Natural Assets

Background

Natural assets serve as the fundamental building blocks of the environment and are crucial for the survival and well-being of all living organisms, including humans. These assets, distinct from human-made assets, encompass a variety of elements such as land, water, air, the biosphere, ecosystems, and both organic and inorganic minerals.

Historical Context

The concept of natural assets has evolved over time as the relationship between humans and the environment has become more complex. Originally, natural assets were primarily viewed in terms of their immediate utility for survival and economic activities. However, with the advent of industrialization, urbanization, and subsequent environmental awareness movements, the critical role of natural assets in maintaining ecological balance has come to the forefront.

Definitions and Concepts

Natural Assets: Natural resources that include land, water, air, biosphere, ecosystems, and organic and inorganic minerals. These assets are essential for ecological balance, economic activities, and the overall sustainability of natural and human-made systems.

Land: Refers to the terrestrial surface area, which includes soil and vegetation.
Water: Encompasses all freshwater and saltwater resources, including rivers, lakes, underground aquifers, and oceans.
Air: The gaseous layer surrounding Earth, essential for respiration and various climate-regulating processes.
Biosphere: The global sum of all ecosystems, where life interacts with the environment.
Ecosystem: Communities of living organisms and their physical environments, functioning as a single unit.
Organic and Inorganic Minerals: Naturally occurring solid substances that are categorically organic (e.g., coal) or inorganic (e.g., metals like iron and gold).

Major Analytical Frameworks

Classical Economics

Classical economists such as Adam Smith and David Ricardo acknowledged natural resources, particularly land and minerals, as critical for production but did not analyze them extensively as standalone assets.

Neoclassical Economics

Emphasizes the allocation and optimal use of natural assets, addressing market failures such as externalities (e.g., pollution) and public goods.

Keynesian Economics

While not focused on environmental issues, it calls for government intervention to address market inefficiencies which could extend to managing natural

Marxian Economics

Discusses the exploitation of natural resources in the context of capital accumulation and its impacts on labor and the environment.

Institutional Economics

Examines the role of institutions and governance in managing natural assets sustainably, incorporating legal and political dimensions.

Behavioral Economics

Investigates how human behavior and decision-making affect the usage and conservation of natural assets, using insights from psychology.

Post-Keynesian Economics

Focuses on the interaction between economic growth, distribution of income, and ecological sustainability, advocating for policies that address environmental concerns.

Austrian Economics

Argues for minimal regulation, believing that free markets can most efficiently allocate natural assets if property rights are well-defined.

Development Economics

Assesses the role of natural assets in the economic development, particularly the challenges faced by developing countries in sustainably managing these resources.

Monetarism

Generally concerned with money supply and inflation, but raises concerns over the long-term sustainability of ignoring natural asset depletion in economic planning.

Comparative Analysis

Each of these frameworks assesses natural assets through a unique lens, offering diverse strategies for their management and conservation. While Neoclassical frameworks emphasize efficiency and market solutions, Institutional and Behavioral Economics delve deeper into the societal and psychological dimensions. Similarly, Austrian and Development economics present diverging paths on government intervention and sustainable development policies.

Case Studies

The Aral Sea Crisis

This case highlights the severe impacts of unsustainable water resource management on local ecosystems and economies.

Amazon Rainforest Deforestation

Amazon deforestation exemplifies the conflict between economic activities (logging, agriculture) and the vital ecological services provided by the rainforest.

Mineral Extraction in the Democratic Republic of Congo

Illustrates challenges in managing valuable inorganic minerals amidst political instability.

Suggested Books for Further Studies

“Natural Capital: Theory and Practice of Mapping Ecosystem Services” by Peter Kareiva
“The Economics of Ecosystems and Biodiversity in Business and Enterprise” by Joshua Bishop
“The Wealth of Nature: Environmental History and the Ecological Imagination” by Donald Worster

Sustainable Development: Economic development that is conducted without depletion of natural resources.
Ecosystem Services: Benefits that humans freely gain from the natural environment and from properly-functioning ecosystems.
Biodiversity: The variety of life in the world or in a particular habitat or ecosystem.
Conservation: The careful utilization of natural assets to prevent depletion and preserve ecosystems for future generations.

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