Financial Instruments for Human Development
24 Pages Posted: 9 Apr 2009
Date Written: 1998
Abstract
The rapid period of industrial growth since World War H gave rise to an unprecedented and uneven use of the earth's resources, This led to mounting concerns about the scarcity of environmental assets such as water, fertile soil, and a stable atmosphere. There is an increased awareness today about the value that environmental assets have for human societies. Yet today's economic systems are "stacked up" against nature. They often reward the destruction of environmental assets such as forests for short-term economic gain, failing to provide value and incentives for the conservation of assets that could be extremely valuable in the future. Economics often provides the wrong incentives to those who control the assets, such as people in developing countries where most forests are located and who could potentially benefit most from conservation. There is increasing unease about this situation, and an emerging view is that standard economic concepts and prescriptions fail to properly account for the value of environmental assets. Economic values seem to be out of step with social values; it is clear that the economic science of the future should bridge this gap. This paper develops practical ways and new economic thinking to redress this discrepancy: it creates and develops structures and institutions through which the value embodied in environmental assets can be translated into economic return which encourages the conservation of the asset, and induce more equitable and effective use of resources.
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