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1. WHAT IS NATURAL RESOURCE ECONOMICS

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Title: 1. WHAT IS NATURAL RESOURCE ECONOMICS


1
1. WHAT IS NATURAL RESOURCE ECONOMICS WHY
IS IT IMPORTANT?SPRING 2002
  • Larry D. Sanders

Dept. of Ag Economics Oklahoma State
University
2
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.

3
INTRODUCTION
  • Natural Resource Economics Syllabus
  • Purpose
  • Evaluation
  • Schedule
  • Importance of Student Activity

4
Instructor/Philosophy
  • Personal/Professional Background
  • Teaching Philosophy
  • Student Info

5
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

6
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

7
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, appli-cation, perception
    conflicts often related to culture
  • Economics
  • the study of the production, processing,
    distribution, consumption of goods/services in an
    exchange system

8
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 decision to whom those costs benefits
    accrue

9
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

10
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

11
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

12
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)

13
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

14
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)

15
Natural Resource Examples
  • FLOW RESOURCES FUND RESOURCE
  • NONSTORABLE STORABLE RENEW. NONRENEW.(1)
    NONRENEW.(2)
  • 1.
  • 2.
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.

16
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)

17
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

18
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.
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