National Income and Nature: Externalities, Growth and Steady State PDF
Preview National Income and Nature: Externalities, Growth and Steady State
National Income and Nature: Externalities, Growth and Steady State Economy & Environment VOLUME 5 Scientific Advisory Board Scott Barrett, London Business School, London, United Kingdom Klaus Conrad, University of Mannheim, Mannheim, Germany David James, Ecoservices Pty. Ltd., Whale Beach, New South Wales, Australia Bengt J. Kriström, University ofUmea, Sweden Raymond Prince, Congressional Budget Office, U.S. Congress, Washington DC, USA. Domenico Siniscalco, ENI-Enrico Mattel, Milano, Italy I University of Torino, Italy The titles published in this series are listed at the end of this volume. National Income and Nature: Externalities, Growth and Steady State edited by J. J. Krabbe and W. J. M. Heijman Wageningen Agricultural University, Wageningen, The Netherlands SPRINGER SCIENCE+BUSINESS MEDIA, B.V. Library of Congress Cataloging-in-Publication Data National income and nature: externalities, growth, and steady state I edited by J.J. Krabbe and W.J.M. Heijman. p. cm. -- (Economy and environment ; v. 5) Includes index. ISBN 978-94-010-5143-9 ISBN 978-94-011-2590-1 (eBook) DOI 10.1007/978-94-011-2590-1 1. Economic development--Environmental aspects. 2. National income. 3. Externalities (Economics) I. Krabbe, J. J. (Jacob Jan), 1928- II. Heijllan, Wi llem. III. Series: Economy & environment; 5. HD75.6.N38 1991 333.7--dc20 91-38236 CIP ISBN 978-94-010-5143-9 All Rights Reserved © 1992 Springer Science+Business Media Dordrecht Originally published by Kluwer Academic Publishers in 1992 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner. v ACKNOWLEDGEMENTS TheInternationalSocietyfor IntercommunicationofNewIdeas arrangeda congressat theUniversitedeParisSorbonne inAugust1990.Theconvention wasorganizedbyAnghel N. Rugina, EmeritusProfessoratNortheastern University, Boston, and PresidentoftheSociety.At thiscongressaseries of papersin thefield ofenvironmental and resourceeconomicswas presented, which servedas the basisofthiscollectionofessaysonnationalincome and nature.The collectionwasfurther developed andsomestudieswere added. Wewouldliketo thank Henk Folmer, ProfessorofEconomics at WageningenAgriculturalUniversityfor hissupport inoutliningthe collection. RoelJongeneel, Lecturer at the Department ofGeneral Economics, Wageningen Agricultural University,shouldalsobementioned for hissubstantialhelpineditingthe book. Wewouldalso like to thank Mrs. M.e. Rigg-LyallBAand Mrs. A. Kooijman-Timmers for theirvaluable linguisticsuggestions. Theeditors VII CONTENTS Introduction 1 PartOne: EnvironmentalExternalities 1. NatureinPigouvianorientedeconomics 5 JJ. Krabbe 2. Correctingnationalincomefor environmentallosses 23 R. Hueting 3.Themirrorofcleanliness 49 FA.G. denButter 4. Land useexternalitiesin nationalaccounting 77 W.N. AdgerandM.e. Whitby 5.Taxesversus regulation 103 G. Thijssen andA.Laan 6.Efficiencyintransboundarypollutionabatement 125 L. Bergman, H. CesarandG.Klaassen PartTwo:Environment,GrowthandSteadyState 7. Economicgrowth, technologyandtheenvironment 143 A. NentjesandD. Wiersma 8.Thesteadystateeconomy 167 W.J.M. Heijman 9. Entropy,synergyandeconomicchange 193 S.G. Karsten viii 10.Theneo-classicalandsteadystateapproaches 209 RA.Jongenee/ Index 227 INTRODUCTION Since the 'environmentalrevolution' beganin the late1960s,economistshave done alot ofwork in thefield ofeconomictheory-buildingonthe preservation ofnature. Meanwhile, environmentaleconomicliteraturehas swelledtoalargestreamofarticlesinjournalsofdifferentsignature.Asa result,acoherenteconomicviewofthe phenomenonofenvironmental degradation hasemerged.Severalkinds of'green'publicpoliciesandtheir impactsonbothnatureand the performanceoftheeconomyhavebeen analysed.Thefeasibility ofspecifictypesofpolicyhasalsobeendiscussed. Theaimofthebookis to providean insightintothewayseconomistsanalyse the problemsofenvironmentalpollutionandthedepletionofnatural resource.Tothispurposeanumberofarticles havebeenselected.Someof themhaveafundamental character,othersanapplied nature andare foremost, practicallyoriented.The presentationofthecollectionemphasizes our beliefthateconomistsare able to deliveranessentialcontribution to the designofpoliciesto protectnature.Itisclearthat 'nature' and'environment' mayno longer beregardedas'freegifts' tosociety. Rather, theyhave tobe seenasscarceresources,andenvironmentaldisruptionand resource depletionasallocationproblems.Ifanatural resource isscarce, aprice must bechargedinaccordancewith thedegreeofscarcitysinceotherwisesociety willbeconfrontedwith misallocations. In thisconnection there are two topicswhichareofparticularinterestto economists.Thefirst isthe role environmentalexternalitiesplayin the systemof'economyand nature'; thesecond, the relationshipbetween resourcedepletionandenvironmentaldegradation, andeconomicgrowth. Thesetopics