Introduction to-natural-resource-economics

Natural Capital and Sustainable Economic

Growth

An Economic Perspective

Pakistan Institute Of Development Economics

Presented By

Muhammad Yasir Anwar

Synopsis

• Introduction

•Rationales of study

•Methodology

• literature

•Graphic Analysis

•Conclusion

•Way Forward

Natural Climate and Sustainable Economic Growth

• if we talk about long run economic growth

models then they are built on assumption that

assets of an economy comprises of manufactured

capital(physical capital), human capital,

institutions and knowledge and nature is always

absent from these models

•These theoretical models which explain the

growth process fundamentally misrepresent the

role of nature or we can say that natural capital.

Introduction to Natural Capital


•Another capital that play a crucial role in Economic

Growth is “Natural Capital”.

Natural capital includes a safe climate, productive

soil, available water and protection against flooding.

•Like physical capital natural capital also

depreciable and it also requires investments to

maintain its existing stock.

• If we will not invest in natural capital and use our all

investment to increase or to maintain the physical or

human capital then this investment will also be lost

because the working of other types of capitals like

physical and human capital also depends on the

proper working of natural capital.




• Investments in natural capital are important not only for economic growth

but also for the sustainable economic growth.

•So this requires us to revisit macroeconomic models for economic growth so

that these models also account the role of natural capital in economic

growth.


•The main source which depreciates the natural

capital is emission of toxic gases like Co2,

methane and sulpher oxide etc which we are

generally called green house gases.

• these cause damage to the natural capital and

cause ozone layer to deplete.

FACTORS AFFECTING NATURAL CAPITAL


Rationales for study

Objective

The cause of the study is to show that investments not in physical capitals

but also in natural capital are also very important and we will also show that

when natural capital will not work properly then working of all other capitals

will also be affected. We will discuss the case of Pakistan and will show how

the depreciation of natural capital is affecting the economy.


Methodology

Methodology

•We will discuss the case study of Pakistan and will show graphically how

the depreciation of natural capital is affecting the economy of Pakistan from

1990 to 2013.

•So we will show when natural capital will not work properly then how will

natural capital will affect the working of other capital through floods as

protection against flooding is also included in natural capital and in Pakistan

protection measures against floods are almost are not up to the level.

•For this we will show how floods damaged Pakistan’s economy.

•We will do this by seeing the situation of economic growth in the year in

which there is no flood and the year in which floods hit Pakistan graphically.


Shares In Economy

57%

27.50%

8%3%

Provinces shares in Economic Growth

Punjab Sindh KPK Balochistan


Literature

Literature review

• Jeffrey D. Sachs (2014) explains that we need growth models which also take into

account the role of natural capital because working of other capitals greatly depend

on the working of natural capital

• James Blignaut and James Arson (2014) shows that sustainable economic growth

depends on three points (i) new technologies (ii) revision of behaviors which include

reproduction and consumption pattern (iii) investment in the restoration of natural

capital.

• Sjak, Smulders, Michael Toman (2014) explained that sustainable growth depends

on the available natural resources and the services provided by environment.

• John foster, Stephen Gough (2013) explained that environmental sustainability

means present activities ensured the level of present natural capital to be same for

upcoming generations.


Data Analysis

-15

-10

-5

0

5

10

15

20

GDP growth (annual %)

Gross capital formation (annual % growth)


Other Damages

Conclusion


Conclusion

•From study it is observed that for a long term economic growth investments

both in manufactured and natural capital in necessary.

•The proper care of natural capital is more important as compare to

manufactured capital because we can replace manufactured capital

whenever it is depreciated or can be repair but if we talk about natural

capital then it is totally irreversible if depreciated and cannot be replaced

with human manufactured capital.

• If we only focus on investing in manufactured capital and will ignore natural

capital then it may be good for short term economic growth but if we want a

long term sustainable economic growth then we also have to invest in

natural capital as well.


WAY FORWARD

• From above we have seen that how important natural capital is for long term

economic growth is so it is necessary to invest in natural capital to all the countries

including developed as well as developing countries because climate changes are

global phenomena and a single country’s investments in natural capital will have no

significant effect in improving the natural capital, so this require the combined

attention of all developed as well as developing countries. This is very necessary for

the sustainable welfare of the world. Without doing these effort we cannot gain a

sustainable economic growth globally as well as on national level.


Thank You

We welcome your Questions,

Suggestions, Comments!


Introduction to-natural-resource-economics

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