A fundamental proposition of modern economics is that to the extent that
the prices of goods and services are established through exchanges in well-functioning
markets, efficient allocations are likely. Conversely, if there are no markets for certain
goods and services, allocations may be inefficient for not only the non marketed goods
but also for marketed goods that may be substitutes for these goods. To the extent
that economic development takes place with inefficient allocations, then the full
potential for growth in societal well being will not be realized.
1.2 In developing countries, the large portion of fuelwood consumed in
households and the household labor that is used to collect this fuelwood meet the
definition of non marketed goods and services. As expected from economic theory,
there is evidence of inefficient allocations. Under certain conditions, the lack of a market
price for fuelwood has led to excessive depletion of an apparent "free" good, fuelwood
shortages, ecological damage, diversion of labor from valuable agricultural activities, and
an inefficient mix of fuels and energy sources to satisfy the energy needs of a growing
economy. This is especially the case in regions that are undergoing a transition from
abundant biomass supplies from local woodlands to conditions of greater scarcity.
During this transition, the depletion value of these scarce resources rise, but because the
wood resources are used directly by households and are not marketed, their value does