Beyond Environmental Economics New Directions for Policy Making

Abstract

In the 1950s and 1960s economics had its focus on economic growth ignoring the fact that some of theinputs essential to the production process were limited in supply. In other words, the sustainability of thegrowth process was not addressed properly. Since 1970, a number of world views appeared ranging froma support for a market technology driven growth process which is environmentally damaging, through aposition advocating prudent resource management to an ‘eco-preservationist’ positions which explicitlyreject economic growth. Against this background environmental economics became established as a subdiscipline (Pearce and Turner, 1990). Environmental economics (EE) was considered as an opportunity toaccommodate the environmental implications of the growth economy and society within a modified(though not radically different) set of economic models.

The subject has developed immensely during the last three decades both in theoretical and empiricalgrounds. Micro level applications of EE include estimating demands for various environmental goods andservices and damage estimations (through various environmental valuation methods), designing ofeconomic instruments, project level cost benefit analyses, aiding renewable and non renewable resourceharvesting decisions. Macro level applications include green accounting (integrating environmentaladditions and depletions into system of national accounts), development of macro level indicators etc.Such applications seem to cover a wide variety of real world issues ranging from biodiversity, energy,agricultural and local pollution issues to global issues such as climate change, ozone depletion andultimately towards the long term survival of mankind. Although Environmental economics seem toaddress these issues quite comprehensively than conventional economics and pure scientific approaches,the outcomes of such applications are often subject to debate. Doubts are being raised mainly fromdifferent disciplines indicating non recognition of their concerns, particularly from ethical, ecological andphilosophical grounds.

Most natural resource policy decisions in many countries have made sure that environmental economicvalues are being incorporated. There are however policy gaps, partly due to the yet unresolved theoreticalissues of the subject and partly due to the single disciplinary roots of economics. The subject of ecologicaleconomics arose partly in response to such concerns and enriched the analysis with the incorporation ofecological inter linkages to the economics (Costanza, 1991).The objective of the paper is therefore to first elaborate on the various aspects of the subject that are beingused in the various natural resource management issues. For example, EE provides explanations forresource degradation basically the economic failure arguments and proposes corrections accordingly. Thepaper elaborates on the usefulness of such arguments and the critique, the need for alternativeexplanations.

The second section discusses more practical issues, how the decision making has been aided by thediscipline through standard micro level and macro level analysis with special emphasis on Sri Lanka. Italso discusses the drawbacks of the analytical tools especially in relation to the instances where themultidisciplinary integration could enhance the outcome. Some of these integrations are however, onlytheoretical conceptualizations while others have been actually tested in different contexts. The subject ofenvironmental economics has benefited immensely from various other disciplines. The third section ofthis paper is devoted to discuss on such disciplines that could be further integrated in order to widen thescope of the subject.