From an Economic Point-Of-View What Makes Natural Resources Different

Natural Resources from an Economic Point-of-View

Natural resources have significant values in a country's economic growth. In general, the economic prosperity of a country depends on the optimal effort of the country to utilize its natural resources properly and convert them into multiple profits. Commonly a country benefits from the natural resources from the diversity and maximum exploitation of the resources. Natural resources provide the country with direct benefit from raw and processed materials used as trade commodities, the utilization of the resources to be the medium of economic activities, and from leasing the resources to other parties, which will collect additional income for the country such as from taxes, lease and service fees.

Even if a country gets an extraordinary supply of natural resources every year, it is important that the society has the ability to maintain the sustainability of the resources. In the appropriate maintenance, the resources can give people a living space for the community, high-quality environment and at the same time fulfills the need of the country citizens for generations in unlimited time span.

The UK government has brought the issue to surface and seriously implement the sustainable development concept in the decision-making process. Economic calculation of the commercial value of a kind of natural resources material is not the only factor to determine how people should make the most of the material and gain profit from it. The resources have exclusive values that interrelate with other factors such as economic, political and ethical value. During the process of development, such values often collide with each other, causing inconsistency in the system and endangering the nature itself. If the government fails to provide balanced system to regulate natural resource management, those resources will only fulfill the need of certain parties.

Peace (1997) underlined the important function of accounting system to calculate the value of natural resource. Unlike the other characteristics of physical/infrastructure development, or economic development in general, natural resource management includes the huge risk of damage that should be estimated in "monetary measure."

Porter explains, countries often neglect the requirement of subsidies to cover social and environmental cost. For example, in fish industry, prices should cover the "extraction cost" along with production and damages that commercial ships cause, when major fishing season comes. Commercial fishing companies often get into their operation without calculating the loss from destroyed habitat, decreased fish stocks, the recovery time for the nature to return the stock into normal and available for the next generation. Sometimes the recovery takes years and may not run normally due to the degrading water quality as the effect of pollution and physical damage. This is where environmental cost calculation should take place.

Nature degradation caused by human activities contains moral value and collides with the society's social responsibility. Within a sustainable development framework, accountants should measure the economic value of environmental damage, including the risk of the damage to the surrounding community and habitat years after. This method should measure correctly how a person or a party should compensate to the society for the harm a person/corporation creates, including payment for the loss during remediation and cleanup cost. Armed with this information, investors may review how their investments also work in harmony with political and social liability (Peace, 1997).

The UK Sustainable Development Commission (2003) demands positive correlation between economic growth and sustainable development. According to a survey of public attitudes to quality of life and to the environment 2001, environment/pollution concern only ranks on the seventh priority of the most important factors affecting quality of life, after money, health, crime, job, neighborhood, transport and housing. This means the development should suffice the community's basic needs of the factors above, boost economic growth, as well as maintaining the quality of the nature for future generation.

Along with this consideration, the UK Sustainable Development Commission (2003) defined the proper management of natural resources when the issue is linked to the country development:

a. Putting sustainable development "at the centre"

The government needs to put the "framework" allowing sustainable development to be the basic concern of all decision making process in any sector.

b. The value of nature

The nature has intrinsic, economic and aesthetic values. Human activities on earth should meet the values above. Nature provides home and atmosphere for the occupants; however nature also has limit and rules. The decision maker should keep in mind that the nature has its own domain and limitation. It is against the limit if one forces an economic concern before examining the nature facts.