The Environmental Costs of Industrialization

Abstract

Development experts and economists are revising their thinking about the environment. Where once they may have regarded the world we all inhabit as consisting of ‘natural resources’, raw materials to be transformed through labour and capital towards a nation’s economic growth, the environment is beginning to be considered more as a capital stock. Many environmental economists argue that using up natural resources should be counted as a reduction in capital stock, not ‘growth’. New methods such as natural-resource accounting, hedonic pricing, contingent valuation and inclusion of the costs of ‘externalities’ such as pollution in production costs have been proposed for valuing the environment (see Pearce et al., 1989 for descriptions of these methods). One of the problems with recognition of the environmental effects of development is that environmental goods such as air and water are ‘public goods’, so that their costs do not enter directly into the costs of commodity production (Falkus, 1990, p. 67).