Is it time for a third (world) way...?

March 29, 2002

Development economics has traditionally been skewed by a western focus but Chris Bunting reports on attempts to bring a fresh perspective to the issues

Sustainable development does not often get a big showing in the press. But come September, the Rio-plus-ten summit in South Africa could see it squeezing out articles on pregnant superstars, at least in the broadsheet press.

Aid and development will be prominent issues, so perhaps summit participants should heed Partha Dasgupta, professor of economics at the University of Cambridge. He believes that for a long time the issue has been skewed by western development and environmental economists who have dominated debate.

Charles Perrings, professor of environmental economics at the University of York, agrees. The two have known each other for years. In 1995, Perrings was approached by Dasgupta and his research collaborator Karl-Goran Maler, director of the Beijer International Institute of Ecological Economics, to establish the journal Environment and Development Economics .

The journal, whose aim is to encourage academics in the third world to publish and discuss their research, is an extension of Dasgupta and Maler's teaching and research programme on environmental and resource economics in the third world. The programme started in 1989, and about 150 young economists in South Asia, sub-Saharan Africa and Latin America are now involved. The journal is peer-reviewed, but it differs from others in that if an article is deemed promising but unpublishable as submitted, staff will help the author to shape and polish it until it "works". In a typical issue, up to half of the papers may be written by authors who teach in poor countries.

Dasgupta believes this is vital. "In theoretical physics, say, it's really hard for academics in the poorest countries to compete with their counterparts here or in East Asia. Electrons or quarks are the same everywhere. But no two ecosystems or institutions are the same - so our economics colleagues, even in the poorest countries, have something interesting to tell us if we are willing to listen and if they have the self-confidence and a bit of training to tell us."

He thinks a third-world perspective could address the "misleading" and narrow nature of development and environmental economics. "Development economists study poverty, but the more practical among them are obsessed with defining poverty and counting the poor. They are not interested in studying ways in which population growth and erosion of local resource bases might keep people poor in large parts of sub-Saharan Africa and South Asia. Similarly, environmental economists in the United States see nature mostly as an amenity, almost as a luxury."

Perrings, president-elect of the International Society for Ecological Economics, adds that, aside from the focus on amenity, environmental economics research in the United States has been skewed towards pollution and the depletion of stocks of marketed natural resources such as timber.

And the US influences everyone else. Dasgupta says: "When The Economist writes that 'trade improves the environment, because it raises incomes, and the richer people are, the more willing they are to devote resources to cleaning up their living space', we know the magazine is obediently following US economists' lead on the subject. A few years ago we used to be told that poor countries cannot afford democracy, now we are told they cannot afford their environment. I simply do not understand it."

But how would adding the environment to economic thinking change how one does economics? Dasgupta points out that gross domestic product measures economic activity but does not include things such as the wear and tear on ecosystems - which could have damaging long-term implications. Perrings says: "The danger for someone looking at development by studying GDP is that you could have high GDP for a period - GDP could even be increasing - while the productive base generating GDP is eroding. When that happens, the future is being short-changed, but you wouldn't know that."

Economists now recognise "human capital" such as knowledge, skills and literacy, Perrings says. But what has been largely ignored - despite work on valuing environmental amenities such as parks and research into exhaustible resources such as oil - changes in non-marketable "natural capital" are still not properly reported. "These are the resources that enable us to exist and to produce - including the myriad invisible 'bugs'

that make it possible to grow crops, for example, nitrogen fixing."

Dasgupta notes that classical economists did try to include it, but their vision was very limited. He cites the early 19th-century economist David Ricardo, who "had a lot to say about land as a factor of production", but seemed to regard it as "indestructible".

As well as ignoring the long-term implications of processes such as the deterioration of the natural resource base, traditional economic measures also fail to see how ecosystems are interconnected, Dasgupta says. A forest, for example, might protect farmland downstream from floods. If the forest is cut for timber and crops - as happens in much of Asia - the farmers downstream often do not receive compensation for the resulting problems. The real costs of deforestation are borne by the farmers and not by the timber merchants, and the farmers end up subsidising the country's export of timber to their own detriment.

Ecologists and anthropologists have documented many such cases, but Dasgupta and Perrings say much more work must be done. "We know what to look for," Perrings says, "but there are few good statistics. We can't say whether an agro-ecosystem is capable today of cleaning up as much pollution as it was capable of ten years ago. There may be fewer bugs in the system to do the cleaning. Yet that's the kind of measure we need if we are going to estimate changes in natural capital relative to manufactured and human capital."

Dasgupta says: "There are always bits and pieces of information around, the trick is to know what to look for. But there is little incentive to discover what's going on at the local level in poor countries, and why."

He is aware that not everyone will share his ideas. "Early national income statisticians must have met with similar scepticism, but people have now got used to national income statistics - so used to them that now we cannot seem to get enough of them."

The World Bank has made a stab at the problem. Two years ago it published statistics on investment in manufactured, human and natural capital in a large number of countries over 24 years. "The estimates on natural capital were really crude and incomplete. In some instances, they were based on faulty reasoning. But theirs was a first cut at the problem. It's the only set of relevant statistics we've got," Dasgupta says.

Well-Being and the Natural Environment , by Partha Dasgupta, is published by Oxford University Press.

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