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NECESSITY OF SPECIAL DISCOUNTING FOR NATURE RESOURCES, PRODUCTION AND SERVICES TO ASSESS THE EFFECTIVENESS OF INVESTMENTS

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Kotko A. A.

Mekhanizm Rehuluvannya Economiky

2010

vol. 1 (45)

53-61

The purpose of the paper is to demonstrate the necessity of special natural discount rates during conservation activities efficiency assessment. The social rate of discounting originated by D. Pearce is often used now. However much of values of ecosystem origin differ in such aspects as absence of high-grade anthropogenic substitutes and conservative character of natural 'technologies', and consequently, simple, not extended reproduction. As a result there exists the necessity of special discounting rate for non-replaceable production and services having restrictions in capability of their reprocessing and consumption, which follows from the analysis of consumer choice trajectory in the course of budget growth over a level at which the maximum of consumption of the limited good is reached. The paper estimates the reduction value for discounting rates in the special case of individual utility functions of Cobb-Douglas type and - for collective consumption of renewable natural resources, restricted in reproducing possibility - equal parts resource sharing among consuming community members. The idea of special discount rates for the production and non-material services of ecosystems is useful both for economic efficiency assessment of nature conservation activities and for calculation of compensations from the activities worsening environment quality.

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1 Mekhanizm Rehuluvannya Economiky

1 2010

1 Kotko A. A.

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NECESSITY OF SPECIAL DISCOUNTING FOR NATURE RESOURCES, PRODUCTION AND SERVICES TO ASSESS THE EFFECTIVENESS OF INVESTMENTS