form the themesofthiscollectionofessays.Thebookoffersa varietyofeconomicapproaches to the problemsmentioned anddescribesa number ofdifferent policyissuesaimed atincorporatingnatureineconomic decision making. Nationalincomefunctions asamain indicatorofacountry's economicperformance.Adirect relationshipexists betweensocial productionandGNP, as is reflectedindetailinthesystemofnational accounts.ThereisalsoalinkbetweeneconomicpolicyandGNP-growth. GrowthofGNPiscommonlyregardedasthe mainconditionfor the 2 Introduction continuationoftheWesternwelfarestateand arisingconsumption levelin developingcountries.However, theGNPindicatorhassomerealflaws, of which the unsatisfactoryreflectionofthe utilizationofnatureisnot the least important. Ontheonehand, naturecanberegarded asasupplierofabig varietyofmeansofproduction. On theotherhand, itserves asapublic consumptiongoodandasareceptacleofwastes.Itis thesecompetingand conflictingfunctions ofnaturewhich raisessevereproblemsofafundamental and practicalnature.Traditionalapproaches have notalways dealtwith this arbitrarycharacterofGNPinasatisfactoryand theoreticallyconsistentway. In thisvolume, thereareanumberofcontributionswhichaimatsolvingthese problemsandavoidinginconsistencies. Thisvolumeisdivided intotwo parts. PartOneis devoted to environmentalexternalities. Here attentionisfocused oncharacter,valuation and accountingofsuchexternaleffects. PartTwodealswiththe relation betweennatureandeconomicgrowth.Itprovidesaninvestigationintothe dynamicsofthisrelationship.Theimpactofeconomicgrowthon environmentandresourceavailabilityisanalysed.In thiscontext, attentionis also paidto theimplicationoftechnologicalchangeand to theconceptof steadystate. Methodological aspects ofthe wayproblemsareapproached are eludicatedaswell. Part Onebeginswith areflectionbyKrabbe on thesignificanceofPigouvian welfareeconomicsfor environmentaleconomics. Pigou'sapproach towelfare is tied to hisconceptofnationalincome, incorporatingthe ideaof externalities.When applied to theenvironmentalproblem, notonlythe volumeofthe nationalproductcounts, butalso its composition.Adirectlink with thesystemofnationalaccounts isestablished. In the second chapter, Huetingfocuses onthe valuation problemofnature in the absenceofmarkets.Shadowpricesshould becomputed onthebasisof 'artificial'supplyand demandcurves, takingintoaccountsustainability standardsfor thecomponentsofnatureconcerned.Thesecomputedprices have tobe used to correctnationalincomefor environmentallosses. In ChapterThree, den Butterchooses adifferent approach from, for example, Hueting. Insteadofarguingfor acorrectionofGNP, heproposes theconstructionofanexplicitenvironmental qualityindex. Usingdifferent methodologies,suchasaverageandgeometricmeans,CES aggregator Introduction 3 functions and principalcomponents, indexesaredevelopedwhichsummarize all available (timeseries) dataonthestateofpollution andenvironmental damage. AdgerandWhitbyinthesubsequentchapter analysehowtheexistenceof land useexternalitiescanbeincorporated intothesystemofnational accounts.Theyillustrate their methodologybyacasestudyonGreatBritain's agricultureand forestry andshowthe high informationalrequirements necessaryto correctthe traditional accounts. Arelatedchapteris providedbyThijssen and Laan. Usingamodel ofthe Dutchintensivelivestocksector, theyevaluatetwo policyscenariosaimed at reducingthesector'sammoniaemissionsby75% ofthe 1986level bythe year 2000.Thefirst scenariocomprises abatement measuresand involvesreducing the numberofanimals, while thesecondscenariofocuses onlevyingtaxeson the agriculturaloutputprice andon thesubsidizationoffarm incomes. Theinternationalaspect ofpollutionabatementisdealtwithbyBergman, Cesarand Klaassen inChapterSix.Theyshowhowtheex-ante costsof additionalemissioncontrolfor individualcountriescanbesignificantly reducedbyusingarelativelysimplecost-sharingscheme.Theydemonstratea modeofoperationfor suchascheme,which couldbeestablishedby introducingasupra-national institution,such as a'Europeanenvironmental protection fund'. Severalgametheoretical implicationsarealsodiscussed. PartTwoofthisvolumebeginswithachapter byNentjes andWiersmaon the relationbetweeneconomicgrowth, technological progress and environment.The authors provideasurveyoftheliteratureon theeconomic growthdebate. Moreover theyanalyse the relationbetweenenvironmental pollutionandeconomicgrowthwithinamacroeconomicframework of reference. Attentionisalso paidtowaysofstimulatinginnovations in pollutioncontrol at amicrolevel. InChapterEightHeijmananalyses the relationbetweenpopulation growthand the possibilityofasteadystateeconomy. Beginningwithan elaborationonsteadystateconcepts, he then looksat the role ofabatement ofenvironmentaldamage, the importanceofrenewable resources, the developmentoftheecosystemand the impactofnature-conservingtechnical change,usinganumberofmodels.
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