Chapter 3: Investing in Natural and Human Capital
3. Investing in natural and human capital (with Olman Segura Bonilla) INTRODUCTION Until recently, economics and ecology were treated as distinct and unrelated subjects. But today the recognition is growing that the ways human beings manage nature are closely related to the ways we manage relationships among ourselves. Threats to the ecosystems that underpin economic activity are forcing us to reconsider our treatment of natural resources in our daily lives and in our ﬁelds of study. The assumption that technical progress is a perfect substitute for natural resources is losing credibility. The inadequacy of myopic time horizons in the face of long-term environmental degradation is becoming ever more apparent. These insights have given impetus to the idea of sustainable development. The treatment of natural resources as natural capital is an important element of the new sustainable development economics. Natural resources can no longer be regarded as free goods. In microeconomic decisions and in national accounts, the depletion of the natural resource base must be treated as a cost. At the same time, it is possible to invest in natural capital, for example via reforestation, soil restoration, and pollution control. In other words, some natural capital can be, if not ‘man-made,’ at least helped along by purposeful human endeavor. This chapter considers the prospects for sustainable development in the so-called Third World (that is, in the agrarian and semi-industrialized economies of Asia, Africa, and Latin America). We argue that a necessary condition for sustainable development in these countries is a...
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