Before proceeding to a discussion of local, national, and global issues, this Report sets forth a framework which argues that social and environmental outcomes have a bearing on human well-being both ­directly and through their effect on growth. When social and environmental issues are systematically neglected for long periods, economic growth will be affected. That is why improving the quality of life for those living in poverty today-and for the 2 billion to 3 billion people who will be added to the world's population over the next 50 years-will require a growth path that integrates environmental and social concerns more explicitly.

Some problems of sustainability are already urgent and require immediate action; examples are local ecosystems where population is pressing on deeply degraded soils, and forests and water stocks that have been nearly depleted. In such cases productivity is already on the decline and opportunities for correction or mitigation may even have been lost; abandonment of existing practices and outmigration may be necessary. The urgency of some of these problems has been overlooked because the people most affected are physically remote from centers of power, or because their voices are not heard, or both.

Some issues call for immediate action because there are good prospects for reversing the damage to the environment at relatively low cost, as in taking measures against air and water pollution. Even then, undoing some of the damage to the affected population (such as the respiratory damage caused by breathing air laden with particulates) may not be fully possible. But knowing the health impacts does create a moral imperative to protect those affected from further exposure, to compensate them to the extent possible, and to prevent others from becoming victims.

Another category of issues unfolds over a longer time horizon. The problems may not yet be urgent, but the direction of change is unmistakable. For these, it is essential to get ahead of the curve and prevent a worsening crisis before it is too costly. Biodiversity loss and climate change are in this category: there is already a need to adapt to the consequences of past and current behavior, but there is also still scope for mitigation, though not for complacency. Similarly, the need to anticipate urban growth by facilitating low-income settlements in safe areas and by setting aside major rights-of-way and spaces for public amenities makes it necessary to act now to avoid greater costs and regrets later.

What is clear is that almost all of the challenges of sustainable development require that action be initiated in the near term, whether to confront immediate crises, such as the health risks to children from unsanitary living conditions in existing slums, or to stem the tide of crises where concerted action in the near term could avert much greater costs and disruption to human development in the longer term.

In looking back over past successes and failures in solving development problems, it is clear that there have been more successes where markets function well (for example, in providing food to people with effective demand), even where the problems that markets have to solve (such as transport and communications) are relatively complex. The major problems that remain (inclusion, poverty reduction, deforestation, biodiversity, and global warming) are, however, generally not amenable to standard market solutions, although markets can help solve subsets of these problems.

One difficulty is that environmental and social assets suffer from underinvestment and overuse because they have the characteristics of public goods:

• Sometimes, ignorance of the consequences of action leads to overuse or underprovision. The ignorance is in part due to underinvestment in knowledge and understanding-itself a public good.³²

• In other cases there are no mechanisms for facilitating cooperation among individuals, communities, or countries even when it is clear to those involved that the returns to cooperation (especially in the long run), exceed the returns to unilateral action (especially in the short run).

• In still other cases the gains from acting in the broader interests of society fail to be realized because correcting a spillover has distributional consequences and the potential losers resist change.

• Sometimes underprovision is a response to perceived tradeoffs between growth and the costs of correcting externalities. These tradeoffs may be the unfortunate outcome of having been boxed into a corner through a past failure of foresight. Or there may be genuinely difficult choices in balancing legitimate interests and assessing the value of nonmarket benefits and risk reduction, especially if those who would benefit are dispersed over current and future generations.

Environmental and social stresses reflect the failure of institutions to manage and provide public goods, to correct spillovers, and to broker differing interests. Because the spatial extent of spillovers varies by problem, appropriate institutions are needed at different levels, from local through national to global. Getting to socially preferred outcomes requires institutions that can identify who bears the burden of social and environmental neglect and who benefits-and who can balance these diverse interests within society. This perspective helps in understanding why technically sound policy advice (for instance, "eliminate perverse incentives" or "impose charges on environmental damages") is so seldom taken up.

The emphasis of this Report is not on identifying a specific set of policies or outcomes considered advantageous but on the processes by which such policies and outcomes are selected. Outcomes emerging from strong processes are more robust. In many cases, and increasingly, institutions respond too late or too poorly-or without the capacity to commit to a course of action. In today's world the lag between the emergence of a problem and the emergence of institutions that can respond to it is too long. We need to see farther down the road. Why? Because institutions that facilitate and manage national economic growth, and even globalization, are still inadequate, yet where such institutions are in fact emerging, they are developing faster than complementary institutions that might be able to avoid or cope with the deleterious environmental and social consequences of economic change.