<< Chapter < Page Chapter >> Page >

We continue our discussion of the most important causes of environmental degradation in emerging nations with a closer look at ignorance.

The role of ignorance

Natural Income accounting was introduced 70 years ago by Simon Kuznets. It is now used everywhere to provide a measure, imperfect as it may be, of economic welfare comparable across countries.

Use of Natural Income accounts and ongoing efforts to improve them has helped us understand much better how to measure growth and compare growth. But there is one area in Natural Income accounting that has received far too little attention. No country properly accounts for the externalities and social costs often involved in extraction and depletion of natural resources, including forests, minerals, oil and fisheries.

This is a measure of our ignorance about the effects of natural resource use. Natural Resource Accounting can help remedy this deficiency.

Resource accounting

The terms Gross National Product (GNP) or Gross Domestic Product (GDP), national income, depreciation and personal income are familiar to all economists. The ultimate test for many government policies has been their impact upon the rate of growth of these magnitudes. Again, the conceptual framework from which these broad macroeconomic measures spring is called national income accounting, used in the U.S. since 1942. The basic purpose intended for national income accounts is to provide analysts with some measure of performance of the economic system. For what the accounts attempt to measure, they do a reasonably good job of measuring, in spite of still sizable errors of omission as well as remaining conceptual issues: especially the impact of government investment.

The system of national accounts in use by virtually all countries suffers, however, from a much more fundamental flaw that has serious implications for prospects for sensible environmental policies: the system greatly distorts the role of natural resources in economic processes. This distortion has two principal dimensions. First, present systems of national income accounting fail to recognize natural resources as economic assets. Second, the protective services provided by these assets are not valued. However, the additional expenditures forced on society by the loss of these services are valued. Thus, systems of national income accounts are laden with harmful paradoxes. The depreciation of man-made capital equipment and infrastructure is recognized as a cost in the national income accounts. But the depletion of soils, minerals, hydrocarbons, and forests is not. As a result, there is a perilous asymmetry in the way we measure, and therefore the way we think about, the value of natural resources. This asymmetry gives rise to patently anomalous, and uneconomic, practices. Consider this, on the one hand, the treatment of government expenditures for cleaning up the catastrophic oil spill in 2010 in the B.P. oil spill in the Gulf of Mexico. These clean-up expenditures added to the nation’s gross national product. This is so even though the affected waters, sea life and tourism were severely harmed . On the other hand, a country could exhaust all of its forest resources and, in the process, silt up all its rivers and harbors, but measured national income would be reduced only when these resources vanished. To put the problem another way, consider a country that for several consecutive years experienced depreciation of its man-made capital stock in excess of new investments in physical capital. That country would soon suffer a decline in its measured National Income, because physical assets would wear out at a faster rate than they were being replaced. Policymakers would have a very clear signal that something was seriously wrong. But a country such as China, or Nigeria, or Venezuela drawing down on its natural resource base, by mining, drilling or logging, may enjoy high rates of GNP growth for long periods, even in the absence of any new investments in sustaining the stock of these natural assets. Under prevailing systems of natural income accounting, the economy’s health would appear quite robust during the draw-down. Therefore, the l iquidation of man-made assets shows up in the national income accounts as economic decline ; the liquidation of productive assets provided by nature shows up as economic growth .

Questions & Answers

who was the first nanotechnologist
Lizzy Reply
technologist's thinker father is Richard Feynman but the literature first user scientist Nario Tagunichi.
Norio Taniguchi
I need help
anyone have book of Abdel Salam Hamdy Makhlouf book in pdf Fundamentals of Nanoparticles: Classifications, Synthesis
Naeem Reply
what happen with The nano material on The deep space.?
pedro Reply
It could change the whole space science.
the characteristics of nano materials can be studied by solving which equation?
sibaram Reply
plz answer fast
synthesis of nano materials by chemical reaction taking place in aqueous solvents under high temperature and pressure is call?
hydrothermal synthesis
how can chip be made from sand
Eke Reply
is this allso about nanoscale material
are nano particles real
Missy Reply
Hello, if I study Physics teacher in bachelor, can I study Nanotechnology in master?
Lale Reply
no can't
where is the latest information on a no technology how can I find it
where we get a research paper on Nano chemistry....?
Maira Reply
nanopartical of organic/inorganic / physical chemistry , pdf / thesis / review
what are the products of Nano chemistry?
Maira Reply
There are lots of products of nano chemistry... Like nano coatings.....carbon fiber.. And lots of others..
Even nanotechnology is pretty much all about chemistry... Its the chemistry on quantum or atomic level
no nanotechnology is also a part of physics and maths it requires angle formulas and some pressure regarding concepts
Preparation and Applications of Nanomaterial for Drug Delivery
Hafiz Reply
Application of nanotechnology in medicine
has a lot of application modern world
what is variations in raman spectra for nanomaterials
Jyoti Reply
ya I also want to know the raman spectra
I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
yes that's correct
I think
Nasa has use it in the 60's, copper as water purification in the moon travel.
nanocopper obvius
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
STM - Scanning Tunneling Microscope.
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
Privacy Information Security Software Version 1.1a
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get Jobilize Job Search Mobile App in your pocket Now!

Get it on Google Play Download on the App Store Now

Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Economic development for the 21st century' conversation and receive update notifications?