Sustainable Economic Development

Resources, Environment, and Institutions

Arsenio Balisacan, Ujjayant Chakravorty, Majah-Leah Ravago

• Publisher: Academic Press
• Year: 2014
• Print ISBN:
  9780128003473
• eBook ISBN:
  9780128004166
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Sustainable Economic Development: Resources, Environment, and Institutions presents 25 articles that lay the foundations of sustainable development in a way that facilitates effective policy design. The editors mix broad thematic papers with focused micro-papers, balancing theories with policy designs.The book begins with two sections on sustainable development principles and practice and on specific settings where sustainable development is practiced. Two more sections illuminate institutions, governance, and political economy. Additional sections cover sustainable development and agriculture, and risk and economic security, including disaster management. This rich source of information should appeal to any institution involved in development work, and to development practitioners grappling with an array of difficult on-the-ground developmental challenges. - Analyzes policies that move markets and resource use patterns towards achieving sustainability - Articles are kaleidoscopic in scope and creativity - Authors embody extraordinary diversity and qualifications

Section 1

Introduction and Synthesis

Outline

Chapter 1 The Principles and Practice of Sustainable Economic Development: Overview and Synthesis

Chapter 2 Reflections on the Foundations of Development Policy Analysis

Chapter 1

The Principles and Practice of Sustainable Economic Development

Overview and Synthesis

Majah-Leah V. Ravago*, Arsenio M. Balisacan*^,† and Ujjayant Chakravorty^‡, *University of the Philippines, Diliman, Quezon City, Philippines, ^†National Economic and Development Authority, Pasig City, Philippines, ^‡Department of Economics, Tufts University, Medford, MA

This chapter provides a summary of this volume, which pays tribute to the work of James Roumasset in the areas of economic development policy, behavior and organization in agriculture, and environmental resources such as energy and water. The authors in this volume are either his longtime collaborators and colleagues or his former students and associates, many of whom are making their own contributions in applying sound economic principles toward understanding problems of development, agriculture, environment, and governance.

Keywords

economy and environment; sustainable economic development; institutions and governance; poverty reduction; agricultural development policy; resource policy

JEL

P48; Q00; O43; O13; Q18; I30

Chapter Outline

1.1 Introduction 3

1.2 Resource Management and Sustainable Development 4

1.3 Institutions, Governance, and Political Economy 6

1.4 The Nature, Causes, and Consequences of Agricultural Development Policy 7

1.5 Development, Vulnerability, and Poverty Reduction 8

1.6 Conclusion 9

References 10

1.1 Introduction

The past half-century has seen historically rapid growth and development in many parts of the world. Both the pace of economic growth and poverty reduction have never been faster during this period than in comparable periods of economic history. Yet, the sustainability of economic development has never been more intensely questioned. The questions have gone beyond the threat to environmental resources to include increasing vulnerability to climate change and biodiversity loss.

Good policy-making founded on scientifically sound and practical research can go a long way in sustaining economic development. This volume aims to contribute in this respect. Cognizant of the gap between the demands for sustainable development policy analysis (e.g., as articulated in Rio+20) and the operational utility of the narrow sustainability concepts, this volume starts with the core model of how to balance the management of produced and natural capital and then adds features of development, policy and institutions, uncertainty, and political economy. We discuss public policy in the context of sustainable development in the broadest sense, incorporating resource management, institutional governance, and poverty reduction.

This chapter provides a summary to this volume, which pays tribute to the work of James Roumasset in the areas of economic development policy, behavior and organization in agriculture, and environmental resources such as energy and water. The authors in this volume are either his longtime collaborators and colleagues or his former students and associates, many of whom are making their own contributions in applying sound economic principles toward understanding problems of development, agriculture, environment, and governance.

Section I sets the tone of the book. Chapter 1 presents the volume overview and synthesis by introducing the principles and practice of sustainable economic development. Chapter 2 by Roumasset focuses on the foundations of development policy analysis. He discusses issues with misplaced exogeneity and incomplete conceptual mechanisms and prescribes fundamental analysis of the behavioral and organizational foundations of agricultural and rural development. This assessment points to promising avenues for future research, including black hole economics and the coevolution of specialization and economic development. The focus on agricultural development also provides a preview to Sections V and VII.

1.2 Resource Management and Sustainable Development

Long before the 1987 Brundtland Report “Our Common Future” from the World Commission on Environment and Development (WCED), there was “Scarcity and Growth” (Barnett and Morse, 1963). The latter may be the earliest formal articulation of sustainability and concerns about the environment. The ensuing decades saw the continued escalation of concerns about the sustainability of economic growth in the face of natural resource depletion and environmental pollution. In the 1980s, the World Conservation Strategy (WCS) was formed with the objective of integrating economic and environmental management. However, WCS was unsuccessful in conveying either how poor economic policies would degrade the environment or how conservation requires coordinated economic policies (Pearce et al., 1989). The United Nations responded and formed the Brundtland Commission in 1983, enjoined to investigate the interrelationship between human activity and the environment and their implications for economic and environmental policy.

