Study Guide
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[Target Audience: Upper elementary grades]
Quiz game!
Q1: What relationship did Professor Dasgupta's research show between the natural Environment and Poverty?
Q2: What is the new concept (index) developed by Professor Dasgupta to measure the wealth of a country?
Answers
Q1: What relationship did Professor Dasgupta's research show between the natural Environment and Poverty?
A1: The natural environment is sometimes deteriorated in poor countries.
Professor Dasgupta noted the close relationship between Environment and Poverty. Poor countries sometimes try hard to become economically rich, but end up destroying nature and making the country poorer in the process.
Q2: What is the new concept (index) developed by Professor Dasgupta to measure the wealth of a country?
A3: To measure production, skills, and the natural resources.
A1 is the gross domestic product (GDP), which is a measure of the value of all products and services produced. A2 is measuring the average life expectancy, education (using literacy rate, school enrollment rate), and per-capita income (using GDP). It includes the measurement of value other than items included under GDP. This is called the human development index (HDI). The HDI was developed by Professor Amartya Sen, Indian economist, and Dr. Mahbub ul Haq, Pakistani economist, in 1990 as an indicator of potential human development, and presented in the 2010 Human Development Report by the United Nations Development Programme (UNDP).
Both GDP and HDI are standards by which the wealth of a country is measured. Professor Dasgupta thought it necessary to have a viewpoint that was different from GDP and HDI. This led to the development of the inclusive wealth index (IWI). Inclusive wealth includes a wide range of things. Natural resources are the clearest example of inclusive wealth.
There is a difference in the factors that GDP and IWI evaluate. The story used the example of tree. Another example is that of water in a water tank, which was featured in a pop-up. Imagine a water tank filled with water. When the faucet is turned on, more water pours into the water tank. When the drain plug is pulled out from the bottom of the water tank, the water begins to drain out and the level decreases.
Profit measured by GDP is equal to the water that is poured into and drained out of the water tank (called "flow") over a certain period of time (e.g. 10 minutes). On the other hand, IWI measures the water stored in the water tank (called "stock") at a certain point of time (e.g. when you check how much water remains in the water tank).
When the water is drained, the amount in the water tank gradually decreases. Even if there is plenty of water in the water tank, it will eventually be empty. If we only look at the amount of water that flows in and out, it is hard to know how much water is still in the water tank. The problem with this is that we do not notice until all of the water is gone.
To evaluate sustainable development, Professor Dasgupta thought it better to measure not only the amount of water drained, but also the amount of water remaining in the water tank. With the IWI concept, we measure the amount of water at several points of time, and note the changes. In this example, the water equals inclusive wealth.
Important points!
Professor Dasgupta looked into what we should do to maintain wealth for future generations, and studied The Relationship Between human-generated wealth and natural resources as an important theme in his research in economics. His research shows us the following:
Human behavior is of key importance in the effort to protect the natural resources that are essential for life. It is, therefore, necessary for us to correctly understand the systems of nature and The Relationship Between humans and nature.
This is necessary not only to ensure an affluent and comfortable life for the present generation, but also to ensure an affluent and comfortable life for future generations.
More details!
Environment and Poverty
Professor Dasgupta found a close relationship between the natural Environment and Poverty.
Let's think about a poor country with plenty of natural forests. Residents of a village in that country share the forests in the area as a source of firewood. They have followed rules that limit the amount of firewood they collect because they know that wood is a limited resource.
What if they ignore the rules and start collecting more firewood? What if the government informs the villagers that the country will take over management of the forest and use the trees for development? In either case, if neither the residents of the village nor the government cares about the forests, they could be lost.
Overuse and mismanagement lead to depletion and various other problems. The villagers would lose their source of firewood, which would cause serious problems for them. Loss of the trees would also mean increased flooding of rivers as deforestation would lower the soil's ability to absorb and hold rainwater.
Systems*
Professor Dasgupta thinks the biggest cause of such problems is the absence of good systems.
Systems are established by agreement among the people who use them. Rules developed by the residents in the above-mentioned village are also considered systems. Trust among residents is the foundation that prevents them from cutting down too many trees.
Not only in villages, but in smaller and larger groups like families and countries as well, there are rules. Trust is the foundation for all systems. If such systems function well, they are very useful. However, if the systems do not function well, people have a wide range of problems.
Professor Dasgupta considers the responsibility that countries have for creating systems to be significant. Therefore, he thinks it is very important for all countries, especially poor countries, to establish good systems to enable them to develop out of their poverty while protecting their natural resources.
* Professor Dasgupta calls a system for the use of inclusive wealth institutions.