Question

Economic growth doesn’t simply depend on having more natural resources, more or higherquality labor, more capital and so on; it depends on people’s incentives to put these resources together to produce goods and services” Do you agree or disagree?

Answer 1

Incentives may be described loosely, as in "anything that motivates or inspires people to act." Many macroeconomic policies would fall into this group, being distant from the consumer and pursuing goals other than encouraging sustainable agricultural practices.

Incentives are directly correlated with the question of depletion of the natural capital. Perrings(1996) describes the environmental pollution issue as "an opportunity mechanism that makes it secretly acceptable for resource consumers to put more demand on the resource base than they can bear without causing long-lasting and potentially permanent harm." This description also highlights the potential for divergences between social and private interests in resource use decisions.

The fundamental rationale for using tax funds to fund natural resource management is that often an action's private gains are smaller than the public benefits. This results in an under-provision of enhanced natural resource mangement, as the landowner can only carry out the operation if there is ample private benefit to mitigate the costs. For instance, preventing soil from running off a property can benefit a farmer's crop production. The farmer does not, however, pursue costly soil preservation activities if the expense of doing so outweighs the value they think they would receive.

Some of the important principles must be taken care in designing incentives.

• promoting the principle that costs and benefits (not just ignorance) determine resource use-There is more widespread understanding of the need to "educate" people about how to handle money than the need to adjust the costs and rewards they face, but education alone would be inadequate.
• Dissemination of facts and guidance is a priority for policy-makers. Joint initiatives, studies, newsletters, workshops,-all help to exchange knowledge and increase awareness about how policy choices will alter expectations for resource use. Economic or ecological jargon needs to be purged of these materials.