An Investigation Into How Natural Resources Shape The Economy
Astonishingly, as this new doctrine does not have a particular individual or group associated with it like John Maynard Keynes with “Keynesian economics” or Karl Marx with “Marxism”, many people are still unaware that such a change is taking place. External influences and pressures, such as the desire for economics to be "relevant" to current policy challenges are driving this gradual change.
So, what is this subtle, often unrecognized, but potentially profound shift in economic thinking?
In simple terms, the age-old concept of the "economic system" has undergone an irreversible transformation. We no longer regard the production of goods and services, as well as the generation of human wellbeing, to be completely dependent on the accumulation of physical and human capital. A large number of economists today believe that there is a third type of "capital" or "economic asset" that is as important to the production, consumption, and total welfare of the economy. This unique category encompasses an economy's natural and environmental resource endowment, which is sometimes referred to as natural capital.
Now, let’s dive into what exactly does natural resources include. Minerals, forests, water, and fertile land, and other materials found in nature that can be used for economic gains are known as natural resources. They are fundamental to our socioeconomic systems and developmental requirements. Natural resources account for a considerable amount of most countries' wealth, making natural resource management a critical aspect of economic development.
Microeconomics provides the foundation for efficient resource allocation as it has grown into a set of concepts that define the rational behaviour of various stakeholders. To underpin the process of sustainable development, effective governance, resource endowments, and demography must all be appropriately coordinated based on sound microeconomic principles. The figure given below showcases the linkage between natural resources and SDGs that occurs through interaction via production and consumption in multiple geographical scales.
Natural resources can also play a vital role in efforts for poverty reduction as most of rural poor depend on natural resources for their livelihood. It acts as a safety net for the poor during times of financial crisis. Governmental policies aimed at promoting small and medium-sized enterprises that use local natural resources can lead to the growth of rural economies.
Poor resource management includes failing to manage renewable resources in a sustainable manner – for instance, when fish stocks collapse due to overharvesting – as well as failure to properly invest the revenue from the sale of non-renewable resources, allowing the majority of resource gains to go to private actors at the expense of the public. Externalities are also central to resource allocation for the economy. In economic terms, an externality occurs when a market transaction affects someone other than the buyer or seller.
For example, a company that pollutes a river while
manufacturing paper harms those who use the river for fishing, swimming, or drinking water. This negative
externality could be quantified in monetary terms, such as the professional fishermen's lost revenue. Some damages are more difficult to quantify but are
no less significant, such as health costs caused by toxins in the water or lost
enjoyment by those who can no longer swim in polluted water. As a result, poor natural
resource management results in missed opportunities for sustainable economic
development and costs both human beings and the environment.
Despite significant advancements in our understanding of the role of natural resources in the recent decades, there is still much to learn. Specifically, we must determine what environmental policies are required to ensure that current needs are met without compromising the economic opportunities to meet the needs of the future. Individuals can contribute to the conservation of natural resources by participating in clean-up, afforestation, and awareness campaigns. The opportunities for the future are enormous as we need to look at the big levers of change for altering the traditional production and consumption systems.
As
Wendell Berry said “The
Earth is what we all have in common.”, so by ensuring proper functioning
of institutions and the implementation of
robust policies, let us create a better future!
Please let me know in the comments your thoughts, opinions, and suggestions regarding natural resources and the economy!
References:
https://www.oecd.org/env/outreach/2011_AB_Economic%20significance%20of%20NR%20in%20EECCA_ENG.pdf
https://www.bu.edu/eci/files/2019/06/Microeconomics_and_the_Environment_Feb2019.pdf
This was so fun to read. And incredibly informative. Good Job!!
ReplyDeleteVery well researched!
ReplyDeleteAmazing! Very well written!!
ReplyDeleteAll the points are nicely put forward and written! Very well researched!
ReplyDeleteWonderful work! In the era of growing demand for even faster growing populations, resource management itself is at a tense point. It is here that sustainable development should be focused and properly implemented.
