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Poverty, Institutions, and the Environmental-Resource Base

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Poverty, Institutions, and the Environmental-Resource Base 13o 3 1 WORLDBANK ENVIRONMENT PAPER NUMBER 9 Poverty, Institutions, and the Public Disclosure Authorized Environmental-Resource Base Partha Dasgupta and Karl-Goran Miler ~~~~ Public Disclosure Authorized ... 4 ~~~ E * Public Disclosure Authorized . .__ -. -,. 4 .*I*i' , R- 4 ,i-.j _ ,... SOS Public Disclosure Authorized RECENT WORLD BANK ENVIRONMENT PAPERS NL. I Cleaver, M%1unasinghe.Dison, Egli, lPeuktr,and Wencdius, editoirs, Conservation of elstsZand Ctcitrnil African tiuiercgs/ccu,:srn'niop,tc la fordi tlense rn .friquc' cciiirile dicit- 1'(3uesf No. 2 Pezzev, SaastaiahllktDlemelopment C'oncepts: Au tEconomic Analy.tsis No. 3 N unasinhhe. En virort:ental Econfzomticsand S rainablIe Dcvelopmnenlt No. 4 ItXwveeS, Trees. Lnn.d, anid Lalbor No. 5 E-nglish. Tiffen, and Nlortimore, Landil Resource Alalntnemenelinr MaclmkosL)islrict. Keu. I 9w193 !3Y99( No. 6 Meier and M-unasinghe, Incorporating Environrmentnl Concernis inlto Power Sector I)ecisionmilalig: A Case Stujdy of Sri Lankar No. 7 Bates, Cofala, and Ttoman, Alternativr Policicsfifort1e Con!trolofAir Pollution iln Poland No . S Lutz, Pagiola, and Reiche, edi tors, Economic and Institutional Alnalyses of Stil Corisen'atio:: Projects in Ce.ntralAmerica anrdltre Carilbeatn WORLDBANK ENVIRONMENT PAPER NUMBER 9 Poverty, Institutions, and the Environmental-Resource Base Partha Dasgupta and Karl-Goran Maler The World Bank Washington, D.C. Copyright C) 1994 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washmgton, D.C. 20433,U.S.A. All rights reserved Manufactured in the United States of America First pinting March 1994 Environment Papers are published to communicate the latest results of the Bank's enviromnental work to the development community with the least possible delay. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cted in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in tJiis publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissenination of its work and will normally give pemiussion promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910,222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. The complete backlist of publications from the World Bank is shown in the annual Index ofPublications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433,U.S.A., or from Publications, The World Bank, 66, avenue dlIna, 75116Paris, France. Partha Dasgupta is at Cambridge University and is affiliated with the Beijer International Institute of Ecological Economics. Karl-Gbran MAleris affiliated with the Beijer Institute and with the UNU/World Institute for Development EconomnicsRese-ch. Library of Congress Cataloging-in-Publication Data Dasgupta, Partha. Poverty, institutions, and the environmental-resource base / Partha Dasgupta, Karl-C bran Maler. p. cm. - (World Bank environment paper; no. 9) Includes bibliographical references. ISBN 0-8213-2758-5 1. Environmental economics. 2. Rural poverty-Environmental aspects. 3. Economic development-Environmental aspects. 1. Miler, Karl-Goran. II. Tide. m. Series. HC79.E5D344 1994 333.7-dc2O 9344827 CIP CONTENTS Foreword iv Acknowledgement v Abstrct vi PART 1: BASICS I 1. The Resource Basis of Rural Production 1 2. What are Environmental Resources? 1 3. Institutional Failure and Poverty as Causes of Environmental Degradation 4 4. Kuznets Curves: Economic Growth and the Environment 5 PART II: ENVIRONMENTAL ECONOMICS AS CAPITAL THEORY 9 5. The Balance of Materials 9 6. Needs, Stress, and Carrying Capacity: Land and Water 11 7. Social Objectives, 1: Sustainable Development 12 8. Social Objectives, 2: Optimal Development, Discount Rates and Sustainability 13 9. Second-Best Optima, Global Warming, and Risk 16 10. Project Evaluation and the Measurement of Net National Product 17 11. Biases in Technological Adaptation 19 12. Environmental Accounting Prices: the Valuation Problem 20 PART Im: POVERTY, INSTITUTIONS, AND THE ENVIRONMENT 22 13. Markets and their Failure: Unidirectionaland Reciprocal Externalities 22 