The Role of Institutions and Policy in Enhancing Sustainable Development and Conserving Natural Capital

The use and management of natural capital is critical in all nations, but especially so in poor nations. The role of institutions – chiefly, property rights and pricing systems for natural resources – is pivotal in achieving growth and improved distribution of income and wealth, in understanding environmental degradation, and in seeking improved policy. Particularly useful criteria and indicators of sustainable development relate to `green' output and productivity measures in which the depreciation of natural capital is being considered. Special management problems exist for `critical' components of natural capital to which variants of the precautionary principle must be applied to ensure that our heirs receive an undiminished patrimony.