ReplyDeleteAgreed. The rate of production and consumption are high due to the growing population and the rising standard of living. GDP may grow, but it won’t compensate for the loss of our natural capital. We need more sustainable policies to ensure that economic growth does not happen at the expense of the earth’s natural resources.
ReplyDeleteVery well written!
Well researched and Well written...the topic is significant for the future. Its not unknown but neither is it taken seriously to thoughts of a common man. Nature has always been unpredictable, but have provided abundance when it is utilised and sustained properly.
ReplyDeleteNatural resources is the base of any economy. This blogpost was well written
ReplyDeleteTotally agree with you! Conservation of natural resources is vital in this current economic situation and the global policies need to be revised accordingly!
ReplyDeleteGood job! Your research was very intensive and brings a light upon the resource crisis our economy is facing globally. It's high time that our policymakers adopt sustainable methods to pave the way to economic stability.
ReplyDeleteVery intriguing write up on how natural resource management impacts economic development. Managing our resources sustainably is the need of the hour, and this article sheds light on numerous aspects of it. Well written!
ReplyDeleteWell compiled ideas shows the extend of research and the labour put forward by the researcher in the presentation. Well done!!!
ReplyDeleteWell researched work !..The need to respect nature and its limits challenges society and the science of conservation .
ReplyDeleteShilpa, this is so brilliantly written and well articulated. Undoubtedly, the presence of natural resources has a positive effect on the economy, and like you mentioned, also has its banes. However, the right allocation policies and a headstrong bureaucracy can make a world of a difference. Let's talk about Norway. It was a small fishing country back in the 1960s. In the 1970s, an unimaginable amount of oil was found in the Norwegian Sea (a LOT of oil. It falls 4th after Kuwait, Saudi Arabia and UAE). Like the other three, it could have easily spent the revenue on fancy buildings, tourist spots, glamorous infrastructure and a world class lifestyle for its citizens. But it didn't. It understood that oil wealth doesn't last forever, and it invested its money in a Sovereign Wealth Fund. It is the largest SWF in the world (beating even China, who has a population 270 times larger). The SWF of Norway is like a giant hedge fund that invests in a diverse portfolio, and the profits reaped are then invested in education, infrastructure, a strong social welfare system, etc. Just for context, the fund made $112.4 Billion in profits. Today Norway tops the world rankings in OECD Life index, GDP per capita, Balance of Trade, Ease of Business and is one of the most economically equal countries in a world. And all of this without harming the scenic nature of Norway.
ReplyDeleteSo if you ask me, It's not WHAT resources a country has, but it's HOW they're used.
Thank you so much for sharing your thoughts! Like you mentioned through the example of Norway, it is indeed the effective utilization of resources that enables strategic growth in the economy!
DeleteWell thought and wonderfully articulated, Shilpa!
ReplyDeleteThe article was backed with facts and figures which all point to the importance of focussing on the SDG goals. It has been integrating a three dimensional approach to attain sustainable development covering social, economical and environmental aspects while also ensuring that it is based on people centric transformational goals. And while SDG Goals are meant to be implemented on a humongous scale across the countries, the shared principals and commitments envisaged by the nations are far from reality.
When it comes to India, Niti Ayog plays a crucial role in implementing, monitoring and accelerating the SDG Goals in the country across the verticals of States, UTs, stakeholders, think tanks and academia. But the reports suggest that the challenges are exacerbating and this would be the case for many of the developing nations. So the policies have to be directed towards country specific issues but also entails an intrinsic obligation from the developed countries to support each other and the lower performing countries through global participation.
Thank you so much for sharing your views! I completely agree with your viewpoint that various country-specific issues need to addressed through global policies and support from well-developed countries.
DeleteVery well researched and credible sources to point out the current situation in todays world economics. The dynamics that have been talked about are very crucial for every country. Good job!
ReplyDelete