Developments in Major Fields of Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
Chapter 35: Resource and environmental economics
The purpose of this entry is to provide an overview of the development of environmental and resource economics and its present situation. Although resource and environmental constraints were not clearly recognized by early economists, setting aside some notable exceptions, it was gradually considered explicitly by economists and analysed in economic models in the middle of the twentieth century. Yet, economic studies on resources and the environment were not regarded as independent branches of economics. It was after the experience of heavy pollution in the 1960s–1970s that they came to be established as branches of economics. Indeed, resources and environmental economics has developed very quickly since then, and has derived a number of useful policy implications and options. The structure of this entry is as follows. We first provide a precise definition of “resources”. The definition is rather broad, so that any substance in natural environment can be included as part of resources in this essay. Next we deal briefly with the early economists’ view on resource and environmental constraints. It is shown that despite their pessimism about endless economic growth, they were rather optimistic as regards the exhaustion of natural resources. Then we review the development of studies on reproducible and non-reproducible natural resources. Next, Pigou’s study of external diseconomy is reinterpreted from the point of view of resource use, and the generalization of his theory is briefly explained. Then the contributions to environmental and resource studies made by non-economists are discussed. It is shown how they had an impact on economists. A survey of the development of environmental and resource economics up to the present time follows. It is emphasized that contemporary research is concerned with its applicability to real environmental issues. A few remarks conclude the entry.