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Abstract

Competent macro-allocation of natural capital would allow micro-allocation by economics
to be fully useful and may help prevent the latter being confused with the former. This
macro-allocation requires social choice, so to see whether it is likely to be competent the
effectiveness of democratic politics is investigated. Dysfunction is predicted because
democratic institutions produce elements of irresponsibility and ignorance. These permit
inflation of want by supply (IWS), a positive feedback in which wants are increased by their
supply, provoking more supply, hence more want. Four IWS systems combine under
common conditions to indefinitely escalate the scarcity of natural capital, a crucial failure of
macro-allocation. This ‘scarcity multiplier' causes apparently rational attempts to satisfy a
few wants to exacerbate many, increasing dissatisfaction. Institutions for deliberative
public participation may enable democracies to recognize and control IWS. Unless this is
done the scarcity multiplier may make cost-benefit analysis misleading: it may make the
costs of development projects exceed their benefits in proportion to their financial success.

Item Type:	Article
Authors/Creators:	Smith, PE
Keywords:	Natural capital Population Contingency of preferences Cost-benefit analysis Macro-allocation
Journal or Publication Title:	Ecological Economics
ISSN:	0921-8009
DOI / ID Number:	https://doi.org/10.1016/j.ecolecon.2008.05.024
Additional Information:	The definitive version is available at http://www.sciencedirect.com
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