0.1 Economic development is about all of economics  (Page 10/14)

This book discusses property rights and the tragedy of the commons at some length. Increasingly, we observe examples of poorly defined property rights adversely affecting sustainable use of such natural endowments of water and fisheries .

4) The Importance of Sensible and Sustainable Use of Natural Resource Endowments

Nature’s endowments can be utilized in ways supportive of growth and poverty reduction for the benefit of both present and future generations. But when these endowments are abused, we find both environmental degradation and economic decline. Throughout history, environmental catastrophes are always economic catastrophes, and some economic catastrophes have been environmental catastrophes.

In this book, time dictates that we focus on only four types of natural endowments:

• Water
• Energy
• Tropical Forests
• Fisheries, especially ocean fisheries

One type of resource is not fully discussed: Hard Minerals. Why? Because the nature of technological change in mineral mining and processing is not nearly as interesting. Also, the author has two books Malcolm Gillis, et al. (1978), Taxation and Mining: Non-Fuel Minerals in Bolivia and Other Countries , Cambridge, MA: Ballinger Publishing Co; Malcolm Gillis, et al. (1980), Tax and Investment Policies for Hard Minerals: Public and Multinational Enterprises in Indonesia , Cambridge, MA: Ballinger Publishing Co. on minerals that students may consult.

Sensible use of natural resource endowments fosters sustainable growth and development. What does that mean? Sustainable development requires sensible development policies and institutions affecting natural resources. Sensible policies and institutions are those that maximize the long-term, net benefits to society, taking into account any costs of environmental degradation and depletion. Net benefits are benefits after deduction of costs. These benefits include not just income gains, but also healthier living conditions for present and future generations. Costs include pollution and degradation of the environment, as well as ordinary costs of exploration and extraction.

Experience over the past half century suggests that sustainable use of fresh water, energy, tropical forests and fisheries requires that at least two important conditions be met:

1. That the resources not be underpriced,
2. That systems of property rights are consistent with efforts to foster conservation and sustainability.

As in California and Florida, many emerging nations now confront a critical shortage of water, not only for irrigation, but also drinking water. Eighty percent of nations that are water-poor are developing countries. The water crisis has become acute for Mexico City and Lima. For Peru climate change has played a role, certainly particularly with melting of mountain glaciers owing to warming. Historically the most important cause of looming shortages of potable water has been gross under pricing of fresh water resources used by agriculture and industry. Around the world seventy-five percent of fresh water is used for irrigation in agriculture, while fifteen to twenty percent is used for industry. Only five to ten percent is used for households. World Water Assessment Programme. Retrieved from (External Link) . Deep subsidies for irrigation water in particular have led to egregious waste of water worldwide. Continued under pricing of this precious resource in the poorest nations will of course have large implication for health and nutrition.