Chapter 10 - environment and development

Question 1

environment and development: the basic issues

Answer 1

• in recent years, economists have realized that environmental problems have serious effects on a country’s ability to grow and improve
• one big reason for this is market failure, which means that the market doesn’t always handle environmental resources properly
• this often leads to too much environmental damage, like deforestation or pollution
• and here’s where poverty comes in: when people are struggling to survive, they might use up their natural resources without thinking about the long-term consequences
• this can trap communities in a cycle where poverty leads to environmental damage, and the damage makes poverty even worse
• in developing countries, overusing natural resources can have major impacts ~ for example, poor farmers may be forced to farm on land that’s already overused, which lowers crop yields and causes food shortage
• this is why sustainable development is so important. it is about growing the economy while protecting the environment
• economists agree that protecting the environment must be part of economic policies ~ for instance, cutting down forests might make money in the short term, but it harms a country’s productivity in the long run
• globally, there’s concern that deforestation is contributing to climate change, especially in developing countries in Africa, as well as countries like Brazil, Indonesia, Peru, and the Philippines
• interestingly, while developing countries in Sub-Saharan Africa and South Asia will likely suffer the most from climate change, it is the richer countries that have historically caused most of the problems

Question 2

the poor: both agents and victims of environmental degradation

Answer 2

1. victims
   - the poor live in environmentally degraded lands which are less expensive because the rich avoid them
   - people living in poverty have less political influence to reduce pollution where they live
   - living in less productive polluted lands gives the poor less opportunity to work their way out of poverty
2. agents
   - high fertility rate of people living in poverty ~ poor communities tend to have higher birth rates, which can place additional pressure on already limited resources
   - short time horizon of the poor ~ due to immediate needs, people in poverty often focus on short-term survival rather than long-term planning. this can lead to decisions that contribute to environmental degradation
   - land tenure insecurity ~ many people living in poverty do not own the land they live on or farm, making them less likely to invest in sustainable practices or land improvement

Question 3

what is sustainability and why is it important for the economy and the environment?

Answer 3

• when we say sustainability, we are talking about finding a balance between growing the economy and protecting the environment
• in simple terms, it means meeting the needs of today without harming the ability of future generations to meet their needs
• this is a key idea in development because if we’re using up all our resources now, what will be left for those who come after us?

Question 4

environment and development: sustainability and economic analysis

Answer 4

to study sustainable development, we can use the following three economic tools
1. giving more value to future benefits than what the market might
- this means we should prioritize long-term environmental and social benefits, even if they seem less profitable now
- for example, if a company can make money by cutting down a forest today, the market might only look at the immediate profit
- but sustainable development requires us to think long term, how will this affect future generations?
2. addressing market failures, like pollution or public goods that markets don’t handle well
- market failure occurs when certain costs like pollution are not included in the price of goods produced by polluting industries
- so, companies may pollute because it’s cheaper, even though it harms health and the environment
- to address this, sustainability policies like a carbon tax make companies pay for their pollution, encouraging emission reduction and correcting the market’s oversight
3. treating natural resources as valuable assets, not just something we use up
- we often think of natural resources like forests, water, and soil as things we can use freely
- but sustainable development requires a different perspective, we should think of natural resources as capital. just like machines or factories, these resources are valuable assets that must be managed carefully
- for example, if we cut down trees without planting new ones or overuse water without replenishing it, we’re depleting our “capital” making it harder for future generations to thrive

Question 5

what makes a development path sustainable?

Answer 5

• a development path is sustainable if the total capital stock which includes natural, human, and manufactured resources stays the same or increases over time
• manufactured capital (like machinery) is generally unproductive without a minimum of available environmental services, and we can’t rely on technology alone to solve all issues

Question 6

environment and development: sustainability and economic analysis continued

Answer 6

• future growth and quality of life rely on a healthy environment. therefore, policymakers should consider this by including environmental accounting in national income ~ for example, if we damage an environmental resource, we should regenerate something of equal or greater value elsewhere
• sustainable development means that the total stock of capital (manufactured, human, and environmental) should not decrease

Question 7

environment and development: sustainability and economic analysis equations

Answer 7

we measure sustainability net national income (NNI*) as the amount that can be consumed without reducing our capital

• in other words, sustainable net national income is: NNI* = GNI - Dm - Dn

NNI* = sustainable net national income
GNI = gross national income
Dm = depreciation of manufactured capital assets
Dn = depreciation of environmental capital

an even better measure, though more difficult to calculate with present data collection methods, would be: NNI** = GNI - Dm - Dn - R - A

NNI** = revised NNI calculation
GNI = gross national income
Dm = depreciation of manufactured capital assets like machinery
Dn = depreciation of environmental capital, such as water
R = expenditure needed to restore environmental capital (ex: replanting trees in deforested areas)
A = expenditure required to avert/prevent destruction of environmental capital (ex: installing filters in factories to reduce air pollution)

Question 8

equation problem example
GNI= 100 billion rupees
depreciation = 20 billion rupees
natural resource degradation = 10 billion rupees
restoration expenditure (R) = 5 billion rupees
averting expenditure (A) = 5 billion rupees
1. calculate NNI (net national income)
2. calculate NNI* (sustainable net national income)
3. calculate NNI** (revised NNI)

Answer 8

1. NNI
   NNI = GNI - depreciation = 100 billion - 20 billion = 80 billion
2. NNI*
   NNI* = GNI - Dm - Dn = 100 billion - 20 billion -10 billion = 70 billion
3. NNI** = GNI - Dm - Dn - R - A = 100 billion - 20 billion -10 billion - 5 billion - 5 billion = 60 billion

Question 9

how does a growing population impact the environment, and what can governments do to protect our essential resources?

Answer 9

• many environmental concerns come from the idea that Earth’s limited resources such as water, forest, may not support an unlimited population
• while new technology might help, continued environmental damage will likely make it harder for current and future generations to meet their needs
• slower population growth could reduce environmental street, but achieving this depends on government efforts to limit fertility
• on the other hand, rapid population growth has led to shortages of land, water, and fuelwood in rural areas, as well as urban health crisis due to poor sanitation and lack of clean water
• to meet the needs of growing populations, environmental damage must be stopped, and existing resources used more efficiently

Question 10

poor and the environment

Answer 10

• the poor are often the main victims of environmental degradation, as they are forced to live on degraded lands that the wealthy avoid
• they also lack political power to reduce pollution and have fewer opportunities to escape poverty
• in some cases, they contribute to environmental damage out of necessity
• high fertility rates are often blamed, but both environmental destruction and high fertility stem from absolute poverty
• for environmental policies to succeed in developing countries, they must first address issues like landlessness, poverty, and lack of resources
• providing the poor with support, such as secure land rights and access to credit, is essential for preventing further environmental damage

Question 11

rural development and the environment: a tale of two villages

Answer 11

• to understand how rural poverty and environmental degradation interact, let’s look at two examples: one village in Africa and another in South America
  1. a village in Sub-Saharan Africa
• imagine a small village in a semi-arid region of Africa where people rely on trees for firewood to cook
• experts warn that cutting trees and farming poor land worsens their hardships, but survival needs come first
• as trees are cut, soil erosion increases, making it harder to grow crops and leading to food shortages
• women walk farther each day for firewood, sometimes making charcoal to sell, which further harms the environment
  2. a settlement near the amazon
• imagining a village on the edge of the Amazon rainforest in South America, where the government encourages migrants to clear the forest for farmland