CHAPTER 5 . Chances for Nature - A Matter of Substitution
91
Because prices determine how much is used of certain inputs, it is understandable
that a zero price for nature, leads to an enormous use of this from of capital, resulting
in environmental degradation. Consequently, it seems necessary to determine the economic value of natural capital to prevent unsustainable use.
A question that is often raised in reaction to the continuous substitution of natural
capital with produced capital, is whether the welfare generating capacity of our total
capital stock is reduced by continuous substitution. Some concerns are that it only
seems as though the welfare generating capacity is untouched, because people are not
confronted with the effects of substitution in the short run. Only when the damage has
been done, one may realize that some welfare potential is lost.
Often degradation can be seen clearly (e.g. deforestation), but in economic terms
no losses are encountered, because individual user do not have to pay for using natural capital. Environmental goods or services are unpriced and therefore referred to as
public goods or commons.
Another related problem is that substitutions are based on present preferences. One
could say that people of today probably prefer goods and services that are produced
by relatively much physical and little natural capital, leading to continuous substitution. However, if our preferences change to more environmentally intensive products
such as the enjoyment of nature and wilderness, it may not be easy to substitute our
capital back tqwards a relatively large natural capital stock. There may be irreversibilities in substitution of nature.
S.3
Substitution of Natural Capital
For an ecologist a sustainable development means sustainable use of natural resources.
Resources are used without degrading their quality and reducing their quantity. This
also means that the carrying capacity of an ecosystem may not be surpassed. In this
view the carrying of human activities is fully ascribed to nature and not to other nonnatural resources.
For economist sustainable development has a different meaning. Sustainable development pertains to ma,intaining the welfare generating capacity of a nation's capital
stock. An additional requirement for sustainable development is that the welfare per capita
of future generations may not decrease. This means that economic growth is necessary in· case of a growing population. The magnitude of the capital stock should thus
keep pace with this growth or the stock should become more productive (Verbruggen
1995).
S.3.1
Capital Stock Theory
A nation's capital stock can be divided into four categories (Segraldin and Steer 1992):
1. Natural capital;
2. Produced capital;
3. Human capital; and
4. Social capital.
91
Because prices determine how much is used of certain inputs, it is understandable
that a zero price for nature, leads to an enormous use of this from of capital, resulting
in environmental degradation. Consequently, it seems necessary to determine the economic value of natural capital to prevent unsustainable use.
A question that is often raised in reaction to the continuous substitution of natural
capital with produced capital, is whether the welfare generating capacity of our total
capital stock is reduced by continuous substitution. Some concerns are that it only
seems as though the welfare generating capacity is untouched, because people are not
confronted with the effects of substitution in the short run. Only when the damage has
been done, one may realize that some welfare potential is lost.
Often degradation can be seen clearly (e.g. deforestation), but in economic terms
no losses are encountered, because individual user do not have to pay for using natural capital. Environmental goods or services are unpriced and therefore referred to as
public goods or commons.
Another related problem is that substitutions are based on present preferences. One
could say that people of today probably prefer goods and services that are produced
by relatively much physical and little natural capital, leading to continuous substitution. However, if our preferences change to more environmentally intensive products
such as the enjoyment of nature and wilderness, it may not be easy to substitute our
capital back tqwards a relatively large natural capital stock. There may be irreversibilities in substitution of nature.
S.3
Substitution of Natural Capital
For an ecologist a sustainable development means sustainable use of natural resources.
Resources are used without degrading their quality and reducing their quantity. This
also means that the carrying capacity of an ecosystem may not be surpassed. In this
view the carrying of human activities is fully ascribed to nature and not to other nonnatural resources.
For economist sustainable development has a different meaning. Sustainable development pertains to ma,intaining the welfare generating capacity of a nation's capital
stock. An additional requirement for sustainable development is that the welfare per capita
of future generations may not decrease. This means that economic growth is necessary in· case of a growing population. The magnitude of the capital stock should thus
keep pace with this growth or the stock should become more productive (Verbruggen
1995).
S.3.1
Capital Stock Theory
A nation's capital stock can be divided into four categories (Segraldin and Steer 1992):
1. Natural capital;
2. Produced capital;
3. Human capital; and
4. Social capital.