Dasgupta, P. (2012). Natural capital as economic assets: a review. In UNU-IHDP and UNEP. Inclusive Wealth Report 2012. Measuring progress toward sustainability. Cambridge: Cambridge University Press.
Key Messages from Chapter
In calculating total wealth, depleting a type of natural capital and substituting it with another form of natural capital or with manufactured capital is frequently uneconomical in most countries. The assumption of absolute substitutability is not a realistic one.
Externalities are the effects of activities on the well-being of people who have not been parties to the negotiations that led to those activities. An example is the impact of upstream deforestation on downstream farmers. Without correction, the use of natural capital is implicitly subsidized by people who suffer from the externalities.
A large part of what nature offers is a necessity and not a luxury. There are options for some level of substitutability, but in consideration, caution must be taken for irreversible processes that might cause a decrease in well-being.
The social worth of natural resources can be divided into three parts: use value, intrinsic value, and option value – in varying proportions.
Property rights are currently focused on individual ownership. However, many of nature’s services are public and therefore it is difficult to assign property rights to them. Moreover, if those rights are assigned, they are typically assigned without due accord to social justice. Ill-specified or unprotected property rights typically prevent markets from forming or make markets function wrongly when they do.