14. Property Rights, Coase's Theorem, and Non-Convexities 24 15. Land Rights 30 16. Public Failure and the Erosion of Local Commons 31 17. Environmental Degradation and Children as Producer Goods 34 IS. Work Allocation among Women and Children, and the Desirable Locus of Environmental Decisions 36 19. Computable General Equilibrium Modelling 37 20. Intemational Institutional Failure and the Erosion of Global Commons 38 21. Trade and the Environment 39 APPENDICES 41 Introduction 41 Appendix 1: The Valuation of EnvironmentalResources: Public Policy as Reform 42 Appendix 2: Net National Product in a Dynamic Economy 44 A2.1. The Economics of Optimal Control 44 A2.2. NNP in a Deterministic Environment 45 A2.3. The Hamiltonian and Sustainable Well-Being 47 A2.4. Future Uncertainty 48 BIBLIOGRAPHY 49 NOTES 59 iii Foreword The decade of the 1980s has witnessed a implications of these linkages for development fundamental change in the way governments policy in general. The objective of the and development agencies think about Environment Paper Series is to make the results environment and development. The two are no of our work available to the general public. longer regarded as mutually exclusive. It is Increasing environmental awareness and now recognized that a healthy environment is concerns over sustainability have broadened the essential to sustainable development and a range of issues that need to be examined in the healthy economy. Moreover, econoriists and assessment of the potential impacts of proposed planners are beginniijg to recognize that projects and programs. This paper focuses on economic development which erodes natumal how environmental resources in developing capital is often not successful. In fact, countries might be linked to rural poverty and development strategies and programs which do fertility. The authors draw on a variety of not take adequate account of the state of critical disciplines including economics, the resources-forests, soils, grassiands, fieshwater, environmental sciences, demography and coastal areas and fisheries-may degrade the anthropology to show that institutional problems resource base upon which future growth is and poverty may give rise to environmental dependent. degradation. Since its creation, the Vice Presidency for Environmentally Sustainable Development (ESD) has placed the highest priority on the analysis of these important issues- Within ESD, the Environment Departnent's work, in Mohamed T. El-Ashry particular, has focused on the links between Chief Environmental Advisor to the President environment and development, and the and Director of Environment Department iv Acknowledgement This paper is based on an article written for lectures were fiuther developed at a teaching the Handbook of Development Ecanomics, Vol. workshop on environmental economics held in 3, edited by Jere Behrman and T.N. Srinivasan Colombo in December 1992 for university (Amsterdam: North Holland), forthcoming teachers of economics from developing 1994. It draws on a course of lectures delivered countries, sponsored by UNU/WIDER. We have by the authors in November 1992 in Bombay at leamt much from the comments of the a workshop for senior civil servants from participants of these workshops and from developing countries, sponsored jointly by the discussions with our co-lecturers: Scott Banfett, Swedish International Development Authority John Dixon, Mohan Munasinghe, Theo (SIDA), the Beijer International Institute of Panayotzu, and Kirit Parikh. EcologicalEconomics, the UNUIWorldInstitute In preparing the final version of this article, for Development Economics Research we have benefitted greatly from the comments (UNU/WIDER), and the Indira Gandhi Institute of Jere Behrman, Lawrence Lau, T.N. for Economic Development Research. These Srinivasan, and Stefano Zamagni. v Abstract This paper relies on empirical material provides the background to the discussion. drawn from anthropology, demography, Part ll and the Appendices provide the capital economics, and the environmentalsciences for theory that is necessary for any exploration identifying possible links between rural
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