The Economy and the Natural Environment

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The development of modern theories in the 1950s and 1960s essentially left out the issue of environment. This is because of the assumption that the environment output flows and the rate of output growth were both dependant on capital and labor. However, this fact is down played by the growth theory. The growth theory showed that there were potential limits to growth in that as capital per person grew, the output growth rate per person declined until a steady state is achieved. It was after these that the limiting factors were found not to be in any way related to the environment (Toman, 2003).

Technology was included later on to factors that affected the growth process. This is because the technology was embodied in specific equipment or skills. It was assumed that the technological advancement played a vital role in prolonging output growth. However, the growth theory still did not consider the environment as valuable input of growth to the economy important at this level. It is not until the 1960s that the impact of the environment had on growth was realized. Therefore, economists had to make changes to the neoclassical growth model since the environment was identified to be playing a vital role in macroeconomics. Alterations made to the analytical paradigm reflect the concerns about economic growth that is environmentally sustainable (Toman, 2003).

The key areas of the economy include agriculture, forestry, and manufacturing sectors. Production of goods solely depends on the following:

  • Flow of capital services which includes labor.
  • Flow of extracted natural materials (this includes the geological, biological, renewable and depleted).
  • Flow of environmental services provided by the natural system, which includes climatic conditions.

I believe that the mechanism of the marketplace should be restrained with regard to environmental concerns. This is because the environment is vital in the successes of the three sectors of the economy. For instance, the environmental services such as water bodies provide water that is essential in the manufacturing industry as well as agricultural production. This means that the environment is essential for the success of the sectors that are pillars of the world economy. Restraining of environmental concerns to the mechanism of the market place is achieved by inclusion of the environment as a factor that affects economic growth. This will mean that economic growth will be given due consideration for the growth model of the economy since it affects the availability as well as the continued productivity of resources now and even in the future. For continuity of growth, there needs to be a constant source of resources. Quality of the environment affects the constant productivity of resources hence dwindling of resources affects the economy (Toman, 2003).

It will also be of importance to formulate new mechanisms and institutions that enable the ecosystem services to become part of the formal economy. This will even stimulate innovation, entrepreneurship, and investments in their provision, which are the driving forces for continuity of economic growth. Many environmental initiatives show the importance of restraining the mechanism of the marketplace to the environmental concerns. Good illustrations are in the going green campaign, recycling of wastes, and the cutting down on emissions by the industries. All these campaigns seek to show the relevance of maintaining the quality of the environment since continued production of resources being dependent on it (Roome and Wijen, 2006).

Corporations are currently more concerned with the effect of the environment on their growth. It is because of this that most corporations are now becoming more responsible for the natural environment. The corporations have thus launched various projects aimed at conserving the environment. At the same time, most corporations have gone a step ahead in ensuring that they control their environmentally harmful operations. Some corporations have even gone a notch higher in promoting environmental awareness initiatives such as environmental walks and charity events (Roome and Wijen, 2006).

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