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The Economics of the Environment by Partha Dasgupta

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The economics of the environment by Partha Dasgupta

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        Nature is a cache of resources from which humans, among other living things, are universally dependent to produce goods and services to satisfy everyone’s needs and wants. Natural resources have a multiple-use value which is significantly involved in the supply and demand chains of services and commodities. In this light, it is vital to partake a sound analysis to evaluate our environmental resource-base, thus, ecological economics plays a very important role.

        Economics typically view the environmental resource-base as an infinite reserve. This perspective has led to disregard environment as one of the major contributing factor to economic development. Its neglect has also led to discount important environmental parameters in pondering economic policies. Consequently, it resulted to a notion that economic development is always directly proportional to an improved environmental quality, when in fact, it is always not the case.

        In its economic aspect, environmental degradation can be an impact from institutional (market) failures to communicate the environment’s best interest. An established market arm in many localities does not function well or not created at all due to several constraints, mainly operational and transactional costs. Certainly, this limitation will negatively affect the environmental resource-base in the long run due to lack of supervision and management skills. In addition, at a microeconomic level, political instability among communities can lead to uncertainty in property rights, creating conflict. It is also linked in the unfitting decentralization of power in decision-making as seen in some cases when not everyone in the community was given equal voices in the negotiation of their shared resources. Lacking enough means to manage the natural resources, again, will lead to environmental degradation.

        Market failure is explained in the article into two interactions: unidirectional and reciprocal. Market failure in a unidirectional interaction is demonstrated when resource extraction is favored among selected few and this privilege is typically abused. And with inappropriate and unjust imposition of policies will directly affect a number of people living near those resources. Extractors benefit while local people suffer. Reciprocal interaction, on the other hand, happens in a common-property resources (local commons). Failure happens when at least one party exercise overconsumption of the resources, negatively affecting the consumption of other parties. There are also issues associated in the local commons which make them not equally open to society for consumption. Communitarianism, in its ideal principle that community involvement plays a vital role in the effective functioning of political institutions and understanding humans in the society was also seen to falter in the current setting due to shifting population, overpopulation, etc. It was seen problematic due to inconsistent degrees of human interventions in the resources, which could lead to uncertain recovery of these resources-base.

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