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Introduction to Environmental Economics and it’s socio economic approach and relation between Econom

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To understand the economy and environment first we have to understand what environmental economics is

 Meaning of Environmental Economics-The mainstream economics is based on market mechanism. Its primary emphasis is on the markets as a supplier of advice about human preferences. It focuses on the rational behavior of consumers and producers. It studies the micro and macro aspects of the economy. But economics differs from environmental economics.

In economic sense, pollution is termed as any loss of human well being arising from physical environmental change. Pollution may also have short-run or long-rum impacts upon the health of human beings. Resource issues, as pointed out by D.W. Pearce, may be interpreted as possible degradation of the human environment. Other forms of degradation may also be added, such as the exploitation of natural resources other than for crop land (for housing/transport etc.), the exhaustion of non-renewable resources (such as oil and mineral), and the mismanagement of renewable resources.

According to Charles Kolstad, the best division between environmental economics and resource economics is between static and dynamic issues related to the natural world. “Environmental economics involves questions of excessive production of pollution by the marker (or insufficient protection of the natural world due to market failure).

Resource economics, on the other hand, is concerned with the production and use of natural resources, both renewable and exhaustible. Renewable resources would include fisheries and forests. Non-renewable would include minerals and energy as well as natural assets.”

Nature of Environmental Economics – The environment become one of the major concerns to the present economy because of the activities of man. The relationships between man and environment have been changing along the development process from generation to generation. Economists are concerned with increasing demand of resources and its implication on the natural environment, therefore, a Controversy on the limits to growth. The environment provides food shelter, clothing, medicine, raw materials and other resources.

Economics is concerned with making best allocation of resources among competing alternatives; it is concerned with utilization of resources to ensure an improvement in welfare. There is therefore, a strong Link between the environment and economics, humanity are faced with a lot of environmental problems which have economic dimensions.

Environmental Economics is that aspect of economics that deals with the interrelationships between the environment and economic development, it studies the ways by which a balance is strike between the two. it is also concerned with how the damage done can come to a halt or reversed.

Scope of Environmental Economies –Environmental economics is considered both a positive and a normative science. Therefore, it has wide scope.

1. Economy-environment analysis: Environmental economics is primarily concerned with the impact of economic activities on environment and its implications for the individual firm, industry and the economy as a whole, Economists have formulated economy-environment models to explain the various economic activities and their external effects. For sample, the Material Balance Model and the Leontief Abatement Model explain these externalities.

2. Eco-development: The main objective of environmental economics is to maintain a balance between economic development and environmental quality. In order to achieve it, environmental economists have to explore the various socio-economic possibilities to reduce pollution and uplift the standard of living of the people. This objective gained momentum after the publication of the Report on Limit to growth.

3. Welfare approach: Environmental economics has emerged as a discipline to tackle environmental problems from an economic Welfare framework. The welfare framework covers scarce resources and market failure due to property rights and ethical aspects of different problems of pollution. Thus it suggests the best possible means to tackle the environmental problems.

4. Dynamic and stock-flow analysis: The mainstream economics is largely confined to the static problems of market behavior. But environmental management issues are about resources and are dynamic in nature. Moreover, resources have a stock and they have a rate of depletion and replenishment such as oil, minerals, and forests. Thus there is the inevitable stock-flow dimension to environmental issues.

5. Environmental values: Environmental issues are about resources the neo-classical economists have analyzed the use of various resources like fisheries. Forests , fossil fuels and water in a rational manner and with environmental values. In fact, environmental values are economic values. It is important for the society to conserve its limited resources in the interest of economic efficiency and welfare.

6. Clean Technology: Presently environmental pollution is caused by misuse of existing technology and failure to develop better one. Environmental economists are in favour of appropriate and clean technologies which provide the most rational use of natural resources and energy and to protect the environment.

7. International Cooperation: There are many international issues like hazards of trans-boundary shipments, unwanted substances and common property resources which need international cooperation among nations. There are many negative effect of inadequate toxic wastes generated within countries and hazardous goods exported to other countries.

Socio-Economic Approach: Dr. Mostafa K. Tolba lays emphasis on socio-economic approach. According to him, we may now look upon environment as the-stock of physical or resources available at a given time for the satisfaction of human needs, and upon development as a process pursued by all societies with the aim of increasing human well-being. Thus the ultimate purpose of both environmental and developmental policies is the enhancement of the quality of life, beginning with the satisfaction of the basic human needs.

Further, environmental problems are caused by lack of adequate development. Today there are hundreds of millions of people without the basic human necessities like adequate food, shelter, clothing sod health, and hundreds of millions more lack access to even a rudimentary education.

This is not only an intolerable situation in human terms, but it also has serious environmental consequences. The relentless pressures that arise where basic human needs are not met erase the resource base from which man must inevitably gain his sustenance.

The destruction of forest, the loss of arable soil, the loss of productivity through disease and malnutrition and the increasing pressure on fragile ecosystems which so often result from poverty.These things are as significant as the pollution created by industry, technology and over consumption by the affluent


All of them lead to the rapid depletion of natural resources. Many human settlement problems also arise from lack of adequate development.

In support of his argument, Dr. Tolba suggests that in the industrialized countries, it will be necessary to reorient society’s aims so that the entire population has more opportunity for self-expression in the fields of culture , education and humanities. These non-physical areas of development represent the highest levels of human achievement. This new orientation must be less demanding on the environment, in particular on natural resources and energy. Present patterns of production and consumption, based on waste, extravagance and planned obsolescence, must be replaced by conservation and reuse of resources.

Developing countries. which still lack the infrastructure and readily useable resources are required to meet the growing needs and aspirations of its people. This approach must continue to have a strong physical orientation. But in earlier stages, each country should be helped to follow a path to development best suited to its own human skills and natural resources. This responds to its own needs and accords with its own culture and value systems. If should adopt environmentally sound technologies in relation to its natural resources of soil, water, plant and animal life, and should avoid the destruction of the resource base.

Economic Growth and Environment: Since the times of

Malthus, Ricardo and Mill, economists like Galbraith , Mishan , Boulding , Nordhaus , Commoner , etc. have voiced their concern about the harmful effects of economic growth on environment. They are of the view that economic growth has produced pollution and wasteful consumption of trivia that contribute nothing to human happiness.

According to them, the objectives of economic growth re to be reviewed because it has negatively affected the quality of life, pollution of the environment wastes of natural resources and its failure to solve socio -economic problems.

E.J. Mishan has expressed his anti-growth arguments in his book entitled The Costs of economic Growth. According to him, “It is hardly possible to move along this golden path of self-perpetuating economic growth without subjecting people to manifold pressures. Moreover, pressures appear to increase both the stage of economic, growth and with the rate of economic growth. Lester Brown he pointed out at the present state of economic growth. He argues that economic benefits are out-weighted by the costs. These costs are more rapid depletion of natural resources, urban problems like congestion, noise pollution and problems of the country side such as strip mining and the indiscriminate clear cutting of timber.

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