An Economic Analysis of Environmental Degradation with Application to Policies of Conservation and Preservation in Costa Rica

Abstract

The purpose of this project is to explore the dichotomy between preserved zones and their unprotected surroundings in Costa Rica. An attempt is made to explain the problem of environmental degradation from an economic standpoint and apply this analysis to the unique situation in Costa Rica. Part I focuses on the environment as an asset and continues with a discussion of property rights structures and externalities as market failure. The first part then concludes with an analyses of sustainable economic development and policy. This section sets the stage for Part II which is a discussion of the specific situation in Costa Rica. A brief political, economic, and ecological background allows for a better understanding of the policies of conservation and preservation existing within the country. The dichotomy of these policies is the central theme of the project and is exemplified in a review of the effectiveness of Costa Rica's environmental policy. Costa Rica's prospects for a sustainable environmental asset are grim unless the country makes rapid changes on all levels of society in favor of sustainable living. The government needs to enact efficient policies of preservation and conservation. Education must play an important factor in the development of an environmental ethic on the part of the individual. An environmental ethic will in turn bolster government support for efficient market intervention. Only through sustainable resource allocation can Costa Rica hope to maintain its economic standard of living. Government intervention, an environmental ethic, and markets which recognize and protect the environmental asset are all necessary to internalize the externalities which cause environmental degradation.