Environment:Want to live? Then use it!

The group of young people, both girls and boys, were in full spirits. “We’ve to protect our environment at any cost. Otherwise, we all are doomed,” they chorused after they had joined the Action Group to Protect Environment.

They were all waiting for my endorsement of their action. The way they were staring at me indicated to me that I should join their cause and fight along with them. Perhaps, unto our death!

I waited for sometime and said, “Kids, you’re both right and wrong.” My response appeared to have puzzled all of them, for they were now staring at me with eyes bulging out of their sockets. “We can’t understand you,” they chorused once again. “You’re correct when you say that we all are doomed if our environment is destroyed,” I said. “But, when you plan to do it at any cost, you’re wrong.”

That response would have puzzled them more, because they were all waiting for a longer explanation. “Look,” I said, “for us to live we have to use all types of goods and services. Then, those goods and services have to be produced and made available to us. Since those goods and services increase our happiness, we can really call them goods. So, those goods are desired by us. But, along with the production of those goods, there comes something undesired by us as well. That constitutes the waste matter that’s produced as an inevitable by-product of goods. Since the waste matter is undesired and reduces our happiness, economists call it bads. But, unfortunately, goods always come with bads as a package. So, we can’t reject bads and accept only goods. If we do so, we have to reject goods also.”

“So, what’s your point?” one of them asked. I continued; “You may wonder how goods and bads come together. Take a very simple example like breathing oxygen. It’s necessary for our life. But, it also produces an undesired by-product or a bad called carbon dioxide. If somebody prohibits us to produce this bad, then, we can’t take oxygen as well. So, it’s inevitable.”

“You still didn’t come to your point,” another one pointed out. “Be patient till I explain,” I said again. “This bad which is undesired can’t be kept with us. It has to be dumped somewhere and we’ve to find a dumping ground for that purpose. It’s the environment which is used as this dumping ground. Every one of us has to use environment to dump the waste matter that we inevitably have to produce when we undertake any economic activity like producing, distributing or consuming. So, we release all gases and heat to the atmosphere, liquids to waters and solids to the earth itself. Hence, environment has to be necessarily used, if we’re to enjoy all those good things in life. As a result, environment is considered as the fifth factor of production without which no economic activity is possible.”

“Fifth factor of production?” they exclaimed. “Like other factors?” “Yes, like other factors, but with a difference,” I explained. “In the case of other factors, there’s an owner who has the property rights to sell those factors in the market at a price. So, the user has to pay a price and it dissuades him to use it excessively. As a result, he stops using the factor when the price he pays for it is higher than the value that factor produces for him. Economists call this ‘equating marginal cost with marginal revenue’. So, there’s an in-built incentive to use them economically.” “So, what’s the difference with environment?” a girl questioned. “The difference is that no one owns the environment,” I began to explain once again. “As a result, no one can charge a price for allowing someone to use it as a dumping ground. Since the user doesn’t have to pay, he has no incentive to economize on its use. So, he uses it as a dumping ground up to the maximum level until it becomes a nuisance. Economists call that it’s used until its marginal benefit is zero. So, there’s a tendency for over-using environment as a dumping ground.”

“Oh, that’s why we have environmental pollution,” they said, now appearing to be happy.

“No, it isn’t like that,” I countered them. “The over-use of environment does not necessarily lead to pollution. That’s because nature has its own assimilating plans to convert our waste matter into beneficial matters and recycle back to us. For example, Carbon dioxide that we exhale is absorbed by trees and converted back to oxygen as their waste matter.

Likewise, germs, viruses, bacteria, fungi, microorganisms, sun light, rains, various animals, etc. continuously absorb waste matter and convert it back to beneficial matter. Environmental pollution occurs when we dump waste matter excessively over and above nature’s assimilative capacity. Then, waste matter accumulates there and become hazardous for all species to live.” “Why is it, then, at any cost wrong?” one of them asked.

“That’s because...” I said, “…it means that we can’t live because we can’t use the environment. It’s like asking you not to exhale carbon dioxide and keep it within yourself. So, if we want to live, we have to use environment as a dumping ground. We’ve no choice.”

“You mean that nothing can be done to protect the environment?” “No, our plan should be to use it without overstretching nature’s assimilative capacity. Then, we all are safe,” I finally said.

(The author of this exclusive weekly series on simple-to-understand facets of the economy on daily life is the Deputy Governor of the Central Bank. Email - waw@cbsl.lk).