Transcript 1. What is natural resource economics & why is it important?

1.
WHAT IS NATURAL RESOURCE
ECONOMICS & WHY IS IT
IMPORTANT?
SPRING 2002
Larry D. Sanders
Dept. of Ag Economics
Oklahoma State University
1
INTRODUCTION
 Purpose:
– to understand the concept of natural resource
economics and its relevance
 Learning
Objectives:
1. Introduce the course & how it is to be
administered
2. Define key terms.
3. Understand the purpose of studying
environmental & natural resource economics.
4. Understand the classification of resources.
2
INTRODUCTION
 Natural
Resource Economics Syllabus
– Purpose
– Evaluation
– Schedule
 Importance
of Student Activity
3
Instructor/Philosophy
 Personal/Professional
Background
 Teaching
Philosophy
 Student Info
4
“Anxiety Test”

“The ultimate test of a set of economic ideas. . .
is whether it illuminates the anxieties of the
time. Does it explain problems that people find
urgent? Does it bear on the current criticism of
economic performance? . . . Does it bear upon
the issues of political debate? For these,
though many have always preferred to believe
otherwise, do not ignite spontaneously or
emerge maliciously from the mouths of
agitators to afflict the comfortable.”
--John Kenneth Galbraith, Economics & the Public
Purpose, 1973 [bold italics added by instructor]
5
Where to get more information
 Syllabus
 Sources
–
–
–
–
–
–
–
–
Hackett
ERS-USDA Pub. No. 712
Handouts
Supplementary Readings
Govt. Documents--Library
Congress, Legislature, St/Fed Agencies
Electronic sources (note biased vs. objective sources)
“Experts”
6
Key Terms
 Natural
Resources
– Specific attributes of the environment that are valued or
have proven useful to humans [or have the potential to do
so]* --G. Johnston
– Aspects of nature that can be used by humans to satisfy
human wants--Hite & Mulkey
– key to human use: technology, time, accessibility, application, perception; conflicts often related to culture
 Economics
– the study of the production, processing, distribution,
consumption of goods/services in an exchange system
7
Key Terms (cont)
 Natural
Resource Economics
– application of economics to manage naturally occurring
resources for human needs/wants with efficiency as the
primary goal
– efficiency may be defined in market or nonmarket terms,
focused on the short or long run, relative to current or
future generations, local or global in scope
– decision choices include maintaining the status quo,
altering the status quo, or doing nothing with focus on
relevant institutions
– evaluation always includes the costs & benefits of a
8
decision & to whom those costs & benefits accrue
Key Terms (cont)
 Environmental
Economics vs. Natural Resources
Economics (Hackett)
– Environmental Economics: economic basis for pollution
problems & policy alternatives
– Natural Resources Economics: problems of managing
common-pool* natural resources, determining optimal
rates of extraction, & understanding resource markets
– *common-pool natural resources: difficult to exclude
access, but once extracted is no longer available to
others (groundwater, rivers, fisheries, public forests)
 Scarcity,
Opportunity cost, economic rationality
9
Why Study Natural Resource Economics?
 Natural
Sciences lack commonly accepted decision
process
 Economics may “assume” the problem away
 Irreversibility
 Market failure
 Joint importance of economic and ecological
systems
 Physical-Natural-Economic System Links
– Improves efficient functioning of system
– Improves understanding about the world we live in
10
Classification of Resources
1.Flow Resources (nondepletable)
a. Nonstorable (sometimes called “environmental
resources”)
»Often indivisible
»Inexhaustible (in human span of time)
»Time & management relevant only to
consumption, not supply
»Examples
Sunshine
(?), “weather”, ocean waves (?)
Forests, scenic views, unique ecosystems
11
Classification of Resources (cont)
1.Flow Resources (cont)
b. Storable
»May be divisible
»Time & management relevant to both to
consumption & supply
Water
Solar, wind, wave, geothermal & hydro
energy (services)
12
Classification of Resources (cont.)
2.Fund Resources (stock or depletable resources)
a. Exhaustible & Renewable
»Regenerative within human use time frame
»Assumes minimum & maximum threshold of
use
»Examples
Timber & crops
Animals, Fish & Humans
Soil & Water Quality, Grazing lands
13
Classification (cont.)
2.Fund Resources (cont)
b. Exhaustible & Nonrenewable
»Relatively fixed stocks/fund within human use
time frame
»(1) Nonrecyclable--Examples: fossil-fuel
energy resources (oil, natural gas, coal, peat)
(2) Recyclable--Examples: some minerals
(iron, aluminum, gold, silver)
14
Natural Resource Examples
FLOW RESOURCES
NONSTORABLE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
STORABLE
FUND RESOURCE
RENEW. NONRENEW.(1) NONRENEW.(2)
15
Framing Natural Resource Issues
 Quantity
& Quality of: Land, Water, Air, Energy
 Public vs. Private Management Question
 Trend of Magnitude of Problem:
– Persistent, Chronic, Cyclical, Declining, Growing?
 Irreversibility
 Geographic
scope
 Whose problem & who decides (ethics)?
 Property rights
 Time (short vs. long run; current vs. future
generations)
16
Optimism vs. Concern for Environment
& Natural Resources
 Concerns
–
–
–
–
Global warming & climate impacts
Over-population & biodiversity
Soil/water quality/Mineral/energy cost/availability
Pollution/resource shortage impacts on social &
political institutions
 Optimism
– Legislative progress
– Toxic release rates down
– US competitiveness
17
References for Lesson 1
Hackett text
Hite, J.C., & W. D. Mulkey. Natural Resource Economics :
An Introductory Textbook, draft unpublished text.
Johnston, G.M., D. Freshwater & P. Favero (editors).
Natural Resource and Environmental Policy Analysis:
Cases in Applied Economics, Westview Press, Boulder,
1988.
18