Economics of the Environment

Prof. Parth Dasgupta

Date: 21st,March,2002

Place:China Centre for Economic Research

Speaker: Prof. Parth Dasgupta

Main idea of the lecture

Good afternoon!

In this lecture I will develop a different perspective with which to view the links between rural poverty and the state of the local nature –resource base.The environment ought to be regarded as a capital asset.Capital and nature goods can subsititute for each other.

Why we should be particularly worried about nature resource? Because when it comes scare,the price will go up and greatly influne the development of economy.

Obviously ,the state and government always take some kind of method to prevent the price from going up,but government is much weaker in economy than to build more roads or buildings.Especially for the poor countries in the past 25 years the situation is much more worse.

We have just discussed that capital and nature resource can subsititute for each other.For example,Mr 1 is rich in capital while Mr 2 is rich in nature resource and Mr1 may lend some money to Mr 2 for investment under the condition that Mr 2 would give 30% of his profit to Mr 1 as return..By this agreement ,Mr 1 and Mr 2 will both improve their profit ,just like the diagram as following:

The bargainning problem

Pay off

Mr1 agreement point

B

·A

Mr 2

Pay off

My research is not to find out which point is the agreement point ,but how to ensure the agreemnt point.or just to answer the questions like “How can I trust you?”and “ Why should I lend money to you?”.

Let’s focus on the question “why is agreement point kept?”

There are four kind of factors to keep the agreement point:

(1) Affection

Nature resource is different on the basis of culture.In some countries,such as those in africa,nature resource is not private ,nor belongs to the state,but in Amarica and other countries, nature resource is private.

(2) Honest Position

It is easy to comperhend.Both sides keep the agreement,bacause they both benefit from the agreement.

(3) Repeated Interaction.

That’s to say that communication is very necessary in keeping thegagreement.You will never lend your money to a stranger.

(4) Third-Party Inforcement

The third-party refers to such factors as government,organizations,institutions as well as laws and rules.A government may interfere with economy by financial policies and laws, to keep the agreement piont.

But wyh should we believe the third-party?

We believe it because it can bring us profit.If we do not believe some a government,it will come out..

The efficiency of the third-party depends on the structure of a country.Generally speaking,the third-party in poor countries are weak..I do not mean that these government are bad,nor not concern about their people,but mean that they have no channel to handle the problem for a country.

Before the end of my lecture,let’s share some words as following:

“Economic growth is good for the environment because countries need to put poverty behind them in order to care”

“Trade improves the environment because it raises income and the richer people are more willing ,they are to devote resource to cleanning up their living space”

let’s end up my lecture with the table as following.From this table we can see that in poor countries such as those in Africa,nature resource is there,but not in use.I think their weak governments in these poor countries shoud be responsible for these problems.

Some question from listeners:

(1) Professor,you have just mentioned “weak government “in your lecture,I want to know whether there exsit “strong government”,and how to distingiush these two kind of governments?

Prof: We judge a government mainly by the consequence of it action.

(2) Professor,as we all know ,there still exsit unequal economic rule in the world trade field,and what is your attitude towards the nature resource transfer between developing countries and developed countries?

Prof : The nature resource transfer nowadays is not the same as that of 1860’s.It will benefit both side of the transfer