Frontiers of Environmental Economics

Frontiers of Environmental Economics

Edited by Henk Folmer, H. Landis Gabel, Shelby Gerking and Adam Rose

Top European and American scholars contribute to this cutting-edge volume on little-researched areas of environmental and resource economics. Topics include spatial economics, poverty and development, experimental economics, large-scale risk and its management, organizational economics, technological innovation and diffusion and many more.

Chapter 9: Industrial ecology: wealth, depreciation and waste

Robert U. Ayres

Subjects: economics and finance, environmental economics, environment, environmental economics


Robert U. Ayres INTRODUCTION Materials extracted from the environment must ultimately either be embodied in durable assets or returned to the environment as wastes or pollutants. This is no longer a new insight (Ayres and Kneese, 1969). The implication is that materials-intensive economic growth cannot continue indefinitely without serious and irreversible damage to the environment, quite apart from the likelihood that, despite recent sharp price declines (attributable to the Asian economic crisis) such ‘essential’ resources as petroleum will not be available indefinitely at ever-declining prices (for example, Campbell, 1997; Campbell and Laherrère, 1998). Neither is it a new idea that the availability of cheap fossil fuels (and other natural resources) has been a key driver of past economic growth: falling energy (and other raw material) prices triggered increasing demand, including many applications of mechanical power to replace human labour. This, in turn, kept real prices of natural resources and mechanical power on a continuing long-term downward trajectory, notwithstanding the exhaustion of original resource endowments in areas that were the first to be industrialized.1 An important growth ‘engine’ of the past has been the positive feedback loop involving scale economies and the so-called ‘experience curve’ which also keeps real costs falling and thus increases the demand for manufactured goods.2 In fact, one of the dilemmas facing present-day governments – although largely unrecognized – has been that most of the historical growth in labour productivity has been in the manufacturing sector. Manufacturing has been the major beneficiary of both falling...

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