Optimisation or making the most of resources

EIA is essentially about optimising resources through an allocation of all resources, to achieve a balance between sustainable development and environment protection. Of the factors of production, natural resources (referred to in traditional economics simply as ‘land’), embrace land, water, air, forests, fishing grounds, fauna, flora, and minerals.

The idea of the economic optimum has pervaded economic literature for a considerable time. Named after Vifredo Pareto (1848–1923), the concept of Pareto optimality is an economic situation from which it is impossible to deviate so as to make one person or group better off without placing some other person or group at a disadvantage. This criterion is not about the distribution of income, hence a situation might be Pareto optimal even if the distribution it represents is totally unacceptable on other grounds. It does not identify the best or optimal social state.

Later, Nicholas Kaldor, the economist, developed a compensation principle to deal with situations in which there are winners and losers; this principle states that if those who gain from a policy could fully compensate those who lose, and still remain better off, then the policy should be implemented. However, the compensation is only hypothetical. In a situation where the overall gains exceed the losses, in narrow financial terms, there could be social and political repercussions.