30 per cent was devoted to cultivation, 20 per cent to fodder collection, and about 25 per cent was spread evenly between fuel collection, animal care, and grazing. Some 20 per cent of time was spent on household chores, of which cooking took up the greatest portion, and the remaining 5 per cent was involved in other activities, such as marketing. In their work on Central and West Africa, Falconer and Arnold (1989) and Falconer (1990) have shown how vital are forest products to the lives of rural people. Poor countries, especially those in the Indian sub-continent and sub-Saharan Africa, can be expected to remain largely rural economies for some while yet. The categories of natural resources that are of fundamental importance in advanced industrial countries no doubt differ from those in poor, agrarian societies; but nowhere is the environmental resource-base in unlimited supply. To treat the base as a free good is to practise bad economics.

Here is an example of how economic analysis can go awry when it neglects the environment. Barring sub-Saharan Africa over the past twenty-five years or so, gross income per head has grown in nearly all poor regions since the end of the Second World War. In addition, growth in world food production since 1960 has exceeded the world's population growth; by an annual rate of, approximately, 0.6 per cent. This has been accompanied by improvements in a number of indicators of human well-being, such as the under-5 survival rate, life expectancy at birth, and literacy. In poor regions all this has occurred in a regime of population growth rates substantially higher than in the past. These observations have led many economists to argue that the high rates of growth of population that have been experienced in recent years aren't a hindrance to economic betterment, but, rather, that economic development itself can be relied upon to bring down population growth rates.

But there is a problem with this argument. Statistics on past movements of gross world income and agricultural production say nothing about the environmental resource-base. They don't say if, for example, increases in gross national product (GNP) per head are not being realised by means of a depletion of natural capital; in particular, if increases in agricultural production are not being achieved by "mining" the soil. Thus, it is today customary for international organizations to estimate societal well-being by means of indices that capture only the current standard of living (e.g. GNP per head, life expectancy at birth, and the infant survival rate; see UNDP, 1993). But such measures bypass the concerns that ecologists have repeatedly expressed about the links that exist between continual population growth, increased material output, and the state of the environment. This is a serious limitation. In Section 10 I will suggest an aggregate measure of societal well-being that captures not only the current standard of living, but also the effect of changes in the composition of a country's natural capital on her future standard of living. This measure is called net national product (NNP).

Now the interesting point is this: it is possible for measures of current well- being, such as the under-5 survival rate and GNP per head, to increase over an extended period of time even while NNP per head is declining. We should be in a position to say if this has been happening in poor countries. But we aren't, precisely because of a neglect of ecological matters in economic modelling.

Despite this neglect, ecological economics has developed considerably over the years, as if by stealth. So far in this lecture I have sketched the terrain of the subject. In what follows, I will try to give you a feel for what the subject amounts to and what insights it has to offer. Over many years now, I have tried to develop ecological economics in a way that speaks to the problems of economic development in poor countries (Dasgupta, 1982, 1990, 1993, 1995a,b; Dasgupta and Mäler, 1991, 1995); so my treatment will be coloured by my own research interests. I don't think there is any harm in this. Even though many of the problems I will discuss here arise from a study of rural poverty in poor countries, their structure is generic, and I think this fact will be transparent to you.

The plan of the rest of this lecture is as follows: In Section 3 I will classify the reasons we face environmental problems, and in Sections 4–8 I will elaborate them. Sections 9–10 will explore prescriptions. In large part the discussion there will be confined to local environmental problems. In Section 11 I will extend the discussion to global environmental problems. One overall conclusion we will arrive at is that it won't do to rely entirely on a decentralised economic environment for avoiding environmental problems: collective action at different levels is necessary. So in Section 12 I will speculate on the various pathways that could sustain agreements among peoples and nations.

More: 3, Poverty and Institutional Failure as Causes of Environmental Degradation
Return to Contents