Preamble

In these background notes I will first attempt to highlight some of the basic assumptions and value judgments underlying economic rationality and then develop and extend some ideas in the context of the ‘benefitcost’ approach. Benefit-cost analysis is relevant to the problem of land degradation and it also provides a useful vehicle for highlighting the main aspects of rational approaches to environmental issues.

My comments focus almost exclusively on mainstream (also termed neoclassicial or rational) economics which is the approach, by and large, taken in the economics contributions to this book. Of course, not all the economists who have contributed chapters to the book would agree with the particular selection of points I choose to emphasise, or perhaps with some of the specific points I attempt to make. But I have done my best to outline a few parts of mainstream economic thinking which I think are important, together with some aspects of benefit-cost analysis.

The later part of my commentary, on benefit-cost analysis and land degradation, includes some ideas which have their origins in a paper I presented to a conference on Soil Degradation: The Future of Our Land? held in Canberra in November 1984.

Scarcity and choice

Society is endowed with a limited supply of a wide array of resources: land, skilled people, clean air, water, non-renewable resources, time, and so forth. A fundamental economic and social problem faced by society is how best to use the scarce resources.