Reconciling private profitability and social costs: The case of clay mining in Sri Lanka

Abstract

In Sri Lanka clay mining is mechanised, resulting in large pits, which fill with water in the wet season, so miners remove as much clay as possible during one dry season. This paper analyses both the private and social profitability of clay mining. The private profitability analysis includes the market cost to the miner of land, labour and equipment, and the market price of clay at the pit head. The market rate for capital is used as the discount rate. Economic benefits are compared with the social (environmental and non-environmental) costs to decide whether clay mining is socially profitable. Non- environmental social costs are shadow-priced land, labour, equipment and damage to roads, while environmental costs are health and lost productivity. The social discount rate is used for this analysis. Comparing profits to the miner and profits to society, it is seen that clay mining is both privately and socially profitable. See end of paper for acknowledgements. © 1997 Taylor & Francis Group, LLC.