2002-2003 Essay Contest

Second Place Essay - advanced Economics

The Economic Necessity for Adaptation:
Combating Deforestation in Developing Countries

Erica Brynildson
Edina High School
Edina, Minnesota

In 1993, the United Nations Food and Agricultural Organization stated that over 53,000 square miles of rainforest were destroyed annually during the 1980s. By 1994 this number had been increased to 66,000 square miles and was still considered conservative.1 Each unit of land destroyed is home to unique organisms, adapted to live in a biome with an average rainfall of 2.3 meters each year.2 The rapidly accelerating destruction of the tropical forest ecosystem results in the daily extinction of approximately one hundred species, many never known to man.3 Despite containing at least half of all plant and animal species, the rainforest is vanishing faster than any other ecological zone.

The rainforest is disappearing because the full benefits of its diversity cannot be measured by economic standards. While free markets excel at setting prices, they are incompetent judges of cost; harming social and ecological systems because of their inability to reflect the true and complete costs of products and services. According to A.C. Pigou in The Economics of Welfare, published in 1920, in order for a marketplace to be truly competitive it is necessary for producers to bear the full costs of production, encompassing typical monetary expenditures for resources or labor as well as environmental damages caused by the firm or industry.4 Cost-price integration through taxation is often the most obvious solution to resolving negative externalities, but is quite difficult both to apply and to enforce in the problem of deforestation for several reasons.

The first barrier to Pigou's "maladjustment taxes" is the fact that industries and firms are not responsible for the bulk of deforestation. Instead, the rainforest is a victim of the tragedy of the commons, depleted by squatters. The lack of alternative sources of income in many tropical regions, as well as the limited availability of employment and capital, forces farmers in need of food and necessities to cultivate new land—slashing and burning the rainforests. The topsoil in a rainforest is very thin, with most nutrients contained in the upper one or two inches, and erodes easily once the shallow network of roots is gone. Rapid desertification, the extreme degradation of land resulting in complete loss of productivity, causes deforestation to become cyclical, each 'desert' abandoned for the next plot of nearly arable land.5 Because these farmers do not own the land that they are cultivating, there is no incentive to improve sustainability and little concern for the long-term effects of erosion and the destruction of animal habitats.6

Difficulties in addressing the ecological effects of deforestation also include overcoming the limitations of transnational relations, since while trade policy is often exogenous, environmental policy is endogenous. Deforestation may be economically beneficial for local regions as developing countries forsake environmental concerns of sustainability and the preservation of bio-diversity in favor of a comparative economic advantage over nations regulating the depletion of their natural resources. Many developing countries are motivated to exploit their natural resources and grow cash crops for export in order to pay the interest on their debt.7 External factors complicating the issue include the desire of foreign businesses to externalize their costs overseas—effectively minimizing their costs and expanding markets through the continued despoliation and exploitation of natural resources.

Even possibilities for reform preclude an environmentally safe resolution to this issue. The most popular substitutions for agricultural-based deforestation attempt to maintain the ecological complexity of the tropical forests by expanding timber, oil, and mineral extraction. While preserving the bio-diversity of the region, these means of specialization would take atoll on the environment through processes such as the refinement and consumption of oil, contributing to global externalities such as the accumulation of airborne toxic emissions. However, replacing a unidirectional externality with a global externality would increase the impact of environmentalism—the mobility of air pollution curtails conflict between domestic economic interests and ecological issues abroad. Because the impact of global externalities is felt universally, it is more likely that endogenous environmental policy would be strengthened accordingly.

The most effective means of addressing the issue of deforestation is not through international polity or maladjustment taxation, but by remedying the fundamental issue—the tragedy of the commons. By entrusting the protection of natural resources to farmers by increasing land ownership while training people in improved cultivation techniques that would allow them to increase yields on arable or resilient land, it would be possible to make farmers aware of the true costs of deforestation by creating an incentive to maintain agricultural lands instead of ravaging successive fields year after year.8 Other actions which could be taken to ensure the success of this solution would involve increased government involvement ensuring access to the credit necessary to invest in improvements, subsidization of arable farmlands, and the development of a national infrastructure capable of supporting a commercial agricultural economy.


1 Dallmeir, Michael A., "Deforestation" 1994. (13 February 2003).

2 Patent, Dorothy Hinshaw, "Children Save the Rain Forest" (New York: Cobblehill Books/Dutton, 1996), 14.

3 Power, Thomas Michael, "Lost Landscapes and Failed Economies" (Washington, DC: Island Press, 1996), 172.

4 Hawken, Paul, "The Ecology of Commerce" (New York: HarperCollins Publishers, 1993).

5 Newbold, Heather, ed Life Stories (Berkeley: University of California Press, 2000), 206.

6 Schmidheiny, Stephan, "Changing Course: A Global Business Perspective on Development and the Environment" (Cambridge: The MIT Press, 1992) 144.

7 Newbold Heather, ed "Life Stories" (Berkeley: University of California Press, 2000), 51.

8 Schmidheiny, Stephan, "Changing Course: A Global Business Perspective on Development and the Environment" (Cambridge: The MIT Press, 1992) 144.


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