Sustained privatisation resolves political risk , bolsters development

In spite of the obvious physical dimension of economic production and consumption, economics has essentially ignored flows and stocks of materials and substances. Environmental economics has recently paid increased attention to material flows, which is not surprising given that its core problems – pollution and resource scarcity – can be directly related to material flows through the economy. Various economic theories and methods are now being refined and applied to improve our understanding of possible de-linking between economic growth and various types of environmental pressure. Turning the tide on neglect Why should economists pay attention to material flows? First, a focused study of material flows through the economy allows us to assess the interdependence between seemingly separate environmental effects of economic activities. We can then distinguish counterfeit solutions, which really shift one problem to another, from real solutions. Consider how end-of-pipe solutions to air or water pollution generate another type of pollution, usually solid waste. A physical description of the economy also allows that models of the physical economy are linked to physical, chemical and biological models of environmental processes and compartments. This is essential for “integrated assessment” studies of land use, large-scale ecosystem change, water pollution, acid rain and climate change. A focused study of material flows through the economy allows us to distinguish counterfeit solutions, which really shift one problem to another, from real solutions. The environmental Kuznets curve Economists have for some time been involved in the “growth debate” over the desirability, feasibility and/or controllability of growth. The feasibility question has recently been tackled with an empirical approach known as the environmental Kuznets curve (de Bruyn 1999). This type of research tests whether the relationship between income per capita and certain indicators of environmental pressure can be described by an inverted-U curve. If so, it implies that beyond a certain threshold income growth leads to a reduction of environmental pressure, i.e. an absolute de-linking of income and environmental pressure. Nevertheless, empirical findings have not delivered substantial evidence that growth “solves environmental problems.” Instead, it seems that economic growth helps to solve or to export mainly local, health-related problems, and ignores problems distant in space or time, such as global warming. To understand the positions in the growth debate, we need to study policies, strategies and other factors that co-determine environmental pressure. Getting Physical Material flows in economic theory and methods I n d e p t h