0.1 Economic development is about all of economics  (Page 11/14)

When water or energy is priced like dirt, each will be treated like dirt. Energy resources have also been deeply underpriced in many developing nations. (Iran, Venezuela, India, and Pakistan). In Venezuela the dollar cost of a gallon of gasoline in 2014 was $1.00 per gallon. Adverse consequences include energy waste, and serious, needless air and water pollution.

As we will see in Module 13, pricing and property rights have both played major roles in rapid rates of tropical deforestation since 1960. The tropical forest covered 12% of the earth’s surface in 1960. Now it covers less than 5%.

And, surprising to most, deforestation is responsible for fully 20% of global carbon emissions per year.

In virtually all developing nations and most of Europe, governments own the property rights to all oil and minerals; not individuals. Governments own property rights to more than 95% of tropical forest land. But governments have so underpriced tropical wood that harvests have long been excessive and needlessly wasteful, especially in Brazil, Indonesia and West Africa. Curbing the destruction of tropical forests will require that two measures be implemented:

1. Increase the cost of harvesting tropical wood, to reduce waste. This can be done through higher timber royalties.
2. Rearrange property rights to tropical forests, as is being done in Colombia, Peru and Brazil.

Government ownership of such rights leads to the familiar tragedy of the commons: when something is owned by everyone , it is owned by no one . That being the case, there is little incentive to maintain it or improve it. In Colombia, Peru and finally, now Brazil, central governments have begun vesting property rights to the forest to local farmers and groups of farmers, to encourage them to improve that land instead of clear-cutting it and moving on.

Fisheries are important resources for all countries, but especially poorer nations because fish is a more critical components of diets in poor nations. But with some exceptions (halibut, mackerel) fishery stocks are in serious decline almost everywhere, because of over-fishing: over 75% of all marine fish species are on the brink of falling below sustainable levels. The main, but not the only, cause of overfishing is another illustration of the tragedy of the commons. Where fish stocks are treated as common property, no one has incentives for sustainable fishing or fishing patterns that would provide fish as a food for future generations and biodiversity for the oceans. We will discuss some approaches to sustainable fisheries, particularly given the threat to fisheries posed by global warming and acid-function of the oceans.

5) The Role of Fiscal Policy, Tax Rate Regimes, Government Investment and Capital Mobility

The past half century yields several striking lessons concerning the role of fiscal policy in financing growth generating public savings, and affecting income distribution, in a world where capital is internationally mobile.

Experience in both rich and poor nations shows very clearly that the best and highest purpose of a tax system is to raise significant amounts of revenue at the lowest economic and administrative costs, in order to finance vital public investments, both in human capital and in physical infrastructure such as school buildings, transport and communication facilities.