It was the Brundtland Report (WCED, 1987) that successfully established sustainability as a critical part of economic development policy. The Commission defined sustainability as “… development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” This rather vague definition has been the source of considerable contention (see Ravago et al., 2010 for the various references cited therein and Chapter 3, of this text). Nonetheless, the Brundtland report has increased the awareness of the importance of the interlinkages between the economy and its dependence on natural resource systems as well as a sense of stewardship for the future and the environment.

In the field of economics, a consensus regarding sustainable growth has also been elusive. Arrow et al. (2004) have espoused an expanded version of the weak sustainability criterion, specifically that the wealth of a society, including human capital, knowledge capital, and natural capital (as well as produced capital), does not decline over time. On the other hand, Barbier (2007) and others maintain that strong sustainability—nondepletion of essential stocks of natural resources—may be more suitable. This lack of consensus presents a challenge to the emerging transdisciplinary field of sustainability science, which began in the early 2000s. Sustainability science arises from the recognition that appropriate science and technology must be utilized in pursuit of sustainable development (Clark and Dickson, 2003; Roumasset et al., 2010). This discipline is being espoused by a number of international scientific organizations, chief among them are the U.S. National Academy of Sciences (NAS), The American Association for the Advancement of Science (AAAS), and the National Science Foundation (NSF).

The weak and strong sustainability criteria have been dubbed as negative sustainability (Ravago et al., 2010) inasmuch as they only proscribe limits on natural resource exploitation. They do not offer any guidance on what should be the optimal conservation patterns of natural capital nor the optimal buildup of human and produced capital. Positive sustainability (see Chapter 3; Endress et al., 2005; Ravago et al., 2010) fills this lacuna by maximizing intertemporal welfare while incorporating system linkages, dynamic efficiency, and intertemporal equity. The requirements for positive sustainability, reviewed in Chapter 3, provide for a solution that is optimal as well as sustainable.

The view of economic development in this volume includes sustainable development. Accordingly, Section II expands the conventional view of the economy to the environomy—the integrated economic and environmental resource system. Chapters in Section II expound and expand the basic principles of natural resource management and the links between environmental resource management and sustainable development. They also provide specific examples of sustainable development. Chapter 3 by Endress not only reviews the principles but suggests how sustainability can be extended to specific sectoral issues such as the management of renewable energy. The rest of the chapters in Section II discuss more specific resource management issues and highlight policies that move markets and resource -use patterns toward sustainable development.

Chakravorty and Gong’s Chapter 4 discusses the economics of fossil fuels and pollution. They focus on pollution coming from coal, oil, and gas. These resources are nonrenewable in the sense that their use subtracts from their future availability. Limiting pollution from these low-cost sources of energy requires economic policies that make them more expensive and that induce new energy efficient technologies and the substitution of renewable energy sources such as solar and wind power.

Roumasset and Wada’s Chapter 5 reviews the principles of groundwater management, including their extension to the optimal coordination of multiple aquifers, groundwater substitutes such as desalination and wastewater recycling, and investments in watershed conservation. By providing principles of pricing and finance, they show how sustainable development can be extended to the management of resource systems instead of a single resource. Chapter 6 by Burnett et al. applies the principles of coordinated resource management to the specific example of managing an invasive tree species that interferes with groundwater recharge. At the optimum, the marginal cost of increasing recharge via watershed conservation should be equal to the shadow value of groundwater in consumption.

Policies that move markets and resource-use patterns toward optimal and sustainable outcomes are exemplified by Pongkijvorasin and Teerasuwannajak in Chapter 7. Green subsidies and coordinated irrigation development are offered as a win–win solution to the problem of maize farming and rapid deforestation in the province of Nan in northern Thailand.

1.3 Institutions, Governance, and Political Economy

Sustainable economic development incorporates sustainable growth and dynamically efficient development patterns. In addition, sustainable development must take into account the lessons from development theory, including how optimal patterns of production, consumption, and trade change with standards of living. While science and technology are commonly employed in the pursuit of sustainability, other factors such as institutions, governance, and political economy are also critical dimensions of sustainable development. This is the focus of Section III: the political, institutional, and policy dimensions of sustainable development.

Deficient institutions, governance, and political economy are typical pathways to unsustainable development. Section III considers the coevolution of institutional arrangements and the environomy. Tarui’s Chapter 8 reviews the literature on managing natural resources under different institutional arrangements and provides a model of resource governance that allows for the optimal transition between open access, common property management, and private property, given the transaction cost properties of those institutions. The rest of the chapters in Section II take on specific country experiences in Africa, Asia, and the Pacific.

Chapter 9 by Ravago and Roumasset continues the theme of institutions and resource management by examining the resource curse but generalizing the phenomenon to include other foreign ...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Dedication
• About the Editors
• About the Authors
• Foreword
• Preface and Acknowledgments
• Section 1: Introduction and Synthesis
• Section 2: Resources, Environment, and Sustainable Development
• Section 3: Institutions, Governance, and Political Economy
• Section 4: The Nature, Causes, and Consequences of Agricultural Development Policy
• Section 5: Development, Vulnerability, and Poverty Reduction
• Index