0.12 Natural capital & Sustainable development introduction  (Page 3/12)

This brings us to a discussion of doomsayers, soothsayers and doomslayers.

Doomsayers have always been with us. Think of Cassandra in the Iliad. Consider the widely expected environmental catastrophes wrongly forecast by the club of Rome in the seventies. They predicted the world would be running out of everything by the year 2,000. Consider the population doomsayers: they foresaw as late as 1990 a terrible population explosion. We have seen that fertility decline coupled with technological innovation has been the undoing of these predictions. I do not listen much to doomsayers, nor to soothsayers, who assure us we have no problems, whether in climate change or looming water scarcity. The company of doomsayers is to be much preferred those who work on measures to avert doom. However, even the best doomslayers cannot provide panaceas. Finally, it behooves us to remain skeptical of panaceas of any kind including those related to the environment. Panacea was ancient Greek for “I can cure it all.” Interestingly in modern Greek: panacea means “wig” (cover all).

Since panaceas are not available for resolving environmental problems, resort must be made to a portfolio of measures, which together can make enduring differences in resolving environmental issues.

The author first began working in sustainable development in 1971, researching tropical deforestation in the jungles of Indonesian Borneo. This led him to searches for causes and cures for tropical deforestation in Indonesia, and in Africa and LATIN America. Over time, these interests extended also to issues such as acid rain, air and river pollution and then energy conservation. These experiences led him to hold views on measures for sustainability that were considerably more market-focused than prevailing received wisdom. Received wisdom, then and now, focused almost exclusively on the role of market failure in environmental degradation and the need for extensive government regulation. There was an old song in the forties titled: The Best Things in Life are Free The Inkspots, 1947. . Market failure says: some of the worst things in life are free (pollution). In this volume, our focus is primarily upon market failures leading to environmental depletion and degradation.

In well-functioning markets where competition prevails, market prices are reasonably reliable indicators of scarcity values. However, there are conditions that cause markets to fail. In such cases private producers and consumers face prices that deviate from scarcity values, causing them to make decisions that may maximize their earnings, but also cause uncompensated losses for others, and for society as a whole. This is market failure. See Malcolm Gillis, Dwight Perkins, et al., Economics of Development , 5 ^th Edition, 1996, pp.156-159.

Common causes of market failure are externalities : costs that are borne by the population at large but not by individual producers, or benefits that accrue to society but cannot be captured by producers. The most important externalities in utilization of natural capital are those arising when resource prices are underpriced . This causes resources to be depleted at unsustainable rates.