Environmental Economics

This is a review of (published in 2000 in The Indian Review of Books)

Environmental Economics, edited by Ulaganathan Sankar, Oxford University Press (Readers in Economics), New Delhi, 2001, pp.viii + 469, Rs. 595 (hardback).


Concern with environmental issues is not a new phenomenon as would appear with a importance it seems to get in the media and public discourse. Almost all pre-modern productive systems integrated a conservationist practice and ideology in their ambit. Often it was the necessity of preserving those natural resources on which the economic community was dependent, rather than a self-conscious act, which impelled the conservationist tendencies of these productive systems. It was only with the ‘Industrial Revolution’ and later that the productive system became free of its immediate dependence on conservation of natural resources. This happened primarily due to two reasons—the ‘secondary’ nature of industrial production, and the availability of non-local, colonial markets for raw materials. This, combined with the necessity of constant rise in productivity both at the level of the firm and the national market, created conditions where all other considerations were cast aside. Specially when ideas and practices of environmental protection and conservation were so strongly associated with a stagnant productive system like Mediaeval agriculture and a society equally stagnant and restrictive.

Even during the nineteenth and early twentieth centuries there were voices which warned about the wantonness with which the industrial age approached nature and humanity but they almost always belonged to either subversive economic and political ideologies or to apologists and romanticists of a by-gone idyll. Productive forces were straining to break free and their agents were men in a hurry. Perhaps because of this, these alternative voices were not heard in the cacophony of clanking machines and clinking cash registers.

It was the post-Second World War boom in babies and consumption in Europe and North America that brought questions of environmental degradation and natural resource sustainability to the fore in these countries. This spawned a certain type of ‘environmentalism’ which has come to be associated with post-industrial societies of the developed world. Here concern for environment is expressed in terms of preservation of natural habitats free from human touch. It has also stressed issues of pollution and ecological degradation caused by the pressure of their growing cities.

Outside the regions of the developed world, environmental concerns are often perceived as luxuries of the rich. But the truth is that control over, use of and preservation of natural resources have been sites for major contests between different social strata in almost all developing countries. During the colonial period forests became the prime focus of popular struggles over natural resources in India. In the last few decades, there have been contests over forests, water, mineral resources, fish and other marine resources and many such matters, which have all involved large masses of people.

It is in this context that one can see a growing concern for environmental issues in the literature of almost every social science discipline. This is the third book to have been published by OUP in the ‘Readers in Economics’ series with Kaushik Basu and Prabhat Patnaik as its general editors. The book comprises of thirteen articles, a useful introduction and an annotated bibliography meant to introduce the reader to other important works in this field. Almost all the articles were published earlier and have been collected here to give an introduction to different works on this topic. Some of them, like Harold Hotelling’s “The Economics of Exhaustible Resources”, Garrett Hardin’s “The Tragedy of the Commons”, Robert M. Solow’s “Sustainability: An Economists Perspective”, W. Michael Hanemann’s “Contingent Valuation and Economics” and William D. Nordhaus’ “To Slow or Not to Slow: The Economics of the Greenhouse Effect” have attained the stature of ‘classic’ works in the neo-classical tradition of economics. Their influence on generations of economic students, government and donor agency policy and even public understanding has been enormous. And between themselves these thirteen essays cover much of the ground in their discipline over the last three decades.

The problems one faces with a collection like this are primarily two. First, it restrict itself to a specific ideological trend within the economic discipline and second, it attempts to understand and tackle environmental issues by “obtain[ing] money values of the damages”. In other words, it foregrounds the desirability of “a policy regime which relies largely on economic/market-based instruments to achieve environmental policy goals” (1). The limitations of such a perspective are clearly seen are many essays. Let us take as an example the essay by Nordhaus. In figure 1, he plots the ‘marginal damage from greenhouse warming’ against the ‘marginal cost of greenhouse gas reduction’ along axis of marginal damage / marginal cost of abatement and of percentage reduction in greenhouse gasses. This establishes a certain equilibrium point for the concerned economy where the cost of reducing greenhouse gasses meets the reduction in the amount of these gasses. This misses the point altogether. The issue is not of finding the equilibrium between the cost of reduction and the amount of gasses produced but of finding the point where the production of greenhouse gasses, primarily carbon compounds, does not damage our environment.

Similarly, when environmental damage is included in the economic costs of a product or an economy, it remains a futile exercise since it is impossible to account for the liability on future generations. How does one account for the disappearance of biodiversity, or even a seemingly small thing like the ecological system of a small lake, which is filled to build apartments, in its effects on future generations? None of the essays included here can hope to answer this. Apart from this, a central problem, which needs to be tackled by ‘environmental’ economics of any sort, is the unfeasibility of replicating the present consumption patterns of the developed world in developing countries. There just aren’t enough resources in this world to enable a sustainable economy where everyone drives a car, consumes thousands of gallons of fuel and kilowatts of electricity and produces waste in the tons. Unfortunately, the economics showcased in this book promises this illusory goal to all societies and therefore remains intrinsically anti-environmental in its core.



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