Economic incentives: successful in expansion, will it also be successful in contraction?

Abstract

Since the early 1970s it has increasingly become apparent that the rate of resource extraction is unsustainable. It was also slowly acknowledged that the traditional regulatory approach to resource management proved inadequate to resolve the problem. The use of economic instruments and incentives was proposed as a better way of facilitating the needed change and this has been presented as a policy change, which in many instances have been subject to strong community opposition. In this paper we illustrate how economic instruments and incentives, backed by public investment have been used for more than 5000 years to achieve the objectives of rulers and societies. They are therefore nothing new, what is new is that the policy objective has changed from providing incentives to expand resource use, clear forest, catch more fi sh, increase water use, and drain wetlands to now providing incentives to reduce resource use, plant trees and recreate wetlands. While expansionary uses of incentives have mainly been seen as positive among resource users and their communities, the new direction is challenging and threatening to both resource users and the communities depending on them as the economic engine for jobs, services and tax revenue.