The Concept of Natural Capital

Wednesday, 13 January 2010 - 9.00am - 10.30am

Speaker: Partha Dasgupta

Abstract
Macroeconomic models of long-run economic possibilities are for the overwhelming part built on the assumption that an economy's assets comprise (i) manufactured capital (roads, buildings, machines), (ii) human capital (health, education, skills), (iii) knowledge (the differential calculus), and (iv) institutions (the legal infrastructure, social norms of behaviour). Nature is almost always absent from the models. Accounting for Nature, if it comes into the calculations at all, is usually an afterthought to the real business of "doing economics". When pressed, we economists defend ourselves by suggesting that Nature is indeed present in macroeconomic models, but that it appears in a hidden way, as a fixed, indestructible factor of production. (The great Classical Economist, David Ricardo called that factor, "land".) The problem with viewing Nature in that manner is that it is wrong: soil, forests, watersheds, fisheries, fresh water sources, river estuaries, and the atmosphere - ecosystems generally - are self-regenerative, but suffer from depletion or deterioration when they are over-used. (In the extreme are exhaustible natural resources like oil and natural gas). Despite the neglect, a number of economists in recent years have been trying to include Nature into economic models in a seamless way. These Notes offer a very brief introduction to the way we have done that.

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    The Concept of Natural Capital - Presentation Notes

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    Soil, forests, watersheds, fisheries, fresh water sources, river estuaries, and the atmosphere - ecosystems generally - are self-regenerative, but suffer from depletion or deterioration when they are over-used. (In the extreme are exhaustible natural resources like oil and natural gas). Despite the neglect, a number of economists in recent years have been trying to include Nature into economic models in a seamless way. These Notes offer a very brief introduction to the way we have done that.