The relationship between economic development and the impact of human activity on the environment is not well understood. Experts often express diametrically opposing views on the subject. Free trade, as represented by the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA), for example, has been described as both threatening to the environment (Daly, 1993) and facilitative of its protection (Bhagwati, 1993). Experts also disagree on the environmental effects of factors such as national debt and level of government spending on domestic programs (Pearce, Adger, Maddison, & Moran, 1995).
According to one view, the relationship is described by an inverted U: When per capita income is increased above minimal levels the degradative environmental effect increases, but as income grows further the relationship reverses and the degradative effect begins to decrease (Dietz & Rosa, 1997; Grossman & Krueger, 1995). The idea is that, in the early stages of economic development of an undeveloped country, the emphasis is totally on economic growth, and little concern is shown for any degradative environmental impact of this growth. Yet as the standard of living reaches a certain level, the citizenry begins to pay more attention to environmental issues because it can afford to do so (Beckerman, 1992). Some writers have pointed out positive relationships between specific indicators of environmental concern or quality and per-capita income levels at least for levels above some minimum value (Vincent & Panayotou, 1997).
The generality of this inverted-U relationship has been questioned, in part, on the grounds that it has been shown to be valid for pollutants involving local short-term costs (for example, sulfur, particulates, and fecal coliforms), not for the accumulation of stocks of waste or for pollutants involving long-term and more dispersed costs (such as C02), which are often increasing functions of income. (Arrow et al., 1995, p. 520)
Arrow et al. pointed out that the relationship has been shown to hold for emissions of pollutants, but not for resource stocks such as soil, forests, and other ecosystems. Economic development, these authors argued, does not guarantee environmental protection. "The solution to environmental degradation lies in such institutional reforms as would compel private users of environmental resources to take account of the social costs of their actions" (p. 520).
Some people assume that economic development not only fails to guarantee environmental protection, but more or less ensures the opposite. Environmentalists and economic developers have often been seen as natural adversaries; what has been desirable to the one group has been presumed to be anathema to the other. Some environmentalists have viewed developers as greedy opportunists so focused on profits as to be oblivious to the effects of their activities on the long-term quality of the environment. Some developers have viewed environmentalists as impractical fanatics who put personal esthetic tastes and the protection of obscure species of questionable value ahead of jobs and the economic security of their fellow human beings.
There appears to be a growing belief, however, that environmental protection and economic development are not necessarily opposing interests. Water utilization has been a policy concern from an environmental point of view in the United States for a long time (Burges, 1979; Loucks, Stedinger, & Haith, 1981). The application of economics to water resource management has been part of governmental policy at least since the Flood Contol Act of 1936, and formal cost-benefit analyses of management policies were undertaken at least as early as the 1950s (Eckstein, 1958; Rogers, 1991). Increasingly, economists are attempting to assess the value of environmental variables in monetary terms. Although attaching a monetary value to the maintenance of a specified standard of clean air or water is difficult, it is clear that such things are worth a great deal indeed. Getting a better understanding of the true values of resources and services provided by natural systems and of the real costs incurred when their effectiveness is diminished is a major challenge facing economists at the present time.
In summing up a review of the application of economic analyses to water resource management, Rogers (1991) noted that it "could be read as an assertion of the futility of attempting economic analysis on a subject as complicated as environmental policy." As to why, in view of this, attention should be given to economic aspects of environmental decision making, his answer is:
economic thinking and conceptualization appear to be the only alternative to a chaotic political battle with no concepts of the public good, but only "log roll ing" and "pork barreling." ... Although it by no means solves all the problems in the field, economic analysis and economic thinking on the part of environmental managers and consumers is essential if a coherent environmental policy is to emerge in the United States, (p. 153)
Environmental economics appears to be coming into its own as a bridging discipline (Costanza, 1992; Dixon & Hufschmidt, 1986; Galbraith, 1991; Kiessling & Landberg, 1994; Kneese, 1977; Krutilla & Fisher, 1985; Tietenberg, 1988).
Environmentalists and economists have many common interests and an increasing willingness to work together on the problem of better understanding environmental economics. This was indicated by the formation of the International Society for Ecological Economics in 1988 and the launching of the society's journal Ecological Economics (Holden, 1990). This is not to suggest that all economists and environmentalists now see eye to eye regarding environmental and economic policy and that disputes between environmentalists and economic developers are things of the past. However, the fact that collaborations between environmentalists and economists aimed at improving their common understanding of economic development and environmental change are occurring (Costanza, 1992) is encouraging.
Another promising development is the emergence of industrial ecology as a field of endeavor, the objectives of which are "to examine the environmental impacts of modern industrial society" and "to discover new methods of production and consumption that will lead—when all the consequences, good and bad, are fully accounted for—to fewer harmful side effects" (Lifset, 2000, p. 32). Effective pursuit of these objectives means viewing manufacturing in a much broader context than that in which it has typically been viewed. It means considering not only the manufacturing process, but also the premanufacturing processes involved in acquiring the raw materials used and the postmanufacturing problems associated with the disposal of products when they no longer serve their intended purposes.
One hope is that viewing consumer society as an ecosystem will (a) lead to a better understanding of how human activities affect the flow of substances on a comprehensive scale, and (b) reduce the chances of effecting innovations that are environmentally beneficial if seen from a narrow perspective, but may do more harm than good if seen in a broader context. The variables are many and the interactions among them complex, but the goal of coming to a better understanding of how to meet the needs of the present generation without mortgaging the quality of life of future generations is one on which there should be wide agreement.
Quality of life is the issue. The basic question is how to increase it or at least ensure that it does not decrease, for people in general, those who are alive now and those of future generations. We cannot look far into the future—which is not to say that our current actions can have no impact on the distant future—but we can have some plausible ideas about what life could possibly be like for our children's children and theirs. We know enough about environmental change to have legitimate concerns about how current behavior could reflect itself in a lower quality of life during the future that is close enough for us to be able to identify with it. Yet we need a much better understanding than we now have of what constitutes quality of life, of how this varies with sociocultural context, and of the environmental implications of the various ways in which it can be enhanced.
Precisely how the quality of the environment affects the quality of life of its inhabitants is an important question for continuing research. It would be naive in the extreme to assume that a high-quality environment would ensure happiness to all who live in it, but it seems obvious that the quality of life cannot be independent of the quality of the environment in which it exists. Other things equal, a pleasant healthful environment must be greatly preferred to a polluted one.
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