Consider the following statements :
(a) In the overall Capital Stock David Pearce and Jeremy Warford include man-made physical capital, human capital and environmental capital.
(b) According to David

Question

Consider the following statements :
(a) In the overall Capital Stock David Pearce and Jeremy Warford include man-made physical capital, human capital and environmental capital.
(b) According to David Pearce and Jeremy Warford, sustainable development implies that man-made physical capital, human capital and environmental capital decrease in the growth process.
Which of the statement/s given above is/are correct ?

UnlockIAS · Accepted Answer

Correct — option (1), "Only (a) is correct." David W. Pearce and Jeremy J. Warford are the authors of World Without End: Economics, Environment and Sustainable Development, published in 1993 by Oxford University Press for the World Bank, and one of the standard texts through which environmental economics entered mainstream development policy. Statement (a) reports their framework accurately. Their argument is that an economy's productive base should be understood as an overall capital stock with three components: man-made physical capital — machinery, buildings, roads, the produced assets of ordinary national accounting; human capital — the skills, education and health embodied in the workforce; and environmental or natural capital — soils, forests, fisheries, water, mineral deposits and the atmosphere's capacity to absorb waste. The insight that gave the framework its force is that conventional national accounting counts the first, gestures at the second, and ignores the third, so that a country liquidating its forests or mining out its soils records the proceeds as income while the loss of the asset appears nowhere. Once environmental capital is placed inside the capital stock, that liquidation shows up for what it is: consumption of capital, not income. Statement (b) inverts their conclusion. On their account sustainable development requires that the overall capital stock be maintained — that it should not decline over time, so that each generation passes on to the next a productive base at least as large as the one it inherited. The statement as printed says the opposite: that sustainable development implies the three forms of capital decrease in the growth process. A shrinking capital stock is precisely what makes a growth path unsustainable. And notice that statement (b) can be rejected without knowing anything at all about Pearce and Warford. Take the word 'sustainable' at its ordinary meaning — capable of being kept up. A process that runs down the stock it depends on cannot be kept up; it must terminate when the stock is gone. So any definition claiming that sustainability means the capital base decreases is self-contradicting on its face. Testing an unfamiliar attribution against the plain meaning of its own key term is one of the most reliable moves available in a prelims paper, because examiners falsify statements by reversing a direction far more often than by inventing a name. Statement (a) standing and statement (b) falling, the credited choice is option (1). Option (4), "None of the above", is offered here as an escape. It is available only when every named alternative fails, and it cannot be taken while statement (a) survives intact.

Why the other options are wrong — (b) Option (2) keeps the reversed statement and discards the accurate one. It accepts that sustainable development means the capital stock decreases — which contradicts the plain sense of the word sustainable and the whole thrust of the Pearce and Warford framework — while rejecting the three-way composition of the capital stock, which is the framework's single most-quoted feature. A candidate marking this has recognised the names, failed to check the direction of the claim, and assumed the more surprising-sounding statement must be the intended one.  (c) Option (3) is the commonest error on this question, because statement (a) is verifiably right and statement (b) is written in the same authoritative register with the same three components named. But 'Both' requires each component to hold independently, and statement (b) reverses the condition: Pearce and Warford's requirement is that the overall capital stock be non-declining, not declining. One reversed word inside a compound option is enough to close it, however solid the other statement is.  (d) Option (4) is the escape, and it is closed because statement (a) survives. The three-part composition of the capital stock — man-made physical, human and environmental — is exactly what Pearce and Warford set out, and it is the reason their work is cited in discussions of green accounting. An escape option is earned by knocking down every named alternative in turn; taken as a refuge from an unfamiliar pair of author names, it simply converts uncertainty into a quarter-mark penalty.

Concept: The capital-stock approach translates sustainability into a balance-sheet condition. Treat the economy's productive base as a stock with three components — man-made physical capital, human capital and natural or environmental capital — and define a development path as sustainable if that total stock is not run down over time, so each generation inherits at least as much productive capacity as the last. Two versions of the rule are distinguished. Weak sustainability requires only that the total be maintained, permitting one form of capital to substitute for another: a forest may be cut if the proceeds are invested in machinery or in schooling of equivalent value. Strong sustainability denies that substitution beyond a point, holding that some natural capital is critical — the climate system, biodiversity, an aquifer — because it has no man-made substitute and its loss is irreversible, so natural capital must itself be non-declining. The associated policy rule for exhaustible resources is Hartwick's: invest the rents from depleting a resource into reproducible capital, and consumption can be held constant indefinitely. Green accounting, environmental valuation and the idea of adjusted net savings all descend from this way of framing the problem.

State PCS 2026 Q48 — Economy PYQ with Answer

State PCS 2026 Q48 — Economy PYQ with Answer