E.V.

Akshita Lukhi- 31
Parth Madia-32
Viren Makwana-33
Sarthak Mangaonkar-34
Dhruv Mania-35
Namrata Manjrekar-36
Nilesh Mari-37
Hardik Masrani-38
Anand Mayani-39
Bhavik Mehta-40
1

Sustainable Development.
Importance of Natural Resources.
Land, Natural Resources, & Natural Resources Resources.
Petroleum.
Resource curse
Poverty & Natural Resources Stresses
Grassroots Natural Resources Action

Pollution
Global Public Goods: Climate &
Biodiversity.
Limits to Growth.
Adjusting Investment Criteria for Future
Generations.
Natural Asset Deterioration, Adjusted
Net Savings, & the Measurement of
National Income
4

Sustainable Development

Progress that meets the needs of the present

without compromising the ability of future
generations to meet their own needs. [UN
(Brundtland) Commission on Environment
and Development 1987].
More than survival of the human species.
Maintenance of the productivity of natural,
produced, and human assets from generation
to generation.
Can physical (produced) capital substitute for
natural capital? (See Dalys theorem).
5

Land, natural resources & Natural

Resources resources

Land Immobile, potentially renewable, &

nonproducible (with exceptions such as
Boston & Mumbais landfills).
Natural resources--Mobile but
nonrenewable.
Resource flowsRenewable energy
sources.
Natural Resources resourcesresources
provided by nature that are indivisible.
6

Response to 1973-74 & 2005

petroleum price increases

Short run price elasticity of demand (%

change in quantity/% change in price) is
close to 0.
Long run elasticities are much higher
(slightly less than one).
DCs adjusted better in 2005 than 197374; however, LDCs were badly affected
both times.
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CHAPTER 13

E.Wayne Nafziger Development Economics

Resource Curse

Resource-abundant economies grow slower than other

economies (Sachs and Warner 1999; Lal and Myint
1996; Auty 2002).
Oil revenues increased average material welfare,
widened employment opportunities, and increased
policy options, but also altered incentives, raised
expectations, distorted and destabilized nonoil output,
frequently in agriculture.
A top Nigerian official in 1970s: Striking it rich on oil
was like a man who wins a lottery and builds a castle
[but] cant maintain it and has to borrow to move out.
Why?
Exchange-rate, pricing, investment, and incentive
policies that Nigeria failed to take to counter Dutch
disease (Chapter 6).
10

Is the resource curse valid?

Resource abundant economies more likely to

suffer growth collapse, due to higher wages
obstructing industrialization.
Neumayer (2003) finds virtually no resource
curse if you measure GNI accurately. Should
subtract capital depreciation, natural resource
depletion, and damage from carbon dioxide &
particulate emissions from national savings
(Figure 4-2).
Curse is partly result of unsustainable overconsumption in resource abundant economies
(as in Nigeria during its oil boom).
11

Mineral export abundance &

predatory rule

Abundance of exportable minerals more

likely to be associated with poor governance.
Resource exportables enabled warlords or
predatory rulers (Liberias Charles Taylor
and Zaires Mobutu Sese Seko) to support
private armies without providing public
services.
Predatory economic behavior not viable in
resource-poor economies, such as Togo.
12

Determinants of Natural
Resources degradation

Market distortions government does

not set conditions for efficient markets.
Defective economic policies
Misguided government intervention in
well-functioning markets.
Inadequate property rights.

13

Why Natural Resources

degradation?
People maximize profits by shifting costs onto

others, and appropriate common and public

property resources without compensation.
Ultimately, excessive Natural Resources
damage can be traced to bad economics
stemming from misguided government policies
and distorted markets (Panayotou 1993).
Growth should be derived from increased
efficiency and innovation not by shifting
Natural Resources costs to innocent third
parties.

14

Determinants of Natural
Resources degradation

Negative externalities economic

activities conveying direct and
unintended costs to other individuals &
firms.
Common property resources tragedy
of the commons just as herders cattle
overgrazes pasture open to all,
individuals exploit open access resource
as if facing an infinite discount rate.
15

Determinants of Natural Resources

degradation

Public goods with non-rivalry & non-exclusion

in consumption.
Irreversibility resource cannot be reproduced in
future if fail to preserve it now.
Undefined user rights people will not pay for
resource without secure & exclusive rights.
High transactions costs Information,
coordination, bargaining, monitoring, &
enforcement costs may be prohibitively high.
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Pollution

Production and consumption create leftovers or residuals that are emitted

into the air or water or disposed of on land. Pollution of air and water is
excessive not in an absolute sense but relative to the capacity of them to
assimilate emissions and to the objectives of society. Pollution problems
result from divergences between social and commercial costs

Hardins tragedy of the commons takes something trees, grass, or fish

out of the commons.

Reverse of tragedy is pollution, which puts chemical, radioactive, or heat

wastes or sewage into the water, and noxious and dangerous fumes into
the air. Without a clear definition of ownership and user rights and
responsibilities, an economy fouls its own nest (Hardin 1968:1244
1245).

Most serious health problems result from exposure to suspended

particulate matter (SPM), consisting of small, separate particles from
sooty smoke or gaseous pollutants. Finer particulates carry heavy metals,
many of which are poisonous.
17

Pollution

Natural Resources Kuznets curve.

Water shortage caused by a low price

(Figure 13-2).

Efficient level of pollution emissions

based on marginal social costs &
benefits (Figure 13-3).
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19

Greenhouse gases

Phenomenon by which the earths atmosphere

traps infrared radiation or heat.

Smudgepot or greenhouse effect (Schelling).

(1993:465), warming the earths surface and
keeping it from rising to be replaced by cooler
air.

Greenhouse gases include carbon dioxide

(CO2), methane, nitrous oxide, and water vapor,
that keep the earth habitable, and
chlorofluorocarbons (CFCs).
20

Will a shortage of natural

resources limit economic growth
in the next half century,
especially in LDCs?

Yes or no?

21

Limits to growth? Yes.

Dalys impossibility theorem: a U.S.-style high

mass consumption economy is impossible for 6.5
billion people.
Present resource flows would allow U.S. living
standard to 15% of worlds population.
Humans already use or destroy 25% of earths net
primary productivity, total amount of solar energy
converted into biochemical energy through
photosynthesis of plants minus the energy these
plants use for their own life (Postel).
Georgescu-Roegen: producing luxury goods with
high entropy shortens life span of human species.
22

Limits to growth? No.

Proven reserves, thought to be woefully short,

represent no more than an assessment of
working inventory of minerals that industry is
confident is available during its forward
planning period (typically 8-12 years) &
should not be used for making long-term
projections.
Critics understate technological change (MIT
study arbitrarily assumes nonexponential limits
compared to exponential growth on demand
side).
23

ACKNOWLEDGEMENT
Presenting this project we hereby thank all the
teachers for helping us gather all this
knowledge and make this project happen.And
also all others who helped by doing their parts
for it.

CHAPTER 13

E.Wayne Nafziger Development Economics

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