Economic Growth and Environmental Policy

We conclude that economic liberalization and other policies that promote gross national product growth are not substitutes for environmental policy. On the contrary, it may well be desirable that they are accompanied by stricter policy reforms. Of particular importance is the need for reforms that would improve the signals that are received by resource users. Environmental damages, including loss of ecological resilience, often occur abruptly. They are frequently not reversible. But abrupt changes can seldom be anticipated from systems of signals that are typically received by decision-makers in the world today. Moreover, the signals that do exist are often not observed, or are wrongly interpreted, or are not part of the incentive structure of societies. This is due to ignorance about the dynamic effects of changes in ecosystem variables (for example, thresholds, buffering capacity, and loss of resilience) and to the presence of institutional impediments, such as lack of well-defined property rights.