Roots - Introduction: The Roots of Resource Economics Why...

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Introduction: The Roots of Resource Economics
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Why study environmental and resource economics? Because we want to know what economic theory and related empirical findings can tell us about a variety of interesting and important issues in this area. Some current examples: Sustainability Loss of biodiversity Global climate change
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Earlier examples The conservation movement (1890-1920), focusing on stocks of commercial extractive resources such as wood, iron, and coal; the echo in the late 1940s and early 1950s, when a Presidential Commission was set up to forecast emerging extractive resource shortages in the wake of heavy depletion during World War II The “energy crisis” of the early 1970s, repeated in the late 1970s and early 1980s, and on occasion since, triggered by oil price shocks or supply disruptions The “environmental crisis” of the early 1970s and on occasion since, leading to air and water quality legislation and regulation and the founding of EPA
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What is the common thread in these examples? We study environmental and resource economics because we are concerned about running out of resources, whether the conventional extractive resources of the early conservation movement, or the capacity of environmental media such as the oceans and the atmosphere for receiving and assimilating the residuals of economic activity. Given that resources are scarce, and perhaps growing scarcer, we want to know, how do we make the best use of them? And to what extent is optimal use accomplished by markets?
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But it’s not just resource economics. Why do we study economics? Again, because we are concerned about scarcity. A common definition of economics is: the study of the allocation of scarce resources among various and competing ends. And what is scarce? According to the classical economists such as Malthus and Ricardo, land – mainly agricultural land, but also minerals on the land.
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So the larger discipline of economics, not just resource and environmental economics, has its roots in a concern for the adequacy of the natural resource base to sustain living standards, and the corollary: how to best use these resources.
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Malthus (Essay on Population, 1st edition 1798) Labor is population, and population, unchecked, grows “geometrically”, or what we would now call “exponentially”, at a constant percentage rate per unit of time. This is the phenomenon of compound interest, and as we know, can lead to very large numbers.
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This note was uploaded on 09/11/2011 for the course ECON 102 taught by Professor Sunding during the Spring '07 term at University of California, Berkeley.

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Roots - Introduction: The Roots of Resource Economics Why...

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