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resource economics

  A branch of resource management which uses economic instruments to prevent or ameliorate the overexploitation of resources. Like environmental economics, resource economics sees an absent or uncorrected market as largely responsible for resource over-exploitation. Two main classes of economically induced resource problems are recognized. Following economist Harold Hotelling (1931), the first problem, discounting the future, is particularly applicable to non-renewable resources like oil, coal and copper. Although historically few non-renewable resources have been exploited to the point of absolute scarcity, many have been exploited to the point of social scarcity. Discounting partly explains this. It describes a situation where, because of the nature of economic interest rates and people\'s social preferences, \'people prefer a benefit today or this year to one tomorrow or next year: a social time preference exists for the present over the future\' (Chapman and Mather, 1995, p. 33). Thus resources are used heavily in the present rather than being exploited with a view to the future and future generations. The second class of economically induced resource problem, following economist H. Scott Gordon (1954), concerns common — or unowned/openaccess — resources and is particularly applicable to renewable resources, like oceanic fish stocks. The problem arises because openaccess encourages a free-for-all in which producers scramble for a share of the resource before their rivals take it, leading ultimately to resource over-exploitation — as has happened for several species of whales and, recently, for the Newfoundland cod fishery (see tragedy of the commons).

For resource economics the solution to these problems is not (as one might suppose) to abandon the market but to \'correct\' it so that it is more eco-friendly. From being eco-villain, the market is thus proposed as eco-saviour. This is achieved through a variety of so-called \'economic instruments\' which \'decouple\' economic growth from resource/ environmental exhaustion and degradation. First, discounting the future can be averted by governmental intervention to either alter interest rates or else impose sustainable use policies (e.g. through a resource depletion tax) in specific resource sectors (cf. sustainable development). Second, the common resource problem can be averted by either privatizing the resource or else imposing a government ceiling on resource take.

Although resource economics has enjoyed some success in reducing resource use, in practice it is subject to a number of technical problems (Rees, 1990, ch. 9). In addition, more radical economists associated with political economy argue, first, that resource economics deals only with the symptom of resource problems — the market — and not the real cause — capitalism — and, second, that it ignores questions of the social distribution of resource problems. Finally, ecocentrists, like Greenpeace, worry that it is anthropocentric, putting humans — rather than nature — first. (See also: environmentalism.) (NC)

References Gordon, H.S. 1954: The economic theory of a common-property resource: the fishery. Journal of Political Economy 62: 124-42. Hotelling, H. 1931: The economics of exhaustible resources. Journal of Political Economy 39: 137-75. Mather, A.S. and Chapman, K. 1995: Environmental resources. Harlow: Longman. Rees, J. 1990: Natural Resources, 2nd edn. London: Routledge.



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