Natural Capital Alternative

Natural capital and its substitution are not only the result of research on sustainable development,but also at the crux of the problem of the theory of sustainable development.Because the theory was originated and developed in the field of ecology and environmental science,the associated definitions and analyses are not well consistent within the framework of economics.As a result,mainstream economists hold views opposite to those ecologists and environmentalists,and communication between them has been poor.Regarding the relation of natural capital to other capital forms,the substitution view and the complementary view do not share the same logical framework,which mot only seriously hampers the convergence of natural capital theory and economics, but also leads to the dilemma of the theory of sustainable development theory--its inability to guide the sustainable practice in a country or a society has been constrained though it's already well-known.For example,China's high-speed economic growth has been ongoing for nearly 30 years,and the national economic aggregate has increased greatly.Meanwhile constraints on natural capital are increasing.What's more,current research has not provided a satisfactory solution on how to deal with this approaching challengeThis study tries to analyze natural capital and its substitution problem based on the framework of economics,and determines that the different definitions of the boundary of natural capital and presumptions on its substitution property are the sources of the discrepancies.Thus deficits of both definitions are analyzed and a new method based on scarcity is established.Furthermore,the presumptions on the substitution property of natural capital are relaxed.An econometric model based on Translog Production Function is applied to analyze the relation between energy(the hardcore natural capital) and man-made capital and human capital.The great progress of the world's ability to substitute energy is presented as a supplement to the econometric model.The main findings are then expanded to the whole range of natural capital step by step,from energy to market-goods-like natural capital to mixed-goods-like ones and finally to the public-goods-like ones.It's found out that the conclusion fits all kinds of natural capital—natural capital can be substituted in the long run while they are complementary in the short run,and human capital plays a decisive role.It's also found out that the more difficult the value of natural capital can be realized in the market,the more difficult it is to substitute,and the higher requirement on the stocks of human capital and the institutional capability of a country.Because the accumulation of human capital is the outcome of huge and long-term investment,the substitution problem of natural capital depends upon a country's strategy of development.Finally a framework of sustainability based on natural capital is established. Suggestions regarding China's natural capital constraints are provided,and emphasis is placed on reinvestment of natural capital and human capital by practicing economy, simple living and hard work throughout the whole society.The research described in this dissertation features several innovations:First,a relatively clear economic boundary of natural capital is established. Competitive use(among different consumers or among different functions) is set to define scarcity.Among all natural goods and services,only the scare ones are regarded as natural resources,and those capable of value-proliferation are regarded as natural capital.As the condition of scarcity changes over time,the scales of natural resource and natural capital also change accordingly,indicating its developmental characteristic.The new setting of natural capital is intended to provide a basis for catalyzing communication,mutual understanding,and thus convergence of mainstream economics and the ecology sides.Second,the presumption on the relation between natural capital and other capital forms are relaxed.A more generalized econometrical model based on Translog Production Function is applied and the conclusions are carefully expanded from energy to all natural capital.Finally it's concluded that natural capital and man-made capital,human capital features substitutes in the long run,while complements in the short run.Some meaningful deductions are made:(?)The differences in the difficulty level of value realization have significant impact on the complementary constraints of natural capital and the constrain-reducing capabilities of human beings.The paths of substitution of natural capital also vary among those three kinds of natural capital.(?)The relations between natural capital and human capital coexist as substitutes and complements,and can be changed by varying the combinations of capital forms in economic input:optimizing the combinations helps improve the long-term substitution,and reduces the short term complementary constraints,or even changes it to substitution.If natural capital can only be combined with low grade human capital,the short-term complementary constraints will increase and the long-term capacity for substitution will be impeded,or even changed to complementary.(?)A country or a society should develop under the complementary constraints of natural capital,and reserve its substitution capability.If the gap between constraints and the constrain-reducing efforts isn't low,there will be serious crisis.Third,based on the conclusions above,a new framework of sustainability is established intending to incorporate the view of strong and weak sustainability.It is argued that sustainability is strongly based on the reinvestment of natural capital and human capital,and it should also meets the requirement of efficiency,fairness and saving rule.Regarding China's natural capital dilemma,a complete and intensive investment on natural capital and human capital and a repositioning of China's role in the international market determines the fundamental solution.