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

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
•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 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.

-15
-10
-5
0
5
10
15
20
GDP growth (annual %)
Gross capital formation (annual % growth